Supply-side heroics

Donald J. Trump @realDonaldTrump 7:44 AM – Jun 15, 2019: “The Trump Economy is setting records, and has a long way up to go….However, if anyone but me takes over in 2020 (I know the competition very well), there will be a Market Crash the likes of which has not been seen before! KEEP AMERICA GREAT”

Just another supply-side creep who hopes the inevitable crash from mediocre economics happens after he lies his way into a second term. [In case you don’t recall Ronald Reagan’s White House career]

Two-Thirds of Business Economists See Trump Recession by End-2020

Two-thirds of business economists in the U.S. expect a recession to begin by the end of 2020, while a plurality of respondents say trade policy is the greatest risk to the expansion, according to a new survey.

About 10 percent see the next contraction starting in 2019, 56 percent say 2020 and 33 percent said 2021 or later, according to the Aug. 28-Sept. 17 poll of 51 forecasters issued by the National Association for Business Economics…

Forty-one percent said the biggest downside risk was trade policy, followed by 18 percent of respondents citing higher interest rates and the same share saying it would be a substantial stock-market decline or volatility.

The reality of supply-side economics is failure. Trump’s added difference is in also increasing the national debt another trillion dollar$

Roubini Warns of ‘Perfect Storm’ for U.S. Economy in 2020

Not exactly a surprise. Supply-side “solutions” used to justify tax breaks for corporations and the wealthy have never resulted in anything other than recession. Roubini explains his analysis more clearly and thoroughly than I might. Watch the video. Bloomberg has blocked linking directly; but, you can click through to YouTube.

Yes, Roubini’s a conservative economist. In this instance, his prediction of doom and gloom is founded on the track record of Republicans who try this every decade or so – and fail each time.

Someone Tell Republicans it is 2017, Not 1981 — and Trump Ain’t Reagan

❝ It’s not 1981 anymore. That’s the message of an editorial in the conservative Weekly Standard, which warns Republicans not to design a tax reform patterned on the one that Ronald Reagan signed in his first year as president.

Mimicking the Reagan tax cuts is a temptation both because of Republicans’ enduring admiration for the 40th president and because his program has been the source of the economic ideas they have championed ever since his time in office.

❝ But the Standard is right that times have changed. That doesn’t mean the Gipper’s basic disposition toward lower and less onerous taxes needs to be junked. It means that today’s Republicans (and Democrats!) need to grapple with four differences between our time and his.

❝ First: The federal debt is much larger now…

❝ Second: The top individual income tax rate is a lot lower than it was in 1981…

❝ Third: The payroll tax for Social Security and Medicare has grown in importance while the income tax has shrunk…

❝ Fourth: The corporate tax rate has become a bigger problem. It has fallen since 1981…But other countries have cut their rates further.

I have my doubt if few – if any – Republicans have the economic smarts to move beyond ideology their electoral base thinks is heavenly writ. Establishment Democrats retain their backbone [or absence of same] problem.

Republican Tax Cuts — Lies & Myths

Bruce Bartlett helped draft the 1981 tax cut while on the staff of Rep. Jack Kemp of New York. The Kemp-Roth tax bill was the basis for this legislation. He is the author of Reaganomics: Supply-Side Economics in Action, published in 1981.

❝ Stymied by Congress’s failure to repeal Obamacare, President Trump hopes to get an easy legislative victory by turning again to the same well that Republicans have drunk from so often in the past—a big tax cut. All thoughts of fundamental tax reform appear to have been abandoned and the tax cut will simply add enormously to the deficit that Republicans railed against continuously when Barack Obama was in office.

❝ Republicans will make grandiose claims for the growth effect of their tax cut—Treasury Secretary Steve Mnuchin has said there will be so much additional growth that federal revenues will not fall because the economic pie will be so much bigger.

❝ We have heard such claims before and they proved to be groundless. Indeed, they are simply lies. The purpose of cutting taxes is not in fact to raise growth but to downsize government, which is an end in itself for Republicans, whether or not it raises growth. They believe there is only so much freedom to go around and when government gets bigger it necessarily comes at the expense of individual liberty. Therefore, cutting government is per se a good thing…

❝ As of 1988, the Economic Recovery Tax Act of 1981 reduced revenues by a total of $264.4 billion, according to Reagan’s last budget. Various tax increases took back $132.7 billion of that. I’ve always wondered how many Republicans who assert that higher growth from the tax cut paid for much of the cost of the tax cut are implicitly counting revenues from legislated tax increases in their calculations? It is my observation that few Republicans today know that Reagan ever raised taxes and most would be shocked to find out that he raised them a lot. The 1982 Tefra bill was the largest peacetime tax increase in American history…

❝ I would not deny that the 1981 tax cut stimulated economic growth to some extent, but Republicans have a tendency to attribute all of the increase in growth after 1981 to the tax cut, when in fact much of it was the normal bounce back from the economic recession that began in July 1981 and ended in November 1982, according to the nonpartisan National Bureau of Economic Research…

❝ Trump may be right that the Republican Congress will once again abandon any semblance of concern for the budget deficit and enact yet another budget-busting tax cut. But no one should be under any illusion that it will do much to raise economic growth or reduce unemployment — certainly not enough for the tax cut to pay for itself. That is a fairy tale at best and a rank lie at worst.

RTFA if you’re an economics geek, too. Lots of alleyways to examine. A forest of concern and craptastic Congressional blather to overcome. Bartlett’s credentials and experience is valuable. He’s not only been down this road before — he worked for the creeps who built it, mostly as an experiment that failed.

Thanks, Barry Ritholtz