The Economy Remains In A Massive Hole
Seven months into the crisis, COVID-19 and the Trump Administrations failure to control it continue to constrain the recovery. While the economy, with the help of the CARES Act, has made critical progress since Spring 2020, output and employment are still extremely depressed relative to their levels before the pandemic. And with labor market gains slowing and economic hardship on the rise, a brutally uneven and needlessly slow recovery will be all but guaranteed unless more fiscal support is delivered immediately.
Repeal Of The Aca Individual Mandate
President Trump signed the Tax Cuts and Jobs Act into law in December 2017, which included the repeal of the individual mandate of the Affordable Care Act . This removed the requirement that all persons purchase health insurance or pay a penalty. The Congressional Budget Office estimated that up to 13 million fewer persons would be covered by health insurance by 2027 relative to prior law and insurance premiums on the exchanges would increase by about 10 percentage points. This is because removing the mandate encourages younger and typically healthier persons to opt out of health insurance on the ACA exchanges, increasing premiums for the remainder. The non-group insurance market would continue to be stable . CBO estimated this would reduce government spending for healthcare subsidies to lower income persons by up to $338 billion in total during the 2018â2027 period compared to the prior law baseline. Trump stated in an interview with The New York Times in December 2017: “I believe we can do health care in a bipartisan way, because we’ve essentially gutted and ended Obamacare.”
$8 Trillion In New Legislation And White House Policies
During President Trumps four years in office, he signed legislation that cumulatively added $7,787 billion to 10-year deficits. His policies reduced tax revenues by $2,098 billion, increased spending by $4,912 billion, and added $777 billion in interest costs.
The main components are listed in Figure 4, and summarized below:
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Trump And The Us Economy: What Can He Take Credit For
Donald Trump promised to tear up trade deals and bring back jobs to the US Rust Belt lost to globalization. Pandemic aside, the American economy has boomed since 2016, but how much is down to the presidents policies?
In the 2016 US presidential election, large swaths of working-class Barack Obama voters switched their support to Donald Trump, who campaigned on a promise to Make America Great Again.
Vowing to drain the Washington swamp that he said had sold millions of US jobs overseas, the billionaire businessman and reality TV show host struck a chord with voters, who had, for years, tolerated the offshoring of high-paying jobs, stagnant or falling wages, and rising job insecurity.
Consequences If Aca Repealed
President Trump and Republicans in Congress tried repeatedly to repeal or replace the ACA, without success. In February 2018, 20 states, led by Texas Attorney GeneralKen Paxton and Wisconsin Attorney GeneralBrad Schimel, filed a lawsuit against the federal government alleging the ACA is now unconstitutional because the individual mandate tax which NFIB v. Sebelius rested on was repealed by the Tax Cuts and Jobs Act of 2017.
Writing in the Washington Post in September 2020, Catherine Rampell summarized some of the adverse consequences if the ACA is overturned by the U.S. Supreme Court:
- 50+ million non-elderly adults with pre-existing conditions could be declined health insurance, or be charged more by insurance companies
- 12+ million low-income persons would become ineligible for Medicaid, thereby losing insurance
- 9+ million persons receiving tax credits to reduce insurance premiums on the exchanges would either pay more or lose coverage
- Minimum essential coverage for prescription benefits and substance abuse treatment would no longer be required in insurance policies
- Children would no longer be able to stay on their parentsâ plans until age 26
- Preventive care would again involve cost-sharing
- More Americans would have healthcare plans without comprehensive protection
- Insurance companies would again be able to impose lifetime limits.
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A Dearth Of Shared Facts And Information
One of the few things that Republicans and Democrats could agree on during Trumps tenure is that they didnt share the same set of facts. In a 2019 survey, around three-quarters of Americans said most Republican and Democratic voters disagreed not just over political plans and policies, but over basic facts.
Much of the disconnect between the parties involved the news media, which Trump routinely disparaged as fake news and the enemy of the people. Republicans, in particular, expressed widespread and growing distrust of the press. In a 2019 survey, Republicans voiced more distrust than trust in 2o of the 30 specific news outlets they were asked about, even as Democrats expressed more trust than distrust in 22 of those same outlets. Republicans overwhelmingly turned to and trusted one outlet included in the study Fox News even as Democrats used and expressed trust in a wider range of sources. The study concluded that the two sides placed their trust in two nearly inverse media environments.
