Trump’s first year as president has been a largely controversial and divisive term. His ambitious campaign promise to “Make America Great Again” has ostensibly been effective. US unemployment has dropped to a 45-year low, coupled with a steady forecasted growth in GDP of two to three percent and a Goldilocks economy, characterized by one without too much inflation or deflation. Therefore, if his effectiveness as president were to be assessed via economic indicators, Trump would appear to be doing relatively well, despite his lack of experience.
However, economic indicators when considered in isolation are meaningless quantifiers. Sure enough, they might paint a rosy picture on the whole for political candidates on which to repeatedly harp. However, they are insufficient to truly capture the impacts on the everyday American public. In this case, have these healthy economic indicators actually led to a “greater America” for all?
One of Trump’s biggest acts upon assuming office has been the Tax Cuts and Jobs Act, which has slashed corporate tax rates from 35 percent to 21 percent. The act hopes that passing tax cuts on business will help stimulate the economy, which would lead to a trickle-down effect to benefit the average American, which is largely premised upon Reaganomics. However, the key consideration to note is whether or not the boost in economy would help offset the fall in revenue from the tax cuts. By considering the impacts from an economic perspective, as shown by the Laffer Curve, these tax cuts only worked in the past because the tax rates were in the prohibitive range. However, modern tax rates are half of what they used to be, and relying blindly upon trickle-down economics to bring about the promised jobs might be nothing but a sham.
In fact, companies such as Cisco, Pfizer and Coca-Cola have stated that they intend on passing cost-savings from the tax cuts to investors through increased dividends, as opposed to increasing jobs for the American public. Therefore, these tax cuts might not necessarily bring about the jobs as promised, which begets the initial question, does this truly benefit the American public?
Taxation has always been a tricky business. After all, no one likes handing their hard-earned money to the government on the pretext of “improving our country.” However, much as it is loathed, taxation is a necessary evil, built upon a progressive and equitable system, to redistribute wealth and minimise the wealth inequality: a system that stands contrary to the Tax Cuts and Jobs Act. Yes, in absolute figures, everyone seems to be on the winning end; we all get to keep more of our income. However, with every choice that we make, there is an opportunity cost that we incur, and similarly, every seemingly “winning” decision comes with its fair share of consequences.
Reducing taxes across the board also reduces the taxes that the rich pays, and by considering this in terms of absolute figures, the money that the wealthy contributes to government revenue also decreases significantly. This fall in revenue not only worsens the current fiscal deficit that the government faces but also places an increasing burden on the government to allocate funds sparingly for public needs such as education and housing. In fact, a report by a think tank found that taxpayers in the top one percent (those making over $730,000) would be receiving 20 percent of the total tax cuts, amounting to $37,000. In contrast, a typical American family would only receive a tax cut of $1,182 in absolute figures. Furthermore, the repeal of the estate tax and alternative minimum tax are two of the many other ways in which the rich are benefitting, ultimately, at the expense of the poor.
It is without a doubt that the US economy appears to be doing well currently, despite potential negative future implications arising from Trump’s protectionist policies. However, the consideration of economic recovery in its entirety has largely been centered around the rich, as opposed to truly reaching those who need it. If the conversation focuses on only the wealthy, how can this economic recovery truly be what makes America great again?