WASHINGTON - What a year this has been! While it’s been a bumpy ride for the Trump administration, lurching from one controversy to another, it ended with a big tax cut victory in Congress that could help Republicans survive the challenging 2018 midterm elections.
The U.S. economy is finally soaring as a result of the tax rate reductions, breaking out of the anemic 2 percent growth rates of the Obama years that prevented America from achieving its fullest economic potential.
Throughout his two terms, President Obama was best known for cherry-picking economic statistics in an attempt to prove the economy was getting stronger. But year after year the polls consistently showed that a weak economy, fewer jobs, a shrinking labor force and declining incomes remained the nation’s top concerns.
But the ink was barely dry on the GOP’s tax reform bill, and its corporate, business and individual tax cuts, when the economy began growing again at a 3.2 percent rate in the third quarter, and, more than likely, fourth quarter.
The liberal news media still weren’t buying it, believing that the corporate tax cuts will end up enriching business fat cats and CEOs. “Are you living in a fantasy world?” NBC’s Savannah Guthrie asked House Speaker Paul Ryan on the Today Show. He wasn’t.
“CEO’s have an incentive to maximize profit and value for shareholders. This means investing in a high-quality workforce, which is why only 3% of workers are paid the minimum wage,” writes Andrew Wilford in Investor’s Business Daily.
“Tax reform will increase after-tax incomes for businesses, allowing them to invest more in their workers. This is why the White House estimates that corporate tax rates will result in an increase to average after-tax worker incomes of $4,000,” he explains.
Under the tax overhaul, businesses “would be able to immediately deduct the entire value of capital investments. Since businesses value money upfront that they can reinvest, they have a strong incentive to invest in new equipment now while this full expensive policy is in place,” says Wilford, a policy analyst at the National Taxpayers Union.
This is why a string of big corporations are announcing bonuses for their workers. AT&T is giving $1,000 to some 200,000 of its workers, and pledging an added $1 billion in capital investment. Similar announcements soon followed from Boeing, Bancorp and Wells Fargo.
Pro-growth advocates like the Club for Growth believe that the GOP’s tax cuts will unleash a tidal wave of “great economic growth and prosperity.”
But David Macintosh, president of the Club for Growth, believes “there’s no reason to wait another thirty years to enact additional reform.”
“In fact, with respect to the individual and major pass through businesses, this bill falls far short of pro-growth expectations,” he says. Among his proposals:
— Enacting “a real 25 percent maximum rate for businesses organized as subchapter S corps or LLCs, rather than artificial exclusions for sectors like financial services, and unfairly excluding 80 percent of business income from the pass-through rate.”
— Making the temporary tax cuts permanent for individuals.
— Abolishing the death tax on estates.
— Repealing the Alternative Minimum Tax.
— Lowering the capital gains tax rates to boost investing in the economy.
— Repealing the Obamacare taxes.
All of these additional tax changes, or even some of them, will significantly accelerate economic growth in the year’s to come, and bring in much higher tax revenues to dramatically shrink the government’s monstrous debt.
If the Republicans can pass additional pro-growth tax reforms next year and beyond, the political pay off in 2018 could be historic.
A booming economy, growing job market and rising incomes, including a declining budget deficit, would result in a GOP landslide election next November. And that could lift Trump’s dismal approval polls to record highs.
But he has a long way to go before that can become an achievable political reality.
First, he needs to hit the road to talk up the growing economy, take credit for signing the tax cuts, and begin to discuss the next tax cut chapter in his party’s agenda.
Trump’s off to a good start, though. The Conference Board, a business research index, reported this week that consumer confidence was just slightly below its 17-year high set in November.
Consumer expectations are now “at historically strong levels, suggesting economic growth will continue well into 2018,” said the board’s director of economic indictors Lynn Franco.
Obama’s economic failures are behind us, and the Trump economy is taking off.