The failure of Trump's economic policy - Politics Forum.org | PoFo

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The theory was that tax cuts would drive demand and would allow companies to invest more of their profits. Combined, these two factors would drive growth up to 6 or 7%. Increased growth would increase tax earnings and reduce the federal deficit: "so much winning!"

That theory always was flawed. At best, the tax cuts produced a flash in the pan GDP growth late last year when it peaked at around 3.8%. Now it is down to 2% and declining. Most of us anticipated that the negative effects of the tax cuts would only show after Trump's 4 years in office. Surprisingly, the failure of Trump's policies is already clear today. Why is that?

Instead of investing, companies have used the tax cuts to buy back stocks or to increase dividends. And much of that money ends up in tax havens. The tax reforms have reduced corporate tax to zero, or even less, for same companies. Fedex which had previously paid 1.5 billion in corporate taxes now pays nothing and even has a deposit of 22 million with the tax office. The same applies in varying degrees to Netflix, GM, Ford, Amazon, Boeing, Walt Disney, Merck, etc. Why is that?

Simple! Trump reduced the corporate tax rate from 35% to 21%, but nobody ever paid 35% because companies used loopholes to get most of their taxes back. Trump reduced the corporate tax rate without closing the loopholes. This effectively reduced taxes to zero for many of the profitable corporations.

The corporations are bragging about paying billions in taxes worldwide. They pay taxes in tax havens but not in the markets where they make most of their earnings.

Image

In the last 20 years, the profits declared by the multinationals in small tax havens increased almost 10-fold (left chart). At the same time, profits declared in their major markets stagnated at a low level (right chart). They are robbing us!

Contrary to expectations, US corporations don't invest more in the US. On the contrary, the latest data show that investments are down by 3%. In addition, Trump's fiscal policy has inflated the federal deficit to nearly 1 trillion USD, that's an increase o 26%.

Reduced growth, falling investments, increasing debt, lower credit rating, economic sanctions, trade wars, increasing inequality ... this is a plan made in hell.

Today, Greece has more growth and better credit rating than the US. :lol:

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