The tax bill was signed by President Trump on Friday and is now law. In spite of many good individual features, including the reduction of the corporate tax rate from 35% to 21%, it has the overall negative effect of adding $1 trillion to the national debt over the next decade, and this is after allowing for new growth.
Every Republican Senator voted for this new law. That means every single one of them is responsible for increasing our debt by $1 trillion. This includes Nebraska Senator Deb Fischer, who is up for reelection in 2018. She needs to be chastised for voting for this atrocious law.
I am seriously thinking of entering the Republican Primary against her, if there is sufficient support for my candidacy. Here is a summary of my views on the most important issues. Roughly in order of importance:
Debt. Now worse than ever with the new tax law, we will soon be back to trillion dollar annual deficits. The only real solution is to curtail the growth (no actual cuts needed!) of entitlement spending. Otherwise a new fiscal crisis will soon occur.
Global Warming. The evidence for man-made global warming is overwhelming, including warmer and more acidic oceans, shrinking artic sea ice, and rising sea levels. The best solution is to impose a (refundable!) carbon tax to replace all sorts of ad hoc and arbitrary regulations.
Economic growth. The U.S. is the most prosperous large country in the world and prosperity equates to economic growth. But our economy is now growing at a 3% annual clip and the new tax law is likely to overheat it and cause inflation to take off. This will force interest rates up prematurely.
Trade Policy. Withdrawing from NAFTA would be a disaster for the whole country and especially Nebraska with its export based ag economy. It is China’s mercantilist policies, restricting imports from other countries, which need to be opposed.
Immigration Reform. With a national unemployment rate of 4.1% (2.7% in Nebraska), a severe labor shortage is developing. The solution is to establish an adequate guest worker visa program so that employers can be assured of having the employees they need.
Conclusion. Senator Deb Fischer is simply unwilling to make the tough decisions necessary to shrink annual deficits and thereby control our burgeoning debt. I would be a sensible replacement for her. Will you support me if I run? Let me know at firstname.lastname@example.org.
Donald Trump was elected President a year ago because the white working class is angry about a lot of things, including slow wage growth. The tax burden in the U.S. is lower than in other developed countries and wages are higher in the U.S. even if they are not rising fast enough. The Brookings Institute has carefully analyzed the wage growth issue, here and here, and has delineated several reasons for wage stagnation:
Compensation has lagged behind productivity growth. This is largely due to globalization and technology which has put upward pressure on skills and downward pressure on wages.
Benefits have grown faster than wages, thus holding down wages. The skyrocketing cost of healthcare is mostly responsible for this.
Labor’s share of income, compared to capital’s, has been shrinking. Technology needs less low skill labor. Also, market concentration, i.e. monopoly power, has been increasing, which increases profits and therefore return on capital.
Wage gains have been higher in the higher wage quintiles. This is explained by the increasing wage benefit of more education and higher skill levels.
Manufacturing output is up and employment is down. High technology needs fewer low skill workers and high skill workers are in short supply.
Entrepreneurship, i.e. new business formation, has declined over the past several decades. This is caused by increased business consolidation and would also be relieved by more immigration of high skilled workers.
Labor market slack has declined since the Great Recession. This bodes well for wage increases which are now starting to occur.
Labor productivity growth since the Great Recession has been especially slow. What is needed is increased business investment which is the justification for the current push for lower corporate and business tax rates.
Conclusion. In short, what is needed to boost wages is better education and skills, more business investment, control of the surging cost of healthcare, better trust busting to break up monopolies, and more high level immigration.
With Donald Trump expanding the culture wars and the Democrats lining up with the progressive policies of Bernie Sanders, the national political scene seems to be getting more confusing all the time.
And yet there is remarkable consensus on many levels about what the country really needs:
Faster economic growth would help provide more jobs and better paying jobs for the blue-collar workers which both parties are trying to appeal to.
Tax reform meaning to reduce tax rates, shrink deductions and generally simplify the tax code has widespread bipartisan support, as one way to provide the growth which everyone wants.
Shrinking the debt as a percentage of GDP is widely recognized as critical to the future well-being of our country and especially for the poor who are most dependent on social welfare programs. How to curtail spending sufficiently to get this done is inevitably a highly contentious issue.
