The payroll tax supports Social Security and Medicare. Cutting it is a quick way to infuse money into a faltering economy because the cuts are most likely to be spent by consumers rather than saved or invested. But cuts also leave Social Security and Medicare underfunded and Republicans — notably Mitch McConnell — often threaten cuts to these programs because, according to him, these “entitlements” (rather than tax cuts) are the reason for the nearly trillion-dollar deficit we now have.
Lately, Trump has floated the idea of payroll tax cuts as a means of saving the economy from the damage his trade war has brought on. Let’s be clear: This scheme is not going to succeed because a payroll tax cut will not get through a Democratically-controlled House of Representatives (unless, of course, we’re in a dire recession and no other means of fiscal adjustment can be passed in the Senate.) But this latest wild-eyed move by Trump reminds us of several of his other economic schemes that have failed to come to pass.
It’s worth recalling these broken promises as we gear up for the 2020 campaign. The list below comes from the Washington Post‘s Finance 202 column:
Middle-Class Tax Cut
Trump spent the weeks leading up to the 2018 midterms talking up a 10 percent middle class tax cut he said congressional Republicans would unveil after the election. “It’s going to be put in next week, 10 percent tax cut,” Trump told a Houston crowd at an Oct. 22 rally. The president claimed he’d been working on the plan for months with then-House Ways and Means Committee Chairman Kevin Brady (R-Tex.), though Brady at the time directed questions about it back to the White House. The effort unraveled before a proposal was unveiled. (That push itself was borne of a recognition that Trump’s signature 2017 tax cut failed to live up to its billing as focusing on the middle class, instead tilting its benefits disproportionately to businesses and the rich.)
Can you say “Infrastructure Week?”
Trump campaigned on a promise to pursue a major infrastructure package, an initiative that moved to the back burner as soon as he took office. But he has returned to the issue repeatedly, vowing to implement “the biggest and boldest infrastructure investment in American history,” and pledging at least a half-dozen times to make the matter a top priority. The project has gone nowhere. And the administration’s attempts to build momentum for it by declaring an “Infrastructure Week” have become Washington shorthand for its hapless efforts to stay on message amid nonstop controversies.
Breaking up the big banks.
Trump also campaigned on a pledge to break up the big banks by restoring the Glass-Steagall Act’s firewall between commercial and investment banking. Back in 2016, he said he was “not going to let Wall Street get away with murder. Wall Street has caused tremendous problems for us.” But his handpicked regulators have pursued what has amounted to a deregulatory bonanza for Wall Street, including most recently a rewrite of the “Volcker rule” that mega-banks have been agitating for since the imposition of the post-crisis rules on the industry. The entire drive has raised alarms among former Federal Reserve officials, who have voiced concern the changes could exacerbate the next downturn.
Eliminating the debt.
Trump as a candidate promised to eliminate the federal debt within eight years. Instead, he’s on track to leave it 50 percent higher. The deficit is swelling to over $1 trillion annually, thanks partly to diminished revenue as a result of Trump’s $1.5 trillion tax cut (which the administration pledged would pay for itself, though it isn’t) and higher federal spending.
Protecting consumers amid the trade war.
Trump has insisted throughout his trade war with China that American consumers have been held harmless while Chinese exporters bear the burden of tariffs he’s imposed on the goods they ship to the U.S. Trump came the closest to an acknowledgment that domestic consumers are in fact on the hook when he last week postponed some import duties set to hit next month until mid-December, a move he said was aimed at shielding Christmas shoppers. Multiple studies, however, confirm that American businesses and consumers are already shouldering the vast majority of the tariffs. JPMorgan Chase economists now estimate Trump’s existing tariffs are costing the average American household $600 a year, a sum that will rise to $1,000 if he follows through with the next round of levies.
Lowering the trade deficit.
Trump’s animating drive in his trade offensive has been reducing America’s trade deficits with its key trading partners. But, the U.S. trade deficit has actually grown during Trump’s presidency:
Trump also pledged to usher in a manufacturing renaissance, a core element of his appeal to blue-collar workers in the Upper Midwest who helped deliver his victory. Per Heather, “Trump’s tax cuts helped boost manufacturing in 2018 (blue-collar job growth hit the fastest pace since the early 1980s), but the president’s tariffs have since taken a toll, sending manufacturing into a “technical recession” in 2019.” The chart:
And here, per the New York Times’s Jim Tankersley, is a look at the Institute for Supply Management’s Purchasing Manager’s Index, another measure of manufacturing activity that shows the sector’s performance dipping close to recession levels:
Boosting economic growth.
Perhaps most relevant to the Trump administration’s consideration of new stimulus measures is the economy’s broader performance. Trump campaigned on a promise to goose economic growth as high as 5 or 6 percent. “We’re bringing it from 1 percent up to 4 percent. And I actually think we can go higher than 4 percent. I think you can go to 5 percent or 6 percent,” Trump said on the campaign trail October 2016.
After approaching 3 percent last year thanks in part to stimulus provided by the tax cut and higher federal spending, growth has slowed this year and is now on track to settle in at around 2 percent, per the Fed. And nearly three in four business economists now say they expect Trump’s policies will tip the U.S. economy into a recession by the end of 2021.
This chart sums up Trump’s failed economic growth promise (Bush 2006-2008); Obama 2009-2016; Trump 2017 – 2019):
Bullies like Trump can make people believe their lies through repetition and shouting. Eventually, the lies become evident in the face of reality.