Some of the media organizations Trump criticized most vocally saw the biggest increases in GOP distrust over time. The share of Republicans who said they distrusted CNN rose from 33% in a 2014 survey to 58% by 2019. The proportion of Republicans who said they distrusted The Washington Post and The New York Times rose 17 and 12 percentage points, respectively, during that span.3
Even Before The Pandemic Trump Failed To Unleash An Economic Miracle
President Trumps failure to save the economy from the coronavirus is consistent with his record of failure before the pandemic. Upon inheriting a growing economy with low and falling unemployment from the Obama Administration, President Trumps first order of business was to squander $2 trillion on a taxgiveaway that showered unnecessary benefits on corporations and the wealthy with little to show for it. Like his tax scam, progress on the Presidents other major promises to eliminate the trade deficit that China would pay for the costs of his tariffs that manufacturing would boom everyone would have health insurance not only failed to materialize, but in many cases moved in the wrong direction. The share of Americans uninsured has grown every yearhe has been in office, for instance, reversing six consecutive years of insurance gains prior to his presidency. Rather than put his economic inheritance to good use, President Trump failed to meaningfully change the economys trajectory or achieve his major economic goals before running the economy further into the ground with his mismanagement of COVID-19.
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Colossal Rebuilding Of The Military
Rebuilt the military and created the Sixth Branch, the United States Space Force.
- Completely rebuilt the United States military with over $2.2 trillion in defense spending, including $738 billion for 2020.
- Secured three pay raises for our service members and their families, including the largest raise in a decade.
- Established the Space Force, the first new branch of the United States Armed Forces since 1947.
- Modernized and recapitalized our nuclear forces and missile defenses to ensure they continue to serve as a strong deterrent.
- Upgraded our cyber defenses by elevating the Cyber Command into a major warfighting command and by reducing burdensome procedural restrictions on cyber operations.
- Vetoed the FY21 National Defense Authorization Act, which failed to protect our national security, disrespected the history of our veterans and military, and contradicted our efforts to put America first.
Defeated terrorists, held leaders accountable for malign actions, and bolstered peace around the world.
Addressed gaps in Americans defense-industrial base, providing much-needed updates to improve the safety of our country.
Fair And Reciprocal Trade
Secured historic trade deals to defend American workers.
Took strong actions to confront unfair trade practices and put America First.
- Imposed tariffs on hundreds of billions worth of Chinese goods to protect American jobs and stop Chinas abuses under Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974.
- Directed an all-of-government effort to halt and punish efforts by the Communist Party of China to steal and profit from American innovations and intellectual property.
- Imposed tariffs on foreign aluminum and foreign steel to protect our vital industries and support our national security.
- Approved tariffs on $1.8 billion in imports of washing machines and $8.5 billion in imports of solar panels.
- Blocked illegal timber imports from Peru.
- Took action against France for its digital services tax that unfairly targets American technology companies.
- Launched investigations into digital services taxes that have been proposed or adopted by 10 other countries.
Historic support for American farmers.
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Surpluses Are Usually The Consequence Of Suppressed Wages
This tendency to conflate unlike trade effects effectively misses the point. They do not ignore the impact of imports altogether, but their methodology seems to assume automatically that imports increase real household income by more than they reduce household income through direct job losses. Meanwhile, they simultaneously ignore the ways imports can repress wages or raise indirect unemployment, along with the indirect job losses caused by this wage suppression.
In nearly every country running large, persistent surpluses, the household share of GDP is lower than that of peer countries and trade partners. This isnt merely a coincidence. It is low wages relative to productivity that allows countries to run surpluses, and yet the USCBC analysis seems implicitly to deny that countries increase international competitiveness mainly by directly or indirectly reducing the wage share of production, or that when countries implement policies to improve what they deem international competitiveness, this is usually nothing more than a euphemism for policies that directly or indirectly suppress wages.
That is why they find that more trade can only result in higher real household income. They exclude the possibility that, to the extent a surplus country relies on lowering wages to become competitive enough to run its surplus, it must put downward wage pressure on its trade partners.
Real Disposable Income And Private Consumption
As Trump and Biden adopt a completely opposite strategy as far as taxing is concerned, the impact on real disposable income also moves in opposite directions . The tax relief in the Trump administrations plans results in a rapid pickup of real personal disposable income in the aftermath of the crisis from $43,350 per capita by the end of this year to roughly $47,000 in 2025, $1,000 more than in our baseline. As Biden imposes higher taxes, by 2025 we project personal income to barely touch $46,000 per capita, which is even below our baseline scenario. The effect of higher minimum wages does not offset the impact of higher taxes.
However, as the impact of tax policies starts to peter out, we see a rapid pickup in real personal disposable income after 2025 in the Biden scenario, which is directly related to productivity-enhancing policies which prop up economic growth. In the Trump scenario, growth of real personal income slows down after 2026 to roughly 0.1% annually. Ultimately, the policy packages of both Trump and Biden result in real disposable income being higher in 2030 vis-à-vis the baseline. In the case of Trump, this would lie in the range of 1.2%-2.5%, whereas in the case of Biden, we expect a range of 2.2% to 3.3%.
Not surprisingly, private consumption in the Trump scenario ends up being higher than the baseline in the first few upcoming years , whereas Bidens plans gain traction on private consumption only in the second half of this decade.
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Cbo Scoring Of The 2018 Budget
A budget document is a statement of goals and priorities, but requires separate legislation to achieve them. As of January 2018, the Tax Cuts and Jobs Act was the primary legislation passed that moved the budget closer to the priorities set by Trump.