Healthcare for (almost) all is now the law of the land, given that the GOP has failed to repeal the Affordable Care Act. The emphasis going forward should be to control healthcare costs for both individuals and families as well as for the federal government (the taxpayers).
Immigration and DACA. There appears to be strong bipartisan support in Congress for giving the Dreamers legal status in the U.S. With a very low (4.4%), and still dropping, unemployment rate, a huge labor shortage is developing in many states, including Nebraska. What the U.S. needs is an expanded guest worker visa program so that all employers are able to find the (legal) employees they need to conduct business. Perhaps DACA reform will lead to broader immigration reform as well.
Conclusion. The above issues should be largely amenable to bipartisan consensus. Both parties would benefit from putting aside petty differences and working together to solve them.
I am a non-ideological fiscal conservative and social moderate. I agree with Republicans on some issues and Democrats on others. It seems to me that there is a lot of common ground between the two national parties and plenty of opportunity for working together.
The economy. Donald Trump was elected President with the support of blue-collar workers. He wants to help them out by speeding up economic growth. But the Democrats also want to give a boost to the working class. Why not lower the corporate tax rate to encourage multi-national companies to bring their profits back to the U.S.? Why not exempt small community banks from Dodd-Frank so they can lend more money to main street businesses?
Sustainable healthcare. After failing to repeal and replace the ACA, Republicans now have to accept that universal health insurance is here to stay even though it needs much better cost control. The popularity of employer provided health insurance makes single payer healthcare unacceptable to many. Two major changes are needed to lower healthcare costs. The ACA Cadillac tax should be replaced by an upper limit on the tax exemption for employer provided insurance. The Medicare Part B premium covers only 25% of the cost of that program and should be increased on a means adjusted basis.
Immigration policy. With the unemployment rate now 4.4% and dropping, a huge labor shortage is beginning to develop which will retard economic growth. We now need more skilled and unskilled immigrants alike. An expanded guest-worker program to meet the needs of employers should be created. Enhanced border security can be part of the mix.
Military spending. In a dangerous world we need a strong military defense. But there is a lot of waste in the Pentagon budget. Do we really need 800 foreign bases in over 70 different countries? Nebraska’s own Chuck Hagel identified $25 billion a year in military waste while he was Secretary of Defense.
Conclusion. Here are just a few ways that the two parties can work together to address some of our biggest national problems. Faster economic growth and fiscal restraint just make common sense.
I am a non-ideological (registered independent) fiscal conservative and social moderate. I was not very excited about either presidential candidate last fall but finally decided to vote for Clinton because of Trump’s sleaziness.
As it turned out Mr.Trump was elected because of his strong support from the white working class, especially in the upper Midwestern states of Wisconsin, Michigan and Pennsylvania. Interestingly, the Democrats are responding by proposing legislation to try to appeal more strongly to blue-collar workers.
Of course I disapprove of Donald Trump’s poor handling of the Charlottesville tragedy but I try to avoid being distracted by all of the drama and rather stay focused on his policies and actions. In this respect there are both plusses and minuses.
On the positive side:
North Korea. He is handling this crisis well simply by working through the UN to condemn North Korea’s provocative testing of ballistic missiles. Also his Administration has clearly stated that the goal of U.S. policy is to denuclearize the Korean peninsula, not to achieve regime change in North Korea.
The economy is still chugging along at 2% annual growth. On the deregulation front, the annualized pace of new regulations for 2017 is 61,000 pages, down from 97,000 in 2016. This is the lowest level since the 1970s and has the potential to speed up growth.
On the negative side:
NAFTA renegotiation is just getting started. Any shrinkage of U.S. exports will badly hurt the economy, especially in states like Nebraska which depend so much on agricultural exports.
Immigration. Mr. Trump proposes to dramatically decrease annual legal immigration quotas, especially for low-skilled workers. This is a very poor idea which will hurt the economy, especially in states like Nebraska which have low unemployment rates.
Conclusion. President Trump’s record at this point is mixed, all the more so since the two very important issues of the 2018 budget and tax reform have yet to be resolved in Congress. Mr. Trump’s election may or may not be good for progress in America. We simply don’t know yet.
