20 September, 2018

Blog

Trumponomics Of Tax Cuts

By Ameer Ali

Dr. Ameer Ali

President Donald Trump’s extraordinary tax cuts or fiscal handout delivered to the U.S. corporate sector and high net-worth individuals, along with his other equally extraordinary resolve to emasculate Obama Care to leave millions of ordinary American citizens without affordable health insurance and at the mercy of the medical and pharmaceutical industries, in addition to his other actions such as withdrawing from international trade and climate agreements,  threat to levy import taxes on foreign manufactured goods and to punish American companies operating in foreign soils and exporting to the U.S. are all solid evidence of one indisputable fact: that is, his election slogan, “Make America Great Again” is a sinister scheme to resurrect the mercantilist economic model of the so called benevolent dictators of pre-industrial Europe. In that model economic growth was assumed to be a zero-sum game and Trump’s policies to Make America Great Again are at the expense of making others small again. To achieve this goal he is even prepared to risk one or two wars. This is evident from the way his regime is handling U.S. relations with North Korea, China, Russia, Iran and the Middle East.

The move to offer this generous fiscal handout to the corporate sector and rich individuals will certainly draw the supply siders and free marketeers to the Trump camp. The IMF, World Bank and Wall Street would welcome the Trump initiative and would urge other nations to follow suit.  Even without the IMF/WB/WS pressure the contagion effect of Trumponomics will compel other competing national economies to join the Trump bandwagon. Already, no sooner the tax bill was passed in the U.S. Congress treasurer Morrison of Australia sounded the idea of following the U.S. leader to protect Australia’s tottering competitive economic edge. Likewise all OECD economies are bound to catch cold from the U.S. sneeze.

However, the economic, social and political implications of this fiscal profligacy are set to worry the leaders of many countries, both inside and outside the OECD, who are already struggling to balance their budgets and reduce national debt. The revenue short fall to the US government in particular and to others if they were to follow Trumponomics will run into trillions of dollars. To compensate for this loss governments would be forced to continue even more aggressively with broadening the tax base and cutting public expenditure, the two favourite prescriptions of the IMF and World Bank. Broadening the tax base by increasing expenditure taxes like the GST or VAT will shift the tax burden yet more disproportionately to the poorer classes of the community; and equally, measures to cut public expenditure would involve downsizing the public sector causing further retrenchment of public servants, reducing fund allocation to health and education and restricting further the welfare entitlements to the sick, aged and other vulnerable. Politically, governments would justify and market these measures in terms of achieving efficiency, increasing economic growth and creating more employment. There is no hard evidence to support these outcomes. But the impoverishment of significant sectors of the population in consequence of these measures is unavoidable.

One of the assumptions behind the massive tax cut is that it would have positive effects on investment, employment and wages. There is no guarantee that these would happen. The late Kenneth Galbraith, a witty post-Keynesian institutional economist compared this strategy with feeding a horse with oats so that its droppings from hind would feed the sparrows. The little benefits that would follow from these cuts will be no more than crumbs falling from the master’s table.

Investors are not going to invest more just because of tax reduction. They will do so only if they expect their profits to maximise, which in turn depend on the forces of supply and demand.  Of course tax reduction would reduce their cost, but if the demand for their output remains sluggish which rational investor is going to bury his capital just to accumulate unsold stocks? Even if world demand increases it does not guarantee that there will be robust growth in the job market because all major economies at present are saddling with significant excess capacity. Also, the current brain-brawn saving technology is another menacing factor for job seekers to contend with.  The continuous weakening of labour unions since the late 1970s has sapped the bargaining strength of labour, and profit maximising entrepreneurs are not going to squander their tax cut benefit by offering higher wages altruistically. Ethics and morals are not part of rational economics. Most probably real wages would fall even further.

Even to the U.S. economy the intended benefits of the fiscal handout may turn out to be a mirage if U.S’ competitors were to counter the Trump move tit for tat. Every initiative of the Trump administration to lure U.S. and other companies to relocate in America and to kick the U.S. economy including his punitive measures targeting recalcitrant firms would turn out to be counterproductive.

