Trump administration: U.S. Economy 2017-18 Chapter II

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Economic Policymaking in the Age of Trump
By 2006 Nobel Laureate Edmund S. Phelps
For decades, America has suffered from a long-run productivity slowdown that has sapped the economy of its former dynamism, and left median wages stagnant. Will the tax legislation recently enacted by congressional Republicans and the Trump administration finally reverse this trend, or will it make a bad situation worse?
(Project Syndicate) Without the same level of indigenous innovation that was achieved during the golden era of high growth rates, from the 1820s to around 1970, the Republican tax law will amount to nothing more than a stop-gap measure. And even over the next decade, it will not deliver truly rapid growth.
More fundamentally, we ought to ask whether it is right to expect tax cuts to translate into higher productivity growth. I would argue that, because the tax package will add to the annual fiscal deficit and the public debt, it might actually block investment, and thus derail a productivity pickup. …
Unfortunately, the economics profession has ignored the potential implications of human agency. If far more people were to start conceiving and creating innovations, investment and wage rates might rise well beyond what the textbook model would have predicted. By the same token, if fewer people engage in innovation, investment and wages rates may rise less than expected, or even fall.
In other words, the innovation factor could very well dwarf the effect of the cut in the corporate-tax rate over the next ten years. By that point, we might not have enough evidence to determine if the tax cut was effective, or merely an inconsequential drop in the bucket.
And the uncertainty goes deeper than that. The problem is not just that the traditional model’s disturbance terms may be so large that they overshadow the effects of the tax cut, but also that the coefficients for measuring the tax law’s effect on investment or wages might not even be knowable. The innovators driving (or failing to drive) gains in productivity cannot be certain ahead of time what form their new products or methods will take, or whether they will be adopted at all. How, then, could economists ever foretell precise changes in investment patterns as a result of a tax cut, or what effects new investments will have on the marginal productivity of labor?
As I in November, what we call the “natural” unemployment rate can be affected by insecurity and fear. Similarly, if an unfunded tax cut conjures visions of insolvency, corporate executives might be wary of making new investments. Or they might decide to invest predominantly in labor-saving technologies, which could actually reduce wages and eliminate jobs in some industries. Given that possibility, one cannot be sure whether the tax law will have a positive or negative effect on wages, employment, or productivity. (January 2018)

12 July
Time To Call Trump By His Real Name — Economic Traitor
By Laurence Kotlikoff
(Forbes) The real question is not whether we are the terrible victim of viciously unfair foreign trade. The real question is why this President is using unfair trade as a pretense for destroying our economy?
Yes, I get that the stock market doesn’t read things this way. But the stock market is completely right just up to the point that it’s completely wrong. All it will take for the stock market to melt down is an announcement by China that it’s cancelling its recent agreement to purchase $300 billion worth of aircraft from Boeing and buying from Airbus instead. All it will take is for an Elton John or a Christiano Ronaldo to start, by tweet, a boycott of U.S. goods until Trump stops kidnapping children. …
Trump is working full time to make it happen. Again, the real question is why. One answer is mental illness. It doesn’t fit the facts. Another answer is stupidity. No one, not even Trump, is that stupid. The only answer is that he’s trying to ruin our economy for the same reason he’s trying to destroy NATO, alienate our allies, befriend our enemies, divide our country, undermine our democracy, and demean our values.
The reason is he’s a traitor.

2 July
Largest U.S. business group attacks Trump on tariffs
(Reuters) – The U.S. Chamber of Commerce, the nation’s largest business group and customarily a close ally of President Donald Trump’s Republican Party, is launching a campaign on Monday to oppose Trump’s trade tariff policies.
With some of America’s tightest trading partners imposing retaliatory measures, Trump’s approach to tariffs has unsettled financial markets and strained relations between the White House and the Chamber.
The new campaign … is an aggressive effort by the business lobbying giant. Using a state-by-state analysis, it argues that Trump is risking a global trade war that will hit the wallets of U.S. consumers.
“The administration is threatening to undermine the economic progress it worked so hard to achieve,” said Chamber President Tom Donohue in a statement to Reuters. “We should seek free and fair trade, but this is just not the way to do it.”

30 June
Paul Krugman: Trump’s Potemkin Economy
Just to be clear, the U.S. economy is still doing quite well overall, continuing the long expansion that began during Obama’s first term. Those of us who thought the economy would be hurt by political uncertainty have been wrong so far.
But Trump’s actual policy initiatives aren’t doing so well. His tax cut isn’t producing the promised surge in business investment, let alone the promised wage gains; all it has really done is lead to a lot of stock buybacks. Reflecting this reality, the tax cut is becoming less popular over time.
And the early phase of the trade war that was supposed to be “good, and easy to win” isn’t generating the kinds of headlines Trump wanted. Instead, we’re hearing about production shifting overseas to escape both U.S. tariffs on imported inputs and foreign retaliation against U.S. products. It’s really worth reading the submission by General Motors to the Commerce Department, urging a reconsideration of a tariff policy that “risks undermining GM’s competitiveness against foreign auto producers” and “will be detrimental to the future industrial strength and readiness of manufacturing operations in the United States.” In other words, “Don’t you understand global supply chains, you idiot?”