Our economy is chugging along at 2% annual growth of GDP, not spectacular but not awful either. The unemployment rate has dropped to 4.3%, and low-wage earners are beginning to see decent pay raises. Furthermore there are good indications that GDP growth may rise in the near future to at least 2.5%, see here and here.
As growth increases, unemployment continues to drop, and wages increase more quickly, severe labor shortages in certain job categories are likely to develop. As the New York Times economics reporter, Eduardo Porter, points out, “The Danger from Low-Skilled Immigrants: Not Having Them.”
Eight of the fifteen occupations expected to experience the fastest growth – personal care and home health aides, food preparation workers, janitors and the like – require no schooling at all.
Low-skilled immigration does not just knock less-educated Americans out of their jobs, it often leads to the creation of new jobs – at better wages.
The strawberry crop in California owes its existence to cheap immigrant pickers. They are sustaining better paid American workers in the strawberry patch to market chain who would have to find other employment if the U.S. imported the strawberries directly from Mexico.
The benefits of immigration come from occupational specialization. Immigrants concentrated in more manual jobs free up natives to specialize in more communication-intensive (English speaking) jobs.
The average American worker is more likely to lose than to gain from immigration restrictions. Halting immigration completely would reduce annual economic growth by .3%.
The Pew Research Center estimates that about 30,000 unauthorized immigrants work in Nebraska, 3.2% of Nebraska’s total labor force. They are heavily represented in a handful of industries, making up 18% of Nebraska’s construction workers, 9% of production workers, and 5% of farm laborers. With an unemployment rate hovering around 3%, the Nebraska economy would be severely stressed without these immigrant workers.
Conclusion. Both in Nebraska and nationwide, the U.S. economy has a strong need for immigrant workers. An adequate guest worker visa program is badly needed to provide legal status to these workers who are so critical to the success of the U.S. economy.
I did not vote for Donald Trump because of his often crude remarks and sleazy behavior. But I am now cautiously optimistic about the prospects for his presidency based on the quality of his nominees for important government posts. Like many of his voters, I “take him seriously but not literally.”
Here is what I think he will do:
Economic Policy. He will try to speed up economic growth, well above the average 2.1% annual GDP growth of the past 7½ years. This can be accomplished with tax reform (lowering tax rates paid for by shrinking deductions), regulatory reform (including paring back Dodd-Frank and the ACA), immigration reform and tougher trade policies. Faster growth benefits the whole country and especially the blue-collar workers who voted for him.
Improving life in the inner cities. K-12 education is a disaster in many inner cities and Betsy DeVos will be a reformer in the Education Department. Ben Carson grew up in public housing and is an excellent choice for HUD.
Foreign Policy. Mr. Trump wants changes from China on currency and trade practices. He also wants more cooperation from Russia in fighting terrorism. He wants our NATO partners to bear a bigger share of their own defense. His Secretary of State designee, Rex Tillerson, supports arming Ukraine against Russia and also supports the TPP trade agreement with Asia. This all sounds good to me.
Fiscal Policy. My biggest concern at this point is our national debt, now 76% of GDP (for the public part on which we pay interest) which is historically high and steadily getting worse. The House Republicans are serious about shrinking deficit spending and hopefully Mr. Trump will support their efforts.
Conclusion. Donald Trump has a highly unconventional (but very effective) style of communication. If it leads to progress in addressing our biggest problems as above, then he’ll have a very successful presidency.
Donald Trump won the presidential election because of his strong support from blue-collar workers who feel aggrieved by the U.S. economic system. Many have lost their jobs in recent years due to technology and globalization. Many others have suffered wage stagnation. Helping this large group of voters is surely Mr. Trump’s primary mandate from the election.
The best way to do this is to make the economy grow faster by implementing smart policies such as:
Corporate tax reform. Reducing the top rate from 35% to about 20% will make the U.S. competitive with other developed countries and induce American multinational companies to bring their overseas profits back home for reinvestment. This will create more jobs and better paying jobs. This can be paid for by eliminating various deductions.
Business tax reform. Allow full expensing of capital investments, paid for by eliminating the deductibility of interest payments. This will strongly encourage more business investment and therefore increase worker productivity.
