Trump’s Debt Blowup and Economic Disruptiveness
The piecemeal plans of the Congress (er Republicans) on the next budget will lead to HUGE (Trumpwise) increases in the National Debt. They will be justified (attempted) by the many-times-disproved trickle-down economics. They have a new word for this called “dynamic scaling”. This not only failed under President Bush, but in Kansas and other states as well.
The Defense Budget has just taken a tremendous boost of $80 billion to $700 billion. Of that, $640 billion is for equipment and $60 billion for expenses in Afghanistan, Iraq, and Syria. This is even $37 billion more than in the Trump budget.
The Trump tax cut is aiming for a $1.5 trillion increase in the national debt. The news on Wednesday claims the newly announced vague plan will be over $2.2 trillion. Last year’s house plan was $3 trillion, with a maximum tax rate of 33%.
The so-called tax simplification to three brackets is not a simplification, since you still have to subtract the base of the bracket from your taxable income to see how much into the bracket you are, and then look up a table or multiply by the bracket’s percentage, and add that to the base tax in that bracket.
While Trump tries to fool us that it is a middle class tax cut, the highest bracket will be cut from 39.6% to 35%. That bracket starts at $418,400.
Business taxes will be cut from 35% to 15% if Trump had his way. Because the debt would increase too much, Trump now calls 20% “perfect”. The middle class may not directly own many stocks to benefit, but most retirement plans are invested in stocks, and would benefit. It certainly benefits the very rich. Would these tax savings go to increase the average wage, or to lower prices and increase international competitiveness, or to just increase the top executive salaries? Yep, you guessed it!
The other brackets would be at 12% and 25%, but where they will start has also not been settled. The lowest bracket is a raise from the present 10%.
The standard deduction will be doubled from $12,000 to $24,000 for families. The mortgage deduction will stay, as will charitable deductions. The child deduction would be raised from $1,000 to more.
The estate tax affecting those with over $5.5 million for single or $11 million for married will be eliminated.
Trump’s “dynamic scaling” Republicans project a 3% growth rate from the tax cuts to grow the economy and eventually make up for the cuts. Economists say the best would be 1.8% or 1.9%.
Overlooked are the hurricane catastrophes that will cost over $200 billion of rebuilding, and business losses from down times. These can continue with climate change over the next budgetary decade, which is the basis of budget projections.
Just like the lack of Republican attention to hurricane damage mitigation in the largest Republican states of Texas and Florida come back to bite you, the Trump Administration’s cancellation of pollution regulations will cause much more expensive clean ups and health problems.
The Puerto Rican debt of $73 billion and total repair and replace costs will weigh heavily. Trump’s bankers’ economics team prompted him to emphasize that they still intend to collect on the debt. When you have Puerto Rico’s 3.4 million people or 1% of the economy left in Trump purgatory of little help, that removes 1% of Trump’s economy for several years, reducing the total to 1% growth from 2%. Trump has shown no indication that he will apply flood mitigation measures to government redevelopment aid.
Health care is 16% of the economy, and Trump backs all Republican efforts to extract $200 billion from health care to fund tax cuts. That is another loss to the economy, as well as the greater number of workers who will become disabled with no health care.
Trump’s deportation of 11 million undocumented, many of whom labor at the base of our economy, like picking crops in California, will be costly to our economy. In particular, the deportation of two million dreamers will lose our $300 billion investment in just sending them through K-12. We will also lose billions they have invested in their college educations.
Investment in scientific research and development pays off many times over in stimulating our economy. One booming area is clean energy sources. Trump’s harsh withdrawal of science research and development funds is losing the talents of many promising students and graduates, and will set back economic growth achieved by past presidents.
The increase in the national debt will not only require more federal interest payments, but will impinge on the availability of credit and drive up interest rates, slowing development.
Not only are Trump’s tax cuts and jump in the national debt unjustified, but the other aspects of his unprogressive policies will make growth even less likely.