Monday, October 05, 2020

My analysis in The Times of Trump's economic programme

Published by The Times

If Joe Biden becomes president, he has said he will increase corporate taxes from 21% to 28% on “day one” of his administration, largely undoing Trump’s corporate tax cuts

Is that going to deliver innovation, growth and dynamism? That looks, talks and barks like a tax-hike to me – and it is something the hard-pressed US economy does not need.

The Democratic challenger denies that middle-class incomes would be hit by these tax increases. But quite a few independent studies have contradicted that.

In contrast, Trump has pledged more tax cuts. Also his business-friendly regulatory approach, which he’s likely to continue, is part of the reason why US tech stocks – America’s big success story – have grown so much during his first term.

As well as higher taxes, Biden would bring in greater labour regulation for the gig economy. Simply speaking, if you restrict how the Ubers and Airbnbs of this world operate, then that is going to act as a clamp on their profits and, ultimately, stock-market growth.

It’s obvious that Trump has an obsession and fascination with the stock market. It certainly would be embarrassing for him if it crashes but, for now, I believe the President can take some credit for the way it has grown under his administration.

The surge has not been a flash in the pan that has come over a period of a few months. It’s been a consistent bull market in stocks.

The Federal Reserve’s move to keep interest rates low, and its loose monetary policies has of course benefited stocks. But you could argue the same stimulus, if not more, has occurred in Europe and the stock indices over here compare poorly in many respects with those in the US.

Trump's handling of the pandemic has come in for fierce criticism but I don't think that the US has done particularly worse than European countries when you compare excess deaths.

Lots of countries which have imposed strict lockdowns – and are now experiencing second waves of Covid-19 – have been quick to pour scorn on Trump’s desire to open up the country.

But let’s face it, it’s been proven that you can fight the virus without an economically damaging lockdown and also take the disease very seriously like some Asian countries have done. 

I must qualify that I don’t support everything Trump has done to help the US economy. 

Apart from his wild spending, the trade wars have been careless and damaging to say the least – but we have learned that he mainly barks and very rarely bites. The trade deal he pushed through with Mexico and Canada was very similar to the one that it replaced.

I’m not a fan of how he's challenged the rule of law and critical of central bank independence too.

So I am saying, with some reservation, that Trump will boost the economy more than Biden.

You cannot discount what his tax cuts have done for the economy. The rich bear a huge amount of taxes in each country and it is true that tax cuts will disproportionately benefit them. 

But if you do give tax cuts that inevitably always benefit big tax payers, it will also benefit the SMEs and the mom and pop stores.

That is money which goes into the pockets of the middle classes who, Trump hopes, will power America’s economy in his second term.


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