26 June
U.S. Debt On Track to Grow to ‘Highest Level in U.S. History by Far’ Says CBO
(Newsweek) America’s growing budget deficit will increase debt to the highest level in U.S. history by far, according to the Congressional Budget Office 2018 long-term budget outlook.
If current laws remain the same, U.S. debt is on track to exceed the size of the economy by 2031. By 2048, federal debt will double to 152 percent of the economy. “The prospect of large and growing debt poses substantial risks for the nation and presents policymakers with significant challenges,” wrote CBO director Keith Hall in a statement.
National security issues arise as interest payments grow. As unsustainable debt levels weaken America’s reputation abroad, defense spending is also crowded out by interest costs. The national debt is “the greatest threat to our national security,” according to former chairman of the Joint Chiefs of Staff Mike Mullen. National Intelligence Director Dan Coats said in February that he was “concerned that our increasing, fractious political process, particularly with respect to federal spending, is threatening our ability to properly defend our nation.”
Trump’s trade war with China, Mexico, Canada and Europe is also contributing to a potential decline in the economy. “Our calculations suggest that a major trade war would lead to a significant reduction in growth,” wrote Bank of America Merrill Lynch’s economist Ethan Harris in a research note. “A decline in confidence and supply chain disruptions could amplify the trade shock, leading to an outright recession.”
The United States is currently more than $20 trillion in debt

30 May
Meet the Economist Behind the One Percent’s Stealth Takeover of America
Nobel laureate James Buchanan is the intellectual linchpin of the Koch-funded attack on democratic institutions, argues Duke historian Nancy MacLean
Efforts to “reform” public education and Social Security are not just about a preference for the private sector over the public sector, she argues. You can wrap your head around those, even if you don’t agree. Instead, MacLean contends, the goal of these strategies is to radically alter power relations, weakening pro-public forces and enhancing the lobbying power and commitment of the corporations that take over public services and resources, thus advancing the plans to dismantle democracy and make way for a return to oligarchy. The majority will be held captive so that the wealthy can finally be free to do as they please, no matter how destructive.

4 May
Jobless Rate Looks Like Old Times, but the Economy Doesn’t
By Natalie Kitroeff
(NYT) The last time the unemployment rate fell below the 4 percent threshold was in 2000, during a period of frenetic activity remembered as the dot-com boom.
Nine years into a sustained, if less feverish, economic recovery, that milestone has been achieved again.
The most prominent is a mystery that has proved impervious to easy explanation: why wage increases haven’t been more robust, when the market continues to edge toward full employment.
The share of working-age women in the labor force began to fall in 2000, after increasing for decades. Men have been dropping out for much longer. The upshot is that a smaller share of people are participating in the labor market, and it’s easier to get low levels of unemployment when fewer people are vying for jobs.
In fact, a shrinking labor force in April is part of why the unemployment rate fell to 3.9 percent from 4.1 percent even as payrolls grew by a fairly routine 164,000 jobs.
Economists say it is too soon to tell how employers may change their hiring or expansion plans in response to the tariffs on Chinese goods, or to Beijing’s retaliation. But there are signs that companies that buy metals are feeling the effects already. The Institute for Supply Management said this week that manufacturing activity grew in April at its slowest pace since July.

25 April
High-Paying Trade Jobs Sit Empty, While High School Grads Line Up For University
Some 30 million jobs in the United States that pay an average of $55,000 per year don’t require bachelor’s degrees.
(NPR) While a shortage of workers is pushing wages higher in the skilled trades, the financial return from a bachelor’s degree is softening, even as the price — and the average debt into which it plunges students — keeps going up.
But high school graduates have been so effectively encouraged to get a bachelor’s that high-paid jobs requiring shorter and less expensive training are going unfilled. This affects those students and also poses a real threat to the economy.
Construction, along with health care and personal care, will account for one-third of all new jobs through 2022, according to the Bureau of Labor Statistics. There will also be a need for new plumbers and new electricians. And, as politicians debate a massive overhaul of the nation’s roads, bridges and airports, the U.S. Department of Education reports that there will be 68 percent more job openings in infrastructure-related fields in the next five years than there are people training to fill them.

25 March
Treasury Secretary Steven T. Mnuchin says Trump’s tariffs won’t harm economy
(LATimes Essential Washington) Brushing aside last week’s market swoon fueled by investors’ fears of a trade war, Treasury Secretary Steven T. Mnuchin said Sunday that he did not expect major economic fallout from President Trump’s recent tariff announcements.
Stocks tumbled late in the week to levels not seen since November of last year, amid post-election uncertainty. The Dow registered a weekly loss of more than 1,400 points, or nearly 6%. While Trump has taken credit repeatedly as markets soared, he has been silent on the declines. Past presidents generally avoided boasting of market gains, mindful that stocks go down as well as up.
23-24 March
The (probably) last major act of an anti-spending Congress: A $1.3 trillion budget-busting bill
(WaPost) The more than 2,200-page spending bill passed — and not vetoed — gave the Pentagon its biggest spending increase in 15 years, a top GOP priority. But it also included full funding for the Corporation for Public Broadcasting, despite President Trump’s initial proposal to slash their funds from $465 million down to $15 million.
After winning the House majority in the 2010 midterms, GOP lawmakers forced a major fiscal showdown with Obama that ended with the Budget Control Act of 2011. That law was supposed to cut federal spending by nearly $1 trillion through a decade of spending caps to federal agency budgets.
Now, the Republican-led decision to bust those caps for the next two years raises the specter that the tough talk on deficits applied only when Democrats held the White House.
Trump signs massive spending bill, but not before a little drama
(Wa Post) President Trump jolted Washington on Friday when he began the day tweeting that he might veto a massive spending bill needed to prevent a government shutdown — and then appearing in front of cameras five hours later to say that he had signed the legislation.
Trump ripped into the $1.3 trillion funding package in remarks at the White House shortly after 1 p.m., calling it a “ridiculous situation,” filled with overspending yet lacking enough money for his border wall or a deal to resolve the future of the young, undocumented immigrants known as “dreamers.” He said he was only signing the bill because it contained a boost for the military.
During his remarks at the White House, Trump sought to distance himself from a bill unpopular with his base but that his aides helped craft and the GOP-led Congress passed. At times he went so far as to portray himself as being almost helpless and having little choice but to accept the spending package.
Here’s what Congress is stuffing into its $1.3 trillion spending bill

15 March
William Watson: Ten out of 10 disagreeable economists finally agree — Trump is wrong
The University of Chicago asked 40 leading economists if the steel and aluminum tariffs would improve Americans’ welfare… The answer was a resounding no
(Financial Post) It’s true the 43 economists who make up the IMG Booth panel are an elite. It’s also true that elites are in ill repute these days. But when it comes to economic understanding, if I have to choose between the views of Trump and this elite, I’ll go with the latter.

