The FT reports this morning that:
Donald Trump's new economic team has vowed to push ahead with his far-reaching policy proposals to slash taxes, loosen bank regulation and shake up US links with China and other trading partners.
The pledges to stand firm on Mr Trump's bold campaign promises came as the president-elect on Wednesday nominated former Goldman Sachs banker Steven Mnuchin as Treasury secretary and confirmed the private equity mogul Wilbur Rossas his choice for commerce secretary.Mr Mnuchin told CNBC Americans should expect the “largest tax change since [Ronald] Reagan”.
And:
Mr Mnuchin said on CNBC the Trump administration would create “huge economic growth” by pushing ahead with its plan to reduce the US federal corporate tax rate from 35 per cent to 15 per cent, a goal it will need to negotiate with Congress.
Three thoughts: so much for 'draining the swamp' of Wall Street influence and being on the side of the ordinary American. This is very much business as usual.
Second, it's also supply side reform, as usual. This impoverished idea has not delivered after 35 years of trying, and still won't. It's fiscal policy that is needed now.
And third, that growth estimate is absurd. There is no major US corporation that is not awash with money, or cannot secure all the funds it needs at incredibly low cost. So there is not one investment project in the US that is being delayed by the cost of capital that can in any way be encouraged to start now as a result of a tax cut. The chance that this tax cut will deliver growth is, then, close to zero.
It will increase inequality if it involves heavy rate cuts.
It might increase the rationality of the US tax regime if it solves the problem of remittances, but since they bug the rest of the world and not the US I am not convinced there will be much energy to do that.
So all in all, this is a disaster for the US economy and people in the making.
Watch this space.
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When Ronald Regan tried something similar it seemed very unlikely it would work. Trickle-down economics it was called. Not surprisingly it didn’t work in practice – lower growth rates but more importantly vastly increased inequality between the rich and poor.
Thirty five years later conditions are far worse in the US. Not only is there a body of evidence showing it hasn’t worked in the past; conditions are such that it is even less likely to have the desired effect. Of course the Republican agenda is to shrink the state (to the size of a bathtub) so it in their eyes have the correct effect.
Anymore news on infrastructure build? This was one aspect of the Trump platform I agreed with; but there was always a risk that it would be hijacked by his building cronies.
I must say that not for the first time in recent weeks I do find myself thinking hard about what many of those who voted Trump must think of the disconnect that’s emerging – and, importantly, growing – between what he said during his campaign and what he’s doing/done even before he gets into office. In terms of policies such as this, as with any government, he has a grace period before it becomes apparent what the actual outcome/impact is. We all know that corporate tax cuts will not deliver the forecast growth, and it has already been well documented elsewhere that the benefits of the promised tax “revolution” to blue collar (ie. working class) US citizens will be minimal at best. Nevertheless, that will take several years to become apparent and given what we know of Trump and his media/PR machine we can expect a stream of lies and misinformation to mask and excuse the failure of the policy (and many others, of course) to deliver for poor American citizens(while also masking the fact that the rich are getting even richer).
Furthermore, it’s clear that Trump’s primary form of communication with the US popululation will be via Twitter – a medium that I would argue has been fundamental in providing the platform for the post-truth, slogan based polities and politics we’ve seen emerge worldwide since 2010 – and thus a technology that has done as much damage to democracy as the positive impact the printing press had for its development and spread. Thus, Trumpism will create a policy environment almost solely based on the further – and quite likely terminal – reduction of complex issues to simplistic, “snappy” slogans for public consumption. Meanwhile, the real business of policy making and the interests it serves will be further removed from public scrutiny, and ignorance of the interelated and interconnected systems based world that we inhabit will increase even more than is currently the case. That is, of course, a precondition for the rise of (right wing) populism we are now witnessing across the world.
More interesting in the short term, however, because they are instantly visible, are these and many other appointments. No doubt Trump and his team will take steps to downplay the credentials of individuals who don’t fit into his “draining the swamp” and anti Wall Street narratives. But that’s some ask with high profile people like Mnuchin and Ross and many others. So Trump is now exposed as two-faced and not a man of his word, and indeed appears relaxed about the “swamp” (as many of those in New York and Washington must have known he would be given his wealth). So the intriguing issue in the short term is how this is sold to his supporters and what their reaction will be when they get their first opportunity to have a say in the mid-term elections in two years. Perhaps the republican establishment have more to worry about than their understandable post presidential election triumphalism might suggest?
Maybe support for a recount will gain a very strong momentum
I agree with you about Twitter. I do use Facebook and have found it a mine of useful information, once you sort out the dross. But I would not be able to cope with all the traffic which Twitter generates, which as you say, is the perfect vehicle for meaningless soundbites which become absorbed into the brains of those who don’t bother to think for themselves. I know that Richard and many others whom I admire use Twitter but I bet they don’t read everything presented. I do try to scan everything on Facebook and continually unfollow friends whose posts have not proved fruitful or are excessive. (I’m probably talking a load of nonsense about Twitter though.)
My heart sank when I heard about the probability of tax cuts being brought in yet again in the US. Those people who voted for him have been had again it seems already.
So Trump is draining the swamp to refill it with people from the cesspit that is corporate America and the top 1%? Groovy!
It looks as though this might be a one term presidency. Which means that Trump and his voting technicians know this too. So almost in an Orwellian way, this can only mean that Trumps administration will be looking for a fall guy in order to whip up nationalistic sentiment?
So who will it be this time? My worry is that it will be Iran. And when I say ‘worried’ I am REALLY worried. And boy do I want to be wrong.