The trump administration plans to cut taxes again to stave off recession

- Aug 22, 2019-

Just as President Donald trump insisted that "the us economy is very strong", a story revealed by us media on August 19 punctured his fairy tale.Top White House officials are reported to be drafting a white paper considering a new round of tax cuts, including payroll tax cuts, to prevent the economy from slumping.

While the economy was declared to be in good shape, it was secretly preparing for a rainy day.As the election year approaches, is Mr Trump really fretting that his economic trump card will fail?

The White House talks about more tax cuts

The Washington post first released the news on August 19, and since then, the New York times, the Associated Press and other major mainstream media in the United States have reported on it.

Fox news Sunday said the director of the national economic council, Andrew kudlow, said the administration is considering a second round of tax cuts, known as "tax cut 2.0."In 2017, trump unveiled the biggest $1.5 trillion tax cut in 30 years.White House officials have begun preparing options to help boost the us economy and prevent it falling into recession, including payroll tax cuts and the possible removal of some of President trump's tariffs, according to people familiar with the matter.

However, the White House issued a cautious statement about the various media reports.It said more tax cuts were on the table, but no payroll tax cut was under consideration.

According to the New York times, employees and employers pay 6.2 percent of their $132,900 in payroll taxes.The tax is used to fund medicare and social security programs.Us media analysis said the payroll tax cut is an attempt to further strengthen consumer spending.Consumer spending has been the driving engine of the U.S. economy this year as businesses cut back on investment.The data show that consumption accounts for as much as 60 percent of U.S. economic growth.Cutting payroll taxes would put more money in consumers' pockets, giving the economy a shot in the arm.

Under the Obama administration, the White House cut payroll taxes by more than $100 billion a year in 2011 as part of a two-year plan to help the economy recover from recession following the global financial crisis.

According to the Washington post, if the trump administration cuts payroll taxes on a scale similar to Obama's, it could be even bigger for many families than the first round of cuts in 2017.

In addition to the payroll tax cut, White House officials are reportedly discussing other potential measures, such as cutting the capital gains tax, which would allow investors to pay lower taxes on profits when they sell investment products.That will largely benefit wealthy investors.Or urging the federal reserve to cut interest rates sharply and take other stimulus measures quickly to pump more money into the economy.Even rolling back some of trump's tariffs on other countries is on the table.

The feasibility of the policy is questioned

However, the feasibility of the proposed measures has been called into question.

A payroll tax cut, for example, would first need congressional approval.But Democrats, who control the house of representatives, have little appetite for it, which means it will be hard to pass.For Democrats, the first is that, under Mr Trump, the us has adopted a rare fiscal and monetary stimulus that need not be repeated.Second, these stimulus policies, combined with increased military and domestic spending, have greatly increased the federal budget deficit.The us Treasury reported this month that the budget deficit in July 2019 was 27 per cent higher than a year earlier.Tax cuts are bound to widen the deficit.Moreover, the Democrats have their own plans.The payroll tax cut is good for the democratic middle class, but in an election year it may be a self-defeating tactic.Supporting a payroll tax cut might give Mr. Trump more political ammunition, since he has accused Democrats of fanning the flames of a potential recession, and if the economy weakens further and the tax cuts fail to pass, the President will have a stronger case to blame on his opponents, which would be bad for Democrats.

In anticipation of a possible congressional roadblock, several people familiar with the matter said discussions within the White House about tax cuts were at an early stage and no decision had been made on whether to press congress to approve any of the measures.

Economic uncertainty has increased

Mr Trump has long credited himself with the longest economic boom in us history.'we're doing very well,' he said Sunday, despite a selloff in U.S. stocks last week as the yield curve upside down 'warned' of recession risks.I gave them a huge tax cut, and they had a lot of money.

Trump confidants, such as vice President mike pence, who was recently chosen by trump to be his running mate in 2020, and White House adviser John conway, all joined in cheering the strong U.S. economy.

Meanwhile, in the face of recent economic upheaval, Mr Trump has put his finger on the blame game.The "profoundly short-sighted" fed and its chairman, colin Powell, conspiratorial Democrats and fake news outlets are all on his list of culprits, accusing it of stoking fears of an economic slowdown.

The latest Revelations, however, have alerted a keen us media to the anxiety and underconfidence within the trump administration.

The fact that the White House is discussing ways to stimulate the economy has highlighted the administration's growing concern about slowing growth, The Times noted.That was in contrast to Mr. Trump's statement on Monday that the economy was "very strong."The Associated Press said the President's tweet on Monday urging the federal reserve to stimulate the economy by cutting interest rates and resuming quantitative easing indicated deep anxiety under the trump administration's bluster.

Trump and his top aides have spent the past few days trying to convince the public that the economy is strong and that fears of a recession are misplaced, the Washington post commented.But internal discussions at the White House about boosting the economy suggest that officials around Mr. Trump are already worried about the possibility of a slowdown, as they try to find new ways to address public concerns and boost business confidence.

Song guo-you, a professor at the center for American studies at fudan university, said the White House's internal deliberations on how to stimulate the economy sent two signals.Second, trump is very concerned about the trend of the us economy. He directly links the future trend of the economy with his re-election bid, so he needs to take measures to protect the economy.

"Trump recession" is a buzzword

"Trump recession" has also become a hot word on social media in the us.But the meaning has been completely reversed.

A new survey released Monday by the national association for business economics shows most economists expect the U.S. economy to be in recession by 2021 at the latest.The latest assessment of standard & poor's global ratings puts the risk of a recession in the us at 30-35 per cent over the next 12 months, a significant step up from the previous 25-30 per cent probability.

"A 'trump recession' is just a label, but a recession in the us is a matter of time. It is the law of the economic cycle.Because the 10-year period has come to an end, the longest expansion period in the history of the United States, which lasted 121 months, has even lasted more than 10 years."Chen fengying, a researcher at the China institute of modern international relations, said the U.S. economy is in danger because of the unfavorable external environment.Weak global demand and trade tensions between countries, such as trade disputes between Japan and South Korea and the "digital tax" dispute between France and the United States.Even Germany's economy shrank by 0.1% in the second quarter, sending European stocks tumbling.Second, internal problems.The us economy did show a downward trend. From the perspective of economic growth, the first quarter was good, the second quarter was down, and the third quarter was not very optimistic.Some economic data, such as a sharp 5.5 per cent fall in private sector investment in the second quarter and a manufacturing purchasing managers' index close to the 50-point line between growth and contraction, suggest problems in the real economy.If macro policy is mismanaged and mismanaged, the recession will report itself early.On the contrary, if trade protectionism is reduced and the international environment is improved, the recession may be delayed.

According to western economists, the current slowdown in global economic growth and the worrying situation of the us economy have something to do with the global trade conflicts provoked by trump.Song agreed that trump is responsible for the state of the U.S. economy.Mr Trump's protectionist policies seem to prioritise us interests in the short run, but hurt the economy in the long run.And Mr Trump's protectionist policies make it hard for America to co-ordinate with other economies to prevent a recession.

Behind White House officials' anxiety about the economic outlook is thought to be anxiety about Mr Trump's re-election prospects.If the former trump boom has saved the businessman President a lot of money, now the "trump recession" could become election poison, wiping out those gains.