14 March
Jonathan Chait: Trump’s New Economic Adviser Lawrence Kudlow Has Been Wrong About Everything for Decades
(New York) A dozen years ago, I wrote a book about the unshakable grip of supply-side economics upon the Republican Party. Supply-side economics is not merely a generalized preference for small government with low taxes, but a commitment to the cause of low taxes, particularly for high earners, that borders on theological. In the time that has passed since then, that grip has not weakened at all. The appointment of Lawrence Kudlow as head of the National Economic Council indicates how firmly supply-siders control Republican economic policy, and how little impact years of failed analysis have had upon their place of power.

9 March
U.S. stocks suffer massive outflows as Trump risks trade war
Investors rushed into government bonds and other safer assets amid rising fears of an international trade war after Mr. Trump’s plans for tariffs on imported steel and aluminum met barbed responses from allies and trade bodies.

6 March
Gary Cohn resigns as Trump’s top economic advisor
Gary Cohn has resigned as White House chief economic advisor.
Cohn’s planned departure comes on the heels of a decision by President Donald Trump to impose stiff tariffs on steel and aluminum imports.
The former Goldman Sachs president had strongly opposed tariffs.
Jordan Weissmann writing in SlateGary Cohn: The man who swallowed the president’s racism and personal humiliation in order to guide tax cuts for his old employer at Goldman Sachs, and then quit over some steel tariffs. Wall Street is sure to welcome him back as a hero

2 March
Updated version of an article published on Nov. 15, 2017
Economic history shows why Trump’s ‘America First’ tariff policy is so dangerous
By Charles R. Hankla, associate professor of political science at Georgia State University in Atlanta. He received his PhD in 2005 from Emory University, and he also holds degrees from Georgetown University and the London School of Economics.
(The Conversation) President Trump assumes the U.S. can act unilaterally without consequences.
Economic history shows this doesn’t work. The world’s economies are far more interdependent than they were during the Great Depression, so the impact of governments all following a “my country first” trade policy – as the president said he expected world leaders to do – could have disastrous consequences.
Today, the international trade system the U.S. helped create, one based on open markets and classically liberal principles, is under threat as never before. Yet President Trump’s “America First” approach is a total abdication of the traditional U.S. role as its defender. And in fact, the president is doing his best to undermine that system.
In my final analysis, the Trump administration is reverting to a policy that is, I would argue, dangerous for the U.S. economy and for the international system.
If the U.S. abdicates as champion of the international trading system, China may be the only country that can take the reins. The question is, what would that mean for the current system of open and free markets?

What Trump’s Trade Guru Doesn’t Get About Economics
Promoting Peter Navarro would not be good for growth.
by
Noah Smith
(Bloomberg) President Donald Trump is reportedly considering promoting noted trade hawk Peter Navarro to the office of assistant to the president. This would be a significant move, and could signal Trump’s intentions for trade policy.
In a way, that’s good news. If Trump focuses on trade, where little of substance is likely to change, it could distract him from areas like health care and immigration where he could do more lasting damage. But Navarro’s promotion, and the protectionist agenda it’s likely to usher in, will probably not be very helpful for the U.S. economy.
First of all, Navarro has made at least one very basic mistake when talking about how trade affects the economy. He — like many other people — appears to believe that if trade deficits go down, economic output must rise. That’s false.

1 March
Paul Krugman: Taxpayers, You’ve Been Scammed
The key thing you need to know is that right now the U.S. government has no business cutting taxes. We need more revenue, not less.
…  Most of [the federal government’s] costs come from Social Security, Medicare and Medicaid — and all three programs are becoming more expensive as ever more baby boomers reach retirement age. This means that unless we cut back sharply on benefits that middle-class Americans count on, we will need to raise more revenue than in the past.
Yet even before the tax cut, federal tax receipts were looking weak for an economy with low unemployment and a rising stock market… . The tax cut will push them lower still. Something will have to give. And we already know what will give, if Republicans get their way: programs that benefit working Americans. In fact, the usual suspects like Paul Ryan were talking about the need for “entitlement reform” — meaning cuts in Medicare and Medicaid — to reduce deficits even as they were passing a huge tax cut that will make those deficits much worse.

18 February
Trump’s infrastructure push, a marquee campaign promise, is overshadowed by controversy and tragedy
(WaPost) Trump’s failure to gain traction on a marquee campaign promise, however, cannot be explained entirely by circumstance.
Trump’s big infrastructure plan has a lot of detail on everything but how to pay for it
The president’s own rhetoric last week left lawmakers questioning how committed he is to seeing legislation pass. Some aides wonder if he’s lost interest in the subject. And Trump has continued to send mixed signals about key aspects of his plan, including how it should be paid for.
The White House initiative aims to pump $1.5 trillion into roads, bridges, airports and other critical infrastructure over the coming decade and dramatically reduce the time it takes to get federal permits for such projects.
Though touted as a bipartisan push, the plan Trump formally unveiled Monday was widely panned by Democrats, who complained that all but $200 billion of the tab would have to be picked up by states and localities.