Trump released his first budget, for FY2018, on May 23, 2017. It proposed unprecedented spending reductions across most of the federal government, totaling $4.5 trillion over ten years, including a 33% cut for the State Department, 31% for the EPA, 21% each for the Agriculture Department and Labor Department, and 18% for the Department of Health and Human Services, with single-digit increases for the Department of Veterans Affairs, Department of Homeland Security and the Defense Department. The Republican-controlled Congress promptly rejected the proposal. Instead, Congress pursued an alternative FY2018 budget linked to their tax reform agenda this budget was adopted in late 2017, after the 2018 fiscal year had begun. The budget agreement included a resolution specifically providing for $1.5 trillion in new budget deficits over ten years to accommodate the Tax Cuts and Jobs Act that would be enacted weeks later.
The Congressional Budget Office reported its evaluation of President Trumps FY2018 budget on July 13, 2017, including its effects over the 2018â2027 period.
How Will Trumps Policies Affect The Us Economy
In a political environment skewed by fake news and alternative facts, the real impact of President Donald Trumps policies is easily obscured. At the recent Tarnopol Deans Lecture Series on the Trump administration and the economy, Wharton experts offered their unvarnished take on the impact of these policies on the capital markets, the dollar, economic growth and job creationand backed them with analysis based on data.
After closing above 20,000 for the first time, the Dow Jones Industrial Average has been giving back some of its gains of late amid a flurry of Trump mandates: escalation of a trade war with Mexico, anchored by a 20 percent tariff on its goods making good on a promise to exit the Trans-Pacific Partnership trade deal in Asia and instituting a temporary immigration ban on seven mainly Muslim countries that could hurt the quality of the U.S. workforceespecially in Silicon Valleyamong others. Initially, the Dow was buoyed by Trumps proposal to substantially cut corporate taxes, roll back many regulations and spend on infrastructure.
Investors and businesses very much like the Republican agenda. Notice I didnt say the Trump agenda, says Wharton finance professor Jeremy Siegel. Why do they like the Republican agenda? Lower corporate taxes, less regulation, lower taxes on interest and dividend income. All that is very, very good for investors.
Coming Trade War?
European Tensions
Immigration Reform
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Enacting Tax Cuts That Overwhelmingly Favor The Wealthy Over The Average Worker
The Tax Cuts and Jobs Act signed into law at the end of 2017 provides a permanent cut in the corporate income tax rate that will overwhelmingly benefit capital owners and the top 1 percent. It also includes temporary reductions in the tax rates faced by the richest households and a temporary tax cut for pass-through business ownersa provision that has been marketed as a small business tax cut but that will actually deliver an even higher share of benefits to top one percenters than the corporate rate cuts will. While TCJA also includes some temporary cuts that could potentially benefit some low- and moderate-income families, these benefits are both stingy and temporary, whereas the tax cuts for the largest corporations have no expiration date. President Trumps boast to diners at the $200,000-initiation-fee Mar-a-Lago Club during the holidays says it best: You all just got a lot richer.
A wide body of research finds that the benefits of a cut in corporate income taxes accrue overwhelmingly to owners of capital instead of to workers. In turn, capital ownership is extraordinarily concentrated at the top of the income distribution. For example, the top 1 percent of households own roughly 40 percent of all stocks, including those owned indirectly in 401s and other savings vehicles.
President Trump Has Failed The American Economy
President Trumps unwillingness to contain the COVID-19 pandemic constitutes one of the most catastrophic failures of leadership in our nations history. His brazenlies about the virus lethality and spread, shamefulefforts to hide critical information from the American people andslander public health experts, and his reprehensible convenings of his very own superspreaderevents across the country collectively illustrate the degree to which he has abdicated responsibility for our nations safety and security. President Trumps refusal to develop a national strategy to defeat let alone contain the virus has resulted in thousands of avoidabledeaths and the most severe economic crisis in a generation.
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Data V Spin: The Truth About Trump And The Us Economy
Can Trump take credit for the economys pre-COVID strength? And did his policies really lift all Americans?
President Donald Trump presided over the final years of an economic expansion in the United States that lasted an unprecedented 128 months. But the record run which began in June 2009 came to a halt this year when the US and global economies fell off the COVID-19 cliff.
In a matter of weeks, tens of millions of Americans found themselves out of work as businesses in every sector shut their doors.
Back on February 4 before lockdown orders swept the nation Trump highlighted his stewardship of the economy during his State of the Union address, telling the American people:
From the instant I took office, I moved rapidly to revive the US economy slashing a record number of job-killing regulations, enacting historic and record-setting tax cuts, and fighting for fair and reciprocal trade agreements We are advancing with unbridled optimism and lifting our citizens of every race, colour, religion, and creed very, very high.
But did Trumps policies really revive the economy for the benefit of all Americans? And does Trump or his Democratic rival, Joe Biden, have the winning policy mix to get the economy back on track as the country remains mired in the coronavirus pandemic?