The most pernicious effect of Trumponomics will be on developing countries. These countries since the onset of so called globalization from the 1980s went almost on their knees to entice foreign capitalists and multinationals to invest in their domestic economies. Their governments offered unprecedented incentives such as rock bottom wages, tax free holidays, strict labour discipline, and lax environmental and human right regulations in order to entice foreign entrepreneurs and MNCs. Now, strengthened by Trumponomics’ attraction to relocate their enterprises in the U.S these foreigners would use Trump’s fiscal trump to extract even more concessions from these poor nations.   

All in all, the fiscal handout by Donald Trump does not augur well to the prosperity of world economy and world peace. Global discontentment with neoliberal economics is already on the rise as we have witnessed since 2000, and Trumponomics quite inadvertently may speed up the collapse of the neoliberal order. Hurrah!

*Dr. Ameer Ali, School of Business and Governance, Murdoch University, Western Australia

Print Friendly, PDF & Email

Latest comments

  • 2
    2

    This man will take this world into WW3. Wait and see ..people of US better get rid of him soon..His popularity is gone down now

    • 0
      0

      Dr. Ali,
      Thanks for your analysis. The same neo-conservative Trickle Up Economic Policies are being pushed in Sri Lanka by the Millennium Challenge Corporation that is providing Fake Aid for Trade, and Fake Development advice and experts (like the Fake Corruption Investigator) to Bond Scam Ranil’s Office!
      It was this MCC outfit that drafted Ranils Vision 2025 and Regaining Sri Lanka. Bondscam Ranil is an economic hit man who works for the deep State’s security interests and the Global 1 percent.. They want further currency depreciation in Lanka and poor countries to buy their assets cheap via shadowy hedge funds and banks like Credit Suise.
      Trickle Up to the Global 1 percent, not Trickle down in the name of the game of the Washington Twins and triplets.

  • 4
    2

    Dr. Ali,
    Have you tried to publish your opinion ( Sinister plans of current USA president ) in any Murdoch University publication or any Australian journal ? I think you can only publish this kind of opinion in SL web sites… Because of US decision to move their embassy to Israel side of Jerusalem…. your intellect or see things objectively is shattered…
    Read again on US trade deficit figures and how Wall Street react after Trumponomics .. USA, West, Asia trading Indexes keep going up .. all at record highs… this is the reality and truth.. You can’t say Trump is 100% failure…

    All agree that Obama was very intelligent and very humane US president. Was Obama succeeded in reducing Muslim world hatred and dislike towards USA/West? Or improved USA public security in respect to Muslim attacks in US land What would Trump “sinister plans” achieve in the end of his term in this respect? Worse …. Better… Evil Vs Evil make things calm too. After Prabakaran took arms in 1983, SL ethnic riots “SB killing/harming Muslims or Tamils” were completely stopped .. Not a single incident until the Prabakaran’s death in 2009……

    • 1
      0

      AVB Trump haters will never admit to any of his successes. US job growth is up stock market didn’t crash and burn its the opposite. Workers are getting tax cuts. ISIS Obama’s JV terrorist are been decimated. Hollywood super rich hypocrites are in denial and on Prozac & snorting heroin. World war three has not started. So far no Russian connection to Trump but lots of evidence against Clinton’s and Obama giving pass to terrorist Hezbollah to run drugs and FBI working hard to defeat Trump.
      All his critic’s got egg on their faces and the intellectuals falls in to Nassim Taleb so eloquently describe” category of Intellectuals Yet Idiots”

  • 1
    2

    This is crazy man works for Isreal..he will have more trouble to US and for world. You wait and see ..some says he got a lot of personal problems and he does not suit to be president.
    See how many people resigned from his cohort. His days are numbered