12 February
The Lessons of Black Monday
By Barry Eichengreen
(Project Syndicate) When interpreting sharp drops in stock prices and their impact, many will think back to 2008 and the market turbulence surrounding Lehman Brothers’ bankruptcy filing. But a better historical precedent for current conditions is the huge one-day drop on October 19, 1987.
US President Donald Trump has regularly pointed to the stock market as a source of validation of his administration’s economic program. But, while the Dow Jones Industrial Average (DJIA) has risen by roughly 30% since Trump’s inauguration, the extent to which the market’s rise was due to the president’s policies is uncertain. What is certain, as we have recently been reminded, is that what goes up can come down.

26 January
A Sober Trump Reassures the Davos Elite
He sought to sell a story of economic growth. “The world is witnessing the resurgence of a strong and prosperous America,” he said. “I’m here to deliver a simple message: There has never been a better time to hire, to build, to invest and to grow in the United States. America is open for business and we are competitive once again.”
By Peter Baker
(NYT) President Trump reassured the world’s political and financial leaders on Friday that his “America First” agenda was not a rejection of international cooperation, but he insisted that cross-border trade had to be made fairer and vowed to take action against predatory practices.
… a relatively sober, restrained speech that argued that defending national interests was consistent with a global system. And he touted what he called a rising economy in the United States, declaring that “America is back” and inviting foreign businesses to invest.
His message of an American economic comeback, however, was tempered by a report that came out even as he was on stage. The American economy grew by 2.6 percent in the fourth quarter of 2017, healthy but lower than the 3 percent that had been expected and that he had set as his goal. Over all, the economy grew 2.3 percent in 2017, Mr. Trump’s first year in office, up from 1.6 percent in 2016, President Barack Obama’s last year.
… He boasted that African-American unemployment was at a new low, but did not mention that it began falling in 2011 and the rate of decline on his watch was simply a continuation of the progress that started under Mr. Obama. He claimed credit for creating 2.4 million jobs since his election, but the number of new jobs created in 2017 was no higher than in any of the last six years of Mr. Obama’s tenure.
Still, he was right that the stock market has soared to new heights on his watch and that the American business community has responded to his tax cuts and regulatory rollback with enthusiasm. His surprisingly warm reception here, despite the schism over trade and global affairs, underscored the optimism of many corporate leaders.
The speech was largely written by Gary D. Cohn, the president’s national economic adviser and a former Goldman Sachs banker, and Robert Porter, the White House staff secretary.

24 -26 January
A weak dollar hurts more Americans than it helps
(CNBC) Treasury secretaries going back to the Clinton administration have embraced a strong dollar policy as being in America’s interest.
A strong currency puts a lid on inflation and helps keep interest rates low.
Secretary Steven Mnuchin’s comments at the World Economic Forum in Davos, Switzerland, this week echo similar “weak dollar” messages by President Trump.

Mnuchin says weaker dollar ‘good’ for US trade, opportunities
Treasury secretary reiterates Trump’s America First mantra
(Financial Times) On the weakness of the US dollar in recent weeks, the Treasury secretary added: “The dollar is one of the most liquid markets. Where it is in the short term is not a concern for us at all. A weaker dollar is good for us as it relates to trade and opportunities. Longer term, the strength of the dollar is a reflection of the strength of the US economy and that it is, and will continue to be the primary reserve currency”.

 

2017

21 December
John Cassidy: The G.O.P. Tax Bill Is Unworkable
(The New Yorker) … here is a prediction: no matter which party controls Congress after next year’s midterms, lawmakers will eventually be forced to revise this tax bill substantially. This legislation simply isn’t workable in the long run. Unless it is fixed, it could end up crippling the tax system.
At this stage, the unfairness and ideological bent of the proposal are widely recognized, as is its corrupt nature. … What isn’t yet fully appreciated is how porous and potentially unstable the rest of the tax code will be after the bill is passed. With a corporate rate of just twenty per cent, and a big new break for proprietors of unincorporated businesses and certain types of partnerships, the new code will contain enormous incentives for tax-driven restructurings, creative accounting, and outright fraud.
Masha Gesssen: The Most Frightening Aspect of Trump’s Tax Triumph
All along there has been Trump claiming that the bill was a “gift” to the middle class. That this assertion appears to have no basis in fact has not affected the President’s statements. The President’s Treasury Secretary, Steven Mnuchin, maintained that his department had run the numbers and had shown that the tax bill would pay for itself. It appears that he lied, not so much about the result of the Treasury’s study but about the existence of the study itself: the Times reported last month that the analysis had not been done.

15 December
Robert Barro’s Tax-Reform Advocacy: A Response
By Jason Furman & Lawrence Summers
(Project Syndicate) Robert Barro is a serious and careful economist, but he makes errors in modeling the actual provisions of the Republican tax plan, and he chooses parameters that distort his conclusions substantially upward. Instead of using his insights to defend and promote the GOP tax legislation, Barro should have helped to shape a much better bill.
Our Harvard colleague and friend Robert Barro recently co-signed a letter with eight other conservative economists finding that the tax cuts would raise the long-run level of output by 3%. The letter also asserted that “the gain in the long-run level of GDP would be just over 3%, or 0.3% per year for a decade,” an estimate that the US Treasury Department has been pointing to justify its claim that dynamic feedback covers much of the cost of the tax cuts.
In response to our listing of numerous flaws in this letter, including its serious misuse of the academic literature, the authors backed off the claim that the annual growth rate would rise by 0.3 percentage point and failed to defend many of the other assumptions as well. Notably, the then-chief economist of the Organization for Economic Cooperation and Development weighed in to support our view that the authors had misused an OECD study, one of only three studies they cited to reach their conclusions.
How US Corporate-Tax Reform Will Boost Growth
Dec 13, 2017 Robert J. Barro
Now that the Republican-led US House of Representatives and Senate have each passed bills to overhaul the tax system, we can start to see what effect the coming changes will have on the US economy. By reducing the costs of investments and cutting the tax rate on corporate profits, the final plan that emerges will likely boost growth substantially.

