1. The Economy Will Be Supercharged
Since the investment boom never materialized, it's hardly a shock to learn that GDP growth didn't boom either. The growth rate increased modestly for two quarters,and then dropped steadily. In the last quarter unaffected by the coronavirus crisis, it was hardly above 2 percent. Not only didn't the tax cut usher in the growth that Republicans predicted, but growth rates started dropping soon after. Although the growth rate increased above 3% for two quarters, it dropped to just above 2% in 2019.
Although new orders for capital goods had spiked to slightly over 10% before the tax cut was passed, the new orders had steadily dropped to slightly above minus 2% late in 2019.
Business investment increased to a high of nearly 6% shortly after the tax cut was passed; however, it plunged to a minus 1% late in 2019.
2. The Tax Cut Will Pay For Itself
Corporate tax receipts plummeted from $240 billion to $140 billion in the first quarter after the tax cut was passed, and have stayed at that level ever since.
The annual federal deficit was almost $600 billion in 2016, and had increased to about $680 billion in 2017. It hit close to $1 trillion in 2019, and recent estimates have it over $1 trillion for 2020 -- pandemic spending will push it even higher.
3. President Trump promised that a temporary "tax holiday" would produce a flood of repatriated earnings -- amounting to $4-$5 trillion -- nearly twice the amount that corporations were actually storing overseas. Repatriations to date (middle of 2020) have amounted to only $840 billion above normal, and the total amount of repatriations in the last quarter of 2019 was only $60 billion higher than it was before the tax cut was passed. The total will never come close to the $4-$5 trillion promised.
Share buybacks have exceeded $200 billion in three of the eight quarters of 2018 and 2019,whereas they never reached even $150 billion in the four quarters of 2017. Some companies have used tax savings to reduce debt, and enhanced bonuses have proven thus far to be a one-time thing.
Foreign direct investment had a small pop in 2018, but dropped to negative territory in late 2019.
4. Your Wages Will Skyrocket
Administration economists and President Trump himself predicted that the annual average household income would increase by at least $3,000 and as high as $9,000. The average household is receiving less than $1,000 annually in tax savings.
5. Jobs, Job, Jobs!
Treasury Secretary Steve Mnuchin said that the tax cut was a "jobs bill." If you look at the total share of the country with jobs -- the "employment-to-population" ratio -- nothing happened after the tax cut passed. It had been growing since the Great Recession and it continued growing at the same rate after the tax cut was passed, until Covid-19 hit.
6. Tax Cuts For All
Contrary to rosy projections of average households getting thousands of dollars in after-tax income, change in after-tax income (by income level) has proven to be very modest. Working poor - 0.4%; Working class - 1.2%; Middle class - 1.6%; Upper middle - 1.9%; and Top 1% - 3.4%. In 2027,the tax rate reductions will end, but the top 1% will continue to benefit from other tax breaks.
8. But Guess What? Corporate Profits Soared
Corporate profits jumped 8% after the tax cut was passed, and they've stayed at their new, higher level ever since. (Source: Mother Jones, July+August 2020, pages 29-31.)
ADDENDUMS:
* Research suggests that the richest 1% of Americans can expect to live more than a decade longer than the poorest 1% -- and that's without the pandemic. (Source: TIME, April 6-13, 2020.)
*A Federal Reserve survey found that 39% of Americans with household incomes below $40,000 lost a job in March, compared with 13% of Americans earning over $100,000. Over a third of people who were laid off couldn't pay their bills in April.
*A Census Bureau survey found that 7% of small business owners said in late April, and early May that they had no cash on hand,and another 9.5% said that they couldn't cover more than a week of operations.
*Federal Judge Lorna G, Schofield refused to stay a case that the Trump family engaged in an illegal pyramid scheme. The lawsuit alleges the ACN Opportunity, LLC company was a "get-rich-quick" scheme that was designed to get victims to give up hundreds or millions of dollars in violation of various state laws.
*Eight billionaires have seen their wealth grow by over a billion dollars apiece during the pandemic.
*For the second year in a row, Iceland will not hunt any whales. Its commercial whaling industry may be at an end. (Source: Paul Rauber, "Up to Speed: Two Months, One Page," Sierra, July/August 2020.)
*In the absence of tourists,poachers are slaughtering wildlife in African parks and wildlife reserves. (Source: Same as above.)
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