  • 1
    0

    Months before this beauty pageant organizer/reality show host took over the country, he mocked and criticized Obama, for the steady job growth numbers, accusing him of doctoring it, the next month after he took over, he took credit for the same numbers from the same source, and experts knew that these were Obama’s policies that were affecting that growth. That is how this clown operates. His lies were published in the New York Times months ago, and it filled up an entire page. It is a pity, that those who voted for him disregarded the fact that a man caught on tape bragging he groped women, and forcibly kisses them, who lies, insults women, and even the disabled, accused the previous President of wiretapping him, which was denied by US intelligence, gets his information from Fox News and right wing sources like Breitbart, who deal with conspiracy theories, who has no clue how to be president and lead, had not worked for one hour in any public office, who insulted and lied about his opponents within his party, and then Clinton, and despite the Republicans bragging about “Christian values”, accepted a man who has 5 children from 3 different wives, and committed adultery in between. Poor judgement? Indeed.

    President Obama was not a perfect President, yet he left the White House after 8 years with no scandals, investigations, and high approval ratings at home, and abroad.
    It has been nearly 1 year, and the Trump White House has been tarnished with investigations, and scandals. No other new administration has had the president’s son, son in law, and 20 members of his administration, been caught lying about secretive meetings with Russian agents, and it has resulted in indictments, admittance of guilt, and one under house arrest. A Special Counsel now investigates the entire administration.

    • 1
      0

      Chitora,
      How SL intellects criticised Bush when he was the US president? For most SL pundicts, Bush was the most foolish man in the earth.. After all “foolish” American people gave him second term too.. Intelligent SL analysts were furious… How do we compare final outcomes of Bush’s two terms, Clinton’s two terms and ultra intelligent Obama’s two terms? You said Obama left without scandals ? Is that what great American people expect from their executive president
      As SL people who are responsible for electing liars, thieves, fools for 70 years, criticising Western people’s ability of electing their leaders.. what a joke..

  • 0
    0

    ACTUALLY, everyone in the 30,000 to 300,000 USD annual income bracket will see a tax reduction. Economy is booming. Record holiday season shopping spending a big $33Billion dollars HIGHER than last year and highest since the recession ended. DJIA has seen massive rapid rise. People’s retirment accounts (403Bs and 401Ks ) are growing fast; College Savings funds 529s are growing too. Petrol cost is stable. Trump is building upon what Obama did; Obama helped create steady growth in jobs and a very steady growth in the DJIA. It just is a fact that Investors and Companies are happy with the corporate tax cuts. Your arguments written from a capitalist nation enjoying democracy and capitalist salaries you cannot make elsewhere are ludicrous.

    • 1
      0

      Trump is not building upon what Obama did, he is benefitting from it, but it will not be for long because Trump is reversing policies, and stripping Obama’s legacy. Anything that has the Obama name is being destroyed by Trump.
      The middle and lower class has a small tax break, but in a few years, that will end, and they will end up paying for Trumps and his rich buddies tax breaks. Trump’s tax break will result in a deficit of 1 trillion plus dollars. He is basically an idiot, and many those who voted for this ridiculous tax cut, will most probably lose their seats in congress.

  • 0
    0

    Ameer Ali
    The darker side of democracy is showing!
    Elections are the vehicle to enhance the wealth of the wealthy. In the past this was done surreptitiously. Now it is more open. The modus operandi is to distract attention.
    Trump is doing exactly that. ‘Make US great again’ is very catchy! Got elected. Tax cuts and the Jerusalem thinghy. Invasion of Iran is past the planning stage. Timing: Just before second term elections?
    We, the Lankan silent majority, see this happening. Here ‘Who holds the rein owns the wealth of the country’ is the driving force. A gamble to hold perpetual power failed on 08 January 2015.

Leave A Comment

Comments should not exceed 300 words. Embedding external links and writing in capital letters are discouraged. Commenting is automatically shut off on articles after 10 days and approval may take up to 24 hours. Please read our Comments Policy for further details. Your email address will not be published.