5 December
Wooden dams and river jams: U.S. strains to ship record grains
(Reuters) – America’s worst traffic jam this fall occurred on the Ohio River, where a line of about 50 miles of boats hauling grains and other products turned into a waterborne parking lot, as ship captains waited for the river to reopen.
Such delays are worsening on the nation’s waterways, which are critical to commerce for the United States, the largest grain exporter in the world. Of the country’s $40 billion in annual grain and soybean exports, about 60 percent is moved by barges on rivers, including the Ohio.
The shutdown, caused by worn or missing sections of a dam, snarled traffic from early September into early November through Locks & Dam No. 52 near Paducah, Kentucky. It was the second shutdown in two months at No. 52, which is among the country’s busiest locks with about $22 billion a year of commodities flowing through it.
The lock, which has been earmarked for replacement by the Army Corps of Engineers for three decades, is one of many choke points along 25,000 miles of waterways used to transport everything from grains to consumer goods to coal.
Reverberations have cut across the U.S. agricultural supply chain – and international markets. This fall, delays in moving crops downriver bumped up grain prices at export terminals along the Gulf Coast, opening up an advantage for global competitors such as Brazil.
Most of the country’s 239 locks have exceeded their half-century design lives, and nearly half the vessels that use the nation’s inland waterways now experience delays, according to the American Society of Civil Engineers.

4 December
John Ibbitson (The Globe and Mail) on : “In the dead of night, with no real debate, with most senators not knowing what, exactly, they were voting on, with amendments so rushed that they existed only as illegible handwritten scrawls on the margins of the text, the Republican caucus pushed through massive tax reforms that slash taxes on the wealthiest Americans. This at the cost of more than a trillion dollars added to the national debt, along with cuts to funding for health care and education. Why did the senators do this thing? Because they were being blackmailed by a few powerful oligarchs, the very people who will benefit most from the tax cuts. Between kowtowing to those oligarchs and the President’s brow-beating of the press, it’s getting harder and harder to tell the difference between the United States and Russia.”

2 December
Senate GOP tax bill passes in major victory for Trump, Republicans
(WaPo) Senate Republicans passed a $1.5 trillion tax bill early Saturday morning that bestows extensive benefits on corporate America and the wealthy while delivering mixed blessings to everybody else.
The measure still has to be reconciled with an earlier House-passed version before being sent to President Trump. Yet in getting the bill through the Senate, Republicans succeeded where they failed earlier this year, when their efforts to repeal the Affordable Care Act collapsed in mortifying fashion.
The tax package still must clear a couple more hurdles before it can become law. There are numerous differences between the House and Senate versions, ranging from when certain tax cuts expire to how the estate tax is handled, and though none are seen as showstoppers, complications could arise. There will be major implications for the taxes paid by families and individuals based on how those discussions go. And the negotiations over the tax bill will proceed as Congress simultaneously faces a Dec. 8 deadline for government funding to expire.


30 November
(The Atlantic) Tax-Cut Costs: A group of organizations that represent more than 560,000 doctors has issued a joint statement condemning the Republican tax plan for the disruption it will likely cause to insurance markets. When the potential effects of poverty and stress are taken into account, the public-health impact of the plan may go even deeper. Though supporters say the plan is intended to simplify the tax code, the deductions it eliminates would place a heavy burden on the working and middle classes. Elite colleges, whose endowments would be taxed under the proposal, may be better able to cope, but critics say the change could hurt students. All in all, writes Ronald Brownstein, the tax plan would be a boon to older Americans that younger ones would have to pay for.

28 November
What’s going on with US tax reform? Let Quartz explain…
Sweeping changes are coming to the US tax system. The Republican-led House and Senate have proposed tax reform bills that are similar enough that something like them will probably pass into law. If the majority party’s lawmakers can quickly agree on a compromise—a big “if”—it may happen by the end of the year.
The Republicans’ tax proposals, as currently written, are pretty unpopular. As we approach the legislative endgame, now is a good time to take a step back and ask: How did we get here?
Quartz has been following tax reform for much of the year, and we are here to help. We’ve compiled a list of stories to demystify the debate and get up to speed if you’re just tuning in.
Republicans Say the $1.5 Trillion Tax Bill Pays For Itself, but Experts Disagree

26 November
Senate GOP tax bill hurts the poor more than originally thought, CBO finds
by Heather Long
(WaPo) The Senate Republican tax plan gives substantial tax cuts and benefits to Americans earning more than $100,000 a year, while the nation’s poorest would be worse off, according to a report released Sunday by the nonpartisan Congressional Budget Office. Republicans are aiming to have the full Senate vote on the tax plan as early as this week, but the new CBO analysis showing large, harmful effects on the poor may complicate those plans. The CBO also said the bill would add $1.4 trillion to the deficit over the next decade, a potential problem for Republican lawmakers worried about America’s growing debt.
For Trump, GOP tax bill could have big downside
(The Hill) Not only would the tax overhaul use up one of the potential funding options for repairing infrastructure, it would also eliminate a financing tool that states have used to back a wide range of infrastructure projects.
That could spell doom for Trump’s infrastructure overhaul, which was always going to be a tough sell for fiscal conservatives on Capitol Hill.
“Preemptively removing [private activity bonds] as a financing tool for infrastructure projects would undermine Congress’s stated goal of leveraging a $1 trillion investment in our nation’s infrastructure,” said Richard A. White, acting president and CEO of the American Public Transportation Association.
The tax package that passed the House last week would eliminate the deduction on tax-exempt private activity bonds, which are used by public-private partnerships to help build roads, highways, housing, hospitals, airports and other critical projects.