Individual tax reform. Lower marginal tax rates across the board by 10%, paid for by eliminating most deductions. This would give an automatic increase in pay to the two-thirds of taxpayers who do not itemize deductions and, since most of the pay increase would be spent, grow the economy by stimulating demand.
Regulatory reform. Much can be done to alleviate the regulatory burden on business, see here and here.
International trade rules. “Tearing up NAFTA” would be a huge mistake because the U.S. exports $600 billion annually to Canada and Mexico with a trade deficit of only $40 billion. But NAFTA can be updated with side agreements to address concerns of fairness. Expand retraining programs for workers who lose their jobs to foreign competition.
Immigration reform. Secure our southern border and deport the illegal immigrants who are lawbreakers as Mr. Trump wants to do. Then give guest worker visas to law-abiding employees of legitimate businesses and use eVerify to enforce them.
Conclusion. Changes such as these will give a big boost to the economy and therefore create many new jobs and better paying jobs.
I want to emphasize that I voted for Hillary Clinton on Tuesday because Donald Trump has such a sleazy and mercurial personality. But Mr. Trump was clearly the change candidate and we need change big time. His strongest base of support is the white working class which has not really recovered from the Great Recession of 2008-2009 and he will surely try to help out these people.
Here are the changes we need in order of importance:
Grow the economy faster. Tax reform, individual and corporate, and regulatory reform are what are most needed. Mr. Trump and the House Republicans are in rough agreement on both of these major initiatives and hopefully the new Republican led Senate will go along. The best kind of tax reform means to lower tax rates and shrink deductions enough to avoid losing tax revenue. This can be accomplished if a real effort is made to do it this way.
Begin to shrink our massive debt. This can only be done by major entitlement reform, meaning to control the costs of Social Security, Medicare and Medicaid. Medicare should be transitioned over from a single payer system to a premium support system, consistent with a reformed Affordable Care Act. Healthcare costs can only be contained by giving consumers more skin in the game, meaning higher deductibles supplemented with health savings accounts.
More assertive foreign policy. Worldwide peace and stability depend on our own economic and military strength. Right now China, Russia and Iran think they can push us around. President Trump will not let this happen.
Trade and immigration policy. Most knowledgeable people agree that international trade is generally beneficial. We simply have to do a better job of retraining American workers who lose their jobs to foreign competition. The key to immigration reform is tougher border security plus an effective guest worker visa program.
Conclusion. The Republican House of Representatives has an excellent plan, “A Better Way,” for American economic, fiscal and social renewal and Mr. Trump is largely supportive of it. This augers well for fundamental progress in the next four years.
My last several posts have discussed the strengths and weaknesses of the U.S. economy and where the presidential candidates stand on the main issues. As Donald Trump now slides further and further behind in the polls due to his juvenile tit-for-tat personality, his personal views matter less and less. What does matter now is how the Republican Party will use the Trump disruption to broaden its appeal in the future. Here is a restatement of several of my ideas, influenced by two recent articles in the New York Times, here and here:
Reject tax cuts for the wealthy. But rather support tax rate cuts across the board, paid for by shrinking deductions which primarily benefit the wealthy. Such tax reform will give a sorely needed big boost to the economy.
Help workers displaced by foreign trade with expanded retraining programs and wage insurance. Increased globalization will also boost economic growth but it will stall without greater public support.
Acknowledge that universal health care is here to stay but push for market-oriented changes such as eliminating the mandates required by the ACA.
Disavow mass deportations but set up a firm border security program along with an adequate guest worker program to provide businesses the workers whom they are unable to hire locally. Again, legitimate immigration reform will boost the economy.
Admit that Invading Iraq was a mistake but nevertheless insist on a muscular foreign policy. U.S. economic and military strength provide peace and stability for the whole world including us.
Loosen up on social policy. Insist on restrictions on abortion (e.g. a 20 week cutoff) rather than abolition and work requirements for social welfare recipients rather than cutbacks in aid. In general turn over more social policy regulation to the individual states.
Conclusion. The U.S. badly needs more fiscally conservative national leaders. But conservatives will not prevail in the political process without using more common sense.