Friends, my latest article considers what stance President Trump should take on fiscal matters heading into the 2020 election. We know where the Democratic candidate will stand: he/she will promise the moon and the stars to American voters -- a veritable bonanza of new federal spending. See what you make of my advice on how Trump should respond...
President Trump: In 2020, Embrace
Fiscal Responsibility, Not Tax Cuts
As
Democratic presidential candidates stumble over one another in a
headlong rush towards socialism and fiscal insanity — promising
trillions in new spending
on everything from child care, health care, and higher education for
all, to “the Green New Deal,” to slavery reparations —
President Trump faces a critical choice.
He could try to
match the Democrats and promise more expansive government programs;
he could instead offer to put more money in Americans' pockets
through tax cuts; or he could do neither and stress the theme of
fiscal responsibility, holding the line on new spending and tax cuts
in favor of reducing the federal deficit.
Although
the last choice is the least exciting, especially in an election year
when people expect to be offered a cornucopia of “free stuff,” it
is the right choice for America, especially given the fiscal
challenges we currently face. This year our deficit will
exceed $1 trillion
for the first time since the Great Recession. Now is not the time,
therefore, to be spending wildly or to be slashing government
revenues via tax cuts. Now is the time to tighten our belts and
return government finances to long-term sustainability, especially
given the fact that the aging of the U.S. population means that
massive spending obligations are coming soon.
To
date, President Trump's philosophy on federal spending has been
ambiguous. On one hand, he touts fiscal responsibility and a
commitment to reducing federal deficits. On the other hand, Trump has
cut taxes and simultaneously presided over a massive
increase in spending.
Often, he boasts
about his administration's “investments” in Republican priorities
like immigration enforcement and defense. Arguably, Trump is playing
the Democrats' own game, parroting their view that a politician's
virtuosity and even his humanity can be measured by his willingness
to spend other people's money.
Lately,
there is some evidence that Trump's advisers want to double down on
this high spending/low taxation strategy for currying favor with
voters. Although the 2017 Tax Cuts and Jobs Act already lowered
middle class taxes — albeit modestly — now the Trump
administration is considering
further reductions
to the marginal tax rates that apply to the middle class. The idea
seems to be to establish a 15% rate that will kick in for those who
may now be paying 22-24%.
No
one likes income taxes or the IRS, but the American people ought to
be skeptical of such proposals. Already, our deficit has inched up to
almost
5% of GDP,
a level that economists believe to be unsustainable. Trump's previous
tax cuts were close to revenue neutral, but cuts on the scale now
being proposed could be far more serious. Keep in mind the broader
context: Social Security, Medicare, and Obamacare spending is all
forecast
to surge
in the coming years. So far, inflation and interest rates have
remained low, and the U.S. has been able to service its huge national
debt with relative ease. If we were to depart totally from the path
of fiscal responsibility, however, as Trump's advisers suggest, we
have to wonder whether the wheels could come off of not just federal
finances, but the overall U.S. economy. In that case, a negative
feedback loop could lead to a severe recession, or even a depression.
President Trump
should also consider the political optics of advocating for further
tax cuts in an election year in which the eventual Democratic
candidate will be promising the American people a laundry list of new
entitlements, as well as tax breaks. Does Trump really want to
compete with the Democrats for the job of Benefactor-in-Chief, or
would he be better off drawing a sharp contrast with free-spending
liberals? The Democratic candidate will be offering a vision of
unprecedented growth in governmental power, unbridled hostility to
job creators, and almost limitless federal spending. Presumably, it
would be easy to argue in response that Democratic promises are empty
and/or reckless. If Trump is making irresponsible claims and promises
of his own, though, about either spending or taxation, his appeal as
the economic voice of reason could be blunted. A socialist could then
enter the White House by the back door.
My advice,
President Trump, is to be honest with the American people. Tell them
that, at this point in our history, huge new spending commitments are
neither affordable nor prudent. In addition, given the future
expenses that are already locked in, especially for Social Security
and Medicare, it's clear that further tax cuts would be
irresponsible.
If President
Trump makes this his economic message going into 2020, he can frame
the election as one of realism versus socialist fanaticism.
That sounds to me
like an election that Trump can win. In fact, it sounds like an
election in which only a fool would vote against him.
Dr.
Nicholas L. Waddy is an Associate Professor of History at SUNY Alfred
and blogs at: www.waddyisright.com.
He appears weekly on the Newsmaker Show on WLEA 1480.
And here it is at American Greatness:
https://amgreatness.com/2019/11/14/embrace-fiscal-responsibility-not-tax-cuts-in-2020/
And here it is at American Greatness:
https://amgreatness.com/2019/11/14/embrace-fiscal-responsibility-not-tax-cuts-in-2020/