24 November
America’s Supply-Side Scam
By Stephen S. Roach, former Chairman of Morgan Stanley Asia and the firm’s chief economist
Congressional Republicans’ proposed tax cuts are no recipe to “make America great again.” Lacking in saving, outsize US budget deficits spell nothing but serious trouble ahead on the balance-of-payment and trade fronts.
(Project Syndicate) Notwithstanding the political pandering to hard-pressed middle-class families, corporate America is clearly the focus of these efforts, with proposed legislation aiming to reduce business tax rates from 35% to 20%. Never mind that US companies currently pay a surprisingly low effective corporate tax rate – just 22% – when judged against post-World War II experience.
And pay no attention to the latest tally of international competitiveness by the World Economic Forum, which finds the US back in second place (out of 137 countries). And, of course, don’t draw comfort from the lofty stock-market valuations of the broad constellation of US companies. Forget all that, Republicans insist: cut business taxes, they say, and all that ails America will be cured.
There are times when the politicization of economic arguments becomes dangerous. This is one of those times. The US simply can’t afford the current tax cuts making their way through Congress. According to the nonpartisan Congressional Budget Office, the cuts will result in a cumulative deficit of about $1.4 trillion over the next decade. The problem arises because America’s chronic saving shortfall has now moved into the danger zone, making it much more difficult to fund multi-year deficits today than was the case when cutting taxes in the past. … And a bigger current-account deficit means that the already-large trade deficit will only widen further, violating one of the main tenets of Trumponomics – that making America great again requires closing the trade gap. (emphasis added)

16 November
The House just passed its big tax bill. Here’s what is in it.
(WaPost) President Trump and GOP House Speaker Paul D. Ryan (Wis.) won a major victory as the House passed the tax bill Thursday, the central piece of the Republican plan to boost the U.S. economy.
The main goal of the House’s “Tax Cut and Jobs Act” is to lower taxes on companies in an effort to make them more competitive and discourage them from moving abroad. The bill reduces the corporate tax rate from 35 percent to 20 percent and the rate for pass-through businesses down to 25 percent (with some restrictions). Many families would also pay less, although Ryan has admitted that won’t be the case for everyone. Here’s a rundown of what is actually in the final version of the bill that passed.
 The entire business tax system would also change from a worldwide system, in which money anywhere around the globe is taxed, to a territorial system in which it’s mostly money made in the United States that is taxed.
Most Americans pay the same — or lower — taxes until 2023. For the next five years, the vast majority of Americans (92 percent) would either pay less or see little change, according to the official estimates from the Joint Committee on Taxation. But that shifts sharply after five years. In 2023, only 40 percent of Americans would pay less. Twenty-two percent would pay more (the rest see little change), JCT found.
Say goodbye to most deductions. Almost all itemized deductions are going away, except for three. The final House bill keeps the deductions for charitable donations, property taxes up to $10,000 a year and the mortgage interest deduction. The mortgage interest deduction would be capped at $500,000 for mortgages (down from $1 million now).

15 November
(The Atlantic) Taxing Times: In order to pass their tax-reform bill under the rules of budget reconciliation, Republican senators are setting their proposed tax cuts for individuals to expire at the end of 2025. Cuts to corporate taxes, meanwhile, are being kept permanent—undercutting the party’s claim that the bill aims primarily to help middle-class families. The senators have also added the repeal of Obamacare’s individual-insurance mandate to the tax bill, in a risky effort to accomplish their two highest legislative priorities at once.

11 November
“The Senate bill unveiled on Thursday would raise taxes on millions of middle-class families, according to a preliminary New York Times analysis. The plan would also disproportionately benefit high earners and corporations. Still, middle-class earners would fare better under the Senate proposal than its counterpart in the House.”

6 November
(Politico) Today begins Republicans’ frantic public sprint to rewrite the tax code this year. House Republicans are marking up their bill beginning at noon today and they plan to wrap up by Thursday. Look for more fissures in support as lobbyists and industries dig deeper into the bills and try to maximize their leverage to keep specific provisions from getting the ax. Senate Republicans are also releasing their bill. Senate GOP could struggle to match House on taxes
(NYT) We went to the leafy suburbs of northern New Jersey, where property values are high, local taxes keep climbing, and residents are furious about the Republican tax plan.
To voters in high-tax states like New Jersey, New York and California, the deduction for state and local taxes is sacrosanct. But the Republican bill would eliminate the deduction, and undo or sharply limit others, in order to raise revenue.
Voter anger over the tax plan could endanger Republicans in those places, maybe even putting the party’s majority in Congress in peril.

31 October
The U.S. Isn’t Prepared for the Next RecessionWhen it comes—and it will, eventually—it’ll be worse than necessary.
(The Atlantic) Maybe it will start with a failed initial public offering, followed by the revelation of widespread fraud in Silicon Valley. Perhaps energy prices will spike, sapping the finances of anyone who drives a car to work. Maybe a foreign crisis will cause a credit crunch, or President Trump will spark a global trade war. A recession might seem like a distant concern, with the latest data showing that the current, extraordinarily economic long expansion just keeps humming along. But one will hit eventually, for some reason or another—that’s how economies work. And when it does, the country won’t be ready.”

