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Are Trump's Economic Policies Really Making America Great?

August 4, 2018 in Economics

By Thomas A. Firey

Thomas A. Firey

President Trump is nearing his 600th day in office, a lengthy
period that has allowed him to develop, refine, and pursue his
economic policies to “Make America Great Again.” The
approach of this milestone is a good time to survey and appraise
his “MAGAnomics.”

Right now, it appears to be successful. The unemployment rate hovers around record-low
levels, gross domestic product growth topped 4 percent
in the second quarter, and consumer confidence is as high as it’s
been since the late-1990s boom. But economic policy isn’t
just about the present; it’s mainly about the long term. So
how is MAGAnomics doing in that regard?

Fiscal policy

President Trump’s biggest policy triumph so far is the
fall 2017 tax legislation that cut income tax rates
on businesses and individuals, increased the standard deduction and
family tax credit, capped a number of deductions used by wealthy
taxpayers, and ended the Affordable Care Act’s insurance
penalty.

Protectionism mainly
harms the protectionist countries, while trade benefits even
countries with large trade deficits.

The lower business tax rate and the capped tax deductions are
noteworthy achievements. The former reduces the deadweight losson desirable business activity and
brings the U.S. rate in line with the rest of
the developed world. The latter reduces the regressivity of some
parts of the tax code. Those changes will likely endure because
future Congresses won’t want to reinstitute a tax
disadvantage on U.S. businesses or restore a tax advantage for the
rich.

However, the legislation’s overall reduction in
Americans’ taxes will almost certainly not endure because
federal spending wasn’t cut along with the taxes. Trump and
Congress will close the budget gap with more federal borrowing,
returning America to trillion-dollar deficits.

Unless Congress launches into serious budget-cutting, federal
taxes will have to rise to pay those debts, or at least to assure
America’s lenders that they will be repaid. Because of that,
the 2017 tax changes are “fake” tax cuts.

Trade and immigration

The Trump administration’s top two policy priorities are
managing the nation’s international trade and cutting both
legal and illegal immigration.

On trade, Trump has backed out of the Trans-Pacific Partnership,
a pact to lower trade barriers between nations around the
Pacific Rim, and he is threatening to abandon similar pacts with
Europe and the rest of North America.

Trump is now taxing imported steel and aluminum, washing
machines, and solar panels, and has threatened tariffs on
automobiles. He’s also singled out specific nations like
China for general tariffs. In response, China, Canada, and the
European Union are are raising tariffs on U.S. goods.

Such protectionism mainly harms the …read more

Source: OP-EDS

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