A year and a half ago I argued against the Republican belief that cutting taxes will benefit the economy and pay for themselves. Granted, tax cuts can increase consumer spending in the short run and that’s good for the economy. But it also balloons the budget deficit and the national debt.
Now, in August of 2019, we see signs of an upcoming recession. This is nothing but bad news for President Trump as a recession would likely doom his reelection.
Hoping to stave this off, in the last few days he’s suggested another round of cuts to payroll taxes (in fairness, as I write this, he now claims he’s not considering it. Then again, since he reacts to the last thing he saw on Fox TV who can tell what will happen?
There are times when higher deficits make sense, and President Obama’s quick action to recover from the Great Recession added to both the deficit and the debt. Ironically, this led to a recovery that lasts to this day. and a recovery that President Trump claims credit for.
But our economy rises and lowers, booms and busts. Frankly we are overdue for a downturn. President Trump clearly hopes not so much to prevent the inevitable next recession as to delay it until after the election 15 months from now.
But here’s the problem: his proposed payroll tax cuts work like taking cash advances on your credit card. Responsible consumers sometimes use cash advances in a short term crisis. But responsible consumers know that they need to plan a path to their repayment. Maybe the need cash to relocate for a better job or make a necessary purchase. Irresponsible consumers, who don’t have a repayment plan, learn eventually that they’ve dug a hole they can never climb out of.
Unlike the United States, irresponsible consumers can declare bankruptcy. Our nation can’t.
And we are led by a President who has declared bankruptcy six times.
Can somebody tell him that the United States economy can’t?