29 October
Powell is favorite as Trump nears Federal Reserve decision
President Trump is expected to announce his choice to lead the Federal Reserve as soon as this week, potentially reshaping U.S. monetary and financial regulatory policy.
(The Hill) [Jerome] Powell — a Fed governor, former Treasury Department undersecretary and investment banker — appears to be Trump’s most likely choice to lead the central bank.
From Politico
House GOP tosses conservative playbook in bid for tax reform,” by Brian Faler: “House Republicans are so desperate for a win on taxes that they’re agreeing to proposals that would have caused internal party warfare just a year or two ago. They’re considering forgoing a big cut in the top income tax rate on the rich, offering moderate-income Americans so many tax breaks that many would be excused from paying taxes entirely and passing a potentially 1,000-page tax bill few have seen within a matter of weeks.” http://politi.co/2zgBXH1
House Tax Writer Gives Ground on a State and Local Tax Break, by Bloomberg’s Ben Brody: “Bowing to concerns from Republican House members in high-tax states, the chamber’s chief tax writer said he’ll preserve a federal income-tax break for property taxes. ‘At the urging of lawmakers, we are restoring an itemized property tax deduction to help taxpayers with local tax burdens,’ House Ways and Means Chairman Kevin Brady said in a statement Saturday afternoon. … But in a sign of the complex balancing act that Brady must perform to produce a tax-overhaul bill this week, the property-tax announcement came on the same day that the National Association of Home Builders pulled its support for the legislation. The group’s chief cited concerns that the bill might undermine existing tax breaks that support the housing market. Likewise, a coalition that includes the National Association of Realtors said in an emailed statement that it ‘will vigorously oppose this plan.'” https://bloom.bg/2ybPkbI

24 October
Ryan: Tax bill coming next week
Speaker Paul Ryan (R-Wis.) detailed the House’s timeline on tax reform Tuesday, saying Republicans will pass the Senate budget on Thursday, unveil their long-awaited tax reform legislation next week and send the bill to the Senate before Thanksgiving.
The Speaker laid out that ambitious timeline during a closed-door meeting of House Republicans in the basement of the Capitol, according to sources in the room.

23 October
President Trump said he would oppose reducing the amount that Americans can save in 401(k) retirement accounts, effectively killing with a tweet a plan that Republicans were considering to help pay for a $1.5 trillion tax cut.
The controversial idea: cap worker contributions at $2,400 annually for 401(k) accounts, far less than the current cap of $18,000 a year — or up to $24,000 for those over 50.

20 October
Senate Republicans came together to pass a budget resolution on Thursday night, coming one step closer to enacting their plan for tax reform—and disappointing spending hawks in the party, as the resolution may result in raising the deficit.

19 October
Trump Picks Joseph Simons, Corporate Antitrust Lawyer, to Lead F.T.C.
President Trump has picked Joseph J. Simons, a veteran antitrust lawyer who has represented tech giants like Microsoft, to lead the Federal Trade Commission at a time of broad bipartisan concern over corporate consolidation and big deals in the waiting, the White House said Thursday.
Mr. Trump has also named Noah Phillips, chief counsel for Senator John Cornyn, Republican of Texas, and Rohit Chopra, a fellow at a consumer advocacy group, to fill the remaining two seats at the agency, said Natalie M. Strom, assistant press secretary at the White House.
Under Mr. Simons, who led the competition bureau of the Federal Trade Commission during the George W. Bush administration, the agency is expected take a free-markets and conservative approach to antitrust issues, maintaining decades-long interpretations of competition laws that put consumer welfare and the efficiencies of markets at the center of enforcement actions and merger reviews.

17 October
The Dow Jones Industrial Average hit 23,000 for the first time today, after an extended upswing for which President Trump has frequently claimed credit. But presidents don’t have much control over stock markets’ success, and Trump has yet to implement many of the business-friendly policies he’s promised. Indeed, he’s been more successful in dismantling policies than creating them.

16 October
Just own the damn robots.
We could be in the midst of the first fear-based investment bubble in American history, with the masses buying in not out of avarice, but from a mentality of abject terror. Robots, software and automation, owned by Capital, are notching new victories over Labor at an ever accelerating rate. It’s gone parabolic in recent years – every industry, every region of the country, and all over the world. It’s thrilling to be a part of if you’re an owner of the robots, the software and the automation. If you’re a part of the capital side of that equation.
If you’re on the other side, however – the losing side – it’s a horror movie in slow motion.
The only way out? Invest in your own destruction.
For the last fifty years, we’ve invested for retirement. For the last two or three years, we might be investing for a whole other reason. What price is too high to pay for a company’s stock if the company spends every waking minute trying to replace you?

12 October
Trump threatens to abandon Puerto Rico recovery effort
President Trump served notice Thursday that he may pull back federal relief workers from Puerto Rico, effectively threatening to abandon the U.S. territory amid a staggering humanitarian crisis in the aftermath of Hurricane Maria.
Declaring the U.S. territory’s electrical grid and infrastructure to have been a “disaster before hurricanes,” Trump wrote Thursday that it will be up to Congress how much federal money to appropriate to the island for its recovery efforts and that relief workers will not stay “forever.”
Three weeks after Maria made landfall, much of Puerto Rico, an island of 3.4 million people, remains without power. Residents struggle to find clean water, hospitals are running short on medicine, and commerce is slow, with many businesses closed.
During a visit last week, the president tossed rolls of paper towels at local residents as if shooting baskets, drawing scorn from local leaders. He also complained that the recovery efforts had “thrown our budget a little out of whack,” and noted that the death toll was lower than the “real catastrophe” of Hurricane Katrina, which devastated New Orleans and surrounding areas in 2005.

28 September
(NYT Evening Brief) An outcry is brewing over the White House tax proposal unveiled yesterday. Lobbyists and trade groups are scrambling to protect valuable tax breaks that could be on the chopping block, including the state and local tax deduction.
Remember when Republicans were concerned about the deficit? It appears those days are behind us. The plan could cost more than $2 trillion over the next decade, according to a preliminary estimate. The administration maintains that economic growth from tax cuts will make up the difference, but that’s a potentially dubious prospect.

