…and Thune Backs Tax Cuts to Make Deficit Worse!
September was the last month of the last Obama Administration budget. October was thus the first month for which we can fully, without technical quibbles, assign fiscal responsibility for the federal deficit to Donald Trump.
The federal government began its new budget year with an October deficit of $63.2 billion, up sharply from a year ago.
The Treasury Department reported Monday that the October deficit was 37.9 percent higher than the $45.8 billion deficit recorded in October 2016 [Martin Crutsinger, “US Budget Deficit up Sharply to $63.2 Billion in October,” AP via Fox Business, 2017.11.13].
According to the United States Treasury, that October 2016 deficit was pretty close to the average monthly deficit of $45.3 billion in Fiscal Years 2014 through 2017, President Obama’s four second-term, non-recession/non-stimulus budgets. Month by month in those second term budgets, the federal government spent 12.65% more than it took in. In its first fiscal month, the Trump regime spent 21.17% more than it took in.
Senator John Thune insists that Donald Trump’s tax cuts won’t make that Obama-topping deficit even worse. State Senator and economics professor Reynold Nesiba calls Thune’s thinking horsehockey and recommends a jobs program instead:
“They keep saying that the main gain, when we cut corporate taxes and cut taxes for the wealthy that eventually this income will trickle down to lower income people,” Nesiba says. “I think this is what John Kenneth Galbraith used to call Horse and Sparrow economics, right? That you feed the oats to the horse and the sparrows get what comes out the other end.”
Nesiba says the tax reform proposal as written will add to the deficit.
Nesiba says tax reform needs to focus more on tax cuts for middle to low income people, rather than corporate or high income earners in the country. He says a jobs program would help the economy more than a tax reform proposal [Lee Strubinger, “Thune Optimistic Tax Reform Will Spur Economy Forward,” SDPB Radio, 2017.11.14].
Vice-President former economic advisor Jared Bernstein backs Nesiba—recent economic data show the Trump/Thune cuts won’t trickle down:
…U.S. businesses have been highly profitable for years now — that’s one reason the stock market’s been crushing it — and the cost of investment capital (the rate of interest) is very low. If firms wanted to make more productive investments, nothing’s stopping them, and there’s no reason to think a huge rate cut, from 35% to 20%, is going to do anything other than further boost their profits and share prices. In fact, that expectation is another reason U.S. equities have been on such a tear.
What about wage growth? In an analysis that’s been widely pilloried, including by the economists whose work they cite, President Trump’s economics team claims that their big corporate rate cut will deliver at least $4,000 to every family. That’s a lot of chickens in every pot. But this claim depends on a chain of many weak links: The cuts will boost investment (nope), that, in turn, will boost productivity (maybe), and faster productivity will boost middle-class wages.
That last link is particularly problematic, as important work by the Economic Policy Institute has shown a long and persistent de-coupling of productivity growth and middle-class compensation [Jared Bernstein, “GOP Tax Plan Won’t ‘Unleash’ Economic Growth. It’ll Make Things Worse,” USAToday, 2017.11.13].
Contrary to all their past promises, Donald Trump and John Thune will only make the deficit worse. It’s too bad Donald can’t run the federal budget any better than he ran his businesses… and it’s too bad John thinks people but not the deficit should “get small.”