7-8 September
The House just passed the massive Trump-Pelosi-Schumer deal
(Business Insider) The bill includes a three-month debt-ceiling suspension. Republican leaders wanted a longer suspension to avoid throwing the must-pass legislation into a wild December that will now include another government-shutdown threat, a closer deadline on the Deferred Action for Childhood Arrivals program, and possibly legislation to overhaul the US tax code.
At the same time, many conservatives in the House wanted the debt-ceiling suspension to be paired with spending cuts to offset some of the increased debt load. This was not in the bill and caused an uproar among Republican members.
Although Harvey caused devastating flooding in parts of Texas, four Republicans from the state voted against the package: Reps. Sam Johnson, Jeb Hensarling, Joe Barton, and Mac Thornberry.

(LATimes) The deal with Schumer and Pelosi might have seemed a small matter: Trump agreed with the Democrats that a measure to provide funds for federal agencies and extend the government’s ability to borrow money should run until early December, not longer, as Republican leaders wanted. But as Noah Bierman, Brian Bennett and Lisa Mascaro wrote, the implications go far beyond the deadlines.
Since they gained control of Congress, Republicans have had huge trouble passing legislation to pay the government’s bills. That’s because the party’s large conservative bloc opposes the current level of government spending but has never been able to get support in Congress — or in the wider population — to significantly reduce it. Conservatives have responded by refusing to vote for must-pass spending measures, making the Republican leadership rely on Democratic votes to keep the government functioning.
So every time there’s a spending vote, Republicans split, and Democrats have leverage to extract concessions. House Speaker Paul D. Ryan of Wisconsin and Senate Majority Leader Mitch McConnell of Kentucky wanted to minimize that leverage by extending current spending deadlines as long as possible. Their initial offer in a White House meeting Wednesday was 18 months, which would have taken spending issues off the agenda until after the midterm elections.
Schumer and Pelosi offered a three-month deal. Republicans objected. So did Treasury Secretary Steven T. Mnuchin. Trump cut him off in mid-sentence, according to participants in the meeting and sided with the Democrats.
The agreement for a three-month extension, which then passed the Senate with 17 Republicans voting no, guarantees repeated spending votes between now and the midterm, each of which will force Republican lawmakers to cast uncomfortable votes, and each of which will require Republican concessions to the Democratic minority. All of those concessions inevitably will anger many Republican voters. Trump’s deal with Democrats averts the budget and debt crisis, but leaves some in the GOP seething

What you need to know about the federal debt ceiling, and why you should care
(PBS Newshour) An agreement between President Trump and Democrats for a three-month extension for the debt ceiling means Congress temporarily ducks a political debate. But the recurring battle will surface again in December. What could happen if we don’t raise the debt limit? Lisa Desjardins explains the history of the debt limit and how it works.
It sounds obvious, like the Capitol dome, an absolute height limit on debt. But the truth is, it doesn’t work that way. The U.S. government is the largest spender on Earth, trillions of dollars a year. But the U.S. doesn’t bring in as much as it spends. So, each year, we borrow the difference and we keep adding to our debt, also the largest on Earth.

Trump, Schumer agree to pursue plan to repeal the debt ceiling
Trump and Schumer discussed the idea Wednesday during an Oval Office meeting. The two, along with House Minority Leader Nancy Pelosi (D–Calif.), agreed to work together over the next several months to try to finalize a plan, which would need to be approved by Congress.

The mind-boggling cost of DACA repeal
(Brookings) Dreamers of working age are employed (over 90 percent) and are paying taxes, while remaining ineligible for some of the same government benefits to which citizens are entitled (such as food stamps and Medicaid). Deportation of Dreamers will mean reduced productivity and reduced tax revenue at the federal, state and local levels. According to a 2017 study from the Institute on Taxation and Economic Policy, Dreamers pay as much as $2 billion annually in taxes.
Finally, the administrative and functional costs of deporting Dreamers would be staggering. As we have written previously, the average cost to Immigration and Customs Enforcement (ICE) from arrest to removal of an undocumented individual is $12,500. Deporting the approximately 800,000 Dreamers would cost the government nearly $10 billion. For perspective, the annual budget for ICE is just over $5 billion. Not only would it cost exorbitant amounts of taxpayer dollars to deport all of the Dreamers—or any significant number of them—but the opportunity costs should alarm the president, his administration, and the average American. Every dollar spent to deport Dreamers is a dollar not spent enforcing immigration laws against individuals who knowingly and purposefully entered the U.S. illegally, individuals engaged in drug or sex trafficking, and undocumented individuals committing serious felonies.

1 September
White House rejiggers Harvey request as dollars dwindle
Trump seeks $7.85 billion for initial Harvey efforts, nearly $2 billion more than expected.
(Politico) White House officials and GOP leaders appear to be in agreement already that the emergency funding should be tied to a vote on increasing the nation’s borrowing limit. But there is less consensus on whether to add to the package a shutdown-preventing spending measure to keep the government funded at current levels beyond Sept. 30, according to sources involved in those discussions.

29 August
(Politico) D.C. IS BEGINNING TO TURN ITS ATTENTION to the likelihood that it will have to pass a massive emergency spending bill to help rebuild Houston. It will take a while for Texas and the federal government to fully assess its needs. But President Trump yesterday promised “rapid action from Congress,” not to mention his vow that the water-logged state will be “up and running very, very quickly,” something that emergency managers and Texas officials have pushed back on. … [one] option is to attach a disaster relief bill to a government funding measure. Upside: As long as the bill didn’t include funding for the border wall, this would help ease the passage of a bill to fund the government and could stop a September shutdown. Downside: Any time Congress lops one measure onto another something could go wrong.

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