Trump Tax Cut Effects

Congress recently passed a tax cut package. Depending on who one might ask, the tax cut will turbocharge the economy or it will lead to massive deficits in the years to come. The article that is summarized in this brief report looks at a take and summary from the New York Times. The verdict, in short, is that “time will tell” as to whether or not the tax cut will achieve the desired result.

The article first points to a few claims that President Trump made during his recent State of the Union address. One of those claims, of course, related to the tax cut package that was passed and how it was the “biggest” in the history of the country. The article’s authors, James Stewart, admits straight away that the current form and function of the economy is very strong.

However, Stewart is also quick to point out that only a month has passed since the tax cut package passed and more than thirty years have passed since the Reagan tax cuts passed. When it comes to the latter, there are still people that debate whether those tax cuts in the 1980’s had the effect that is often trumpeted by pro-Reagan people and/or those that thought the tax cuts led to the economic growth that followed it (Stewart).

Perhaps the biggest reason for this is the lesson offered by Alan Auerbach. A professor from UC Berkeley, he notes that making a single change in a laboratory experiment and testing the results is one thing. However, this is impossible to do in a national economy, or even a city or state one.

Indeed, he refers to the fact that even if the economy responds post-tax cut the way that the economy seemingly did after the Reagan tax cut package, this does not mean that the tax cut packages are the reason. At the very least, it might not be the only reason and/or it may actually be a drag on the economy as compared to what else is going on.

Put another way, there are so many things going on in a national economy even if no tax changes are being made to the tax code or the budget. As such, one can make reasonable guesses as to what caused a national trend to occur. However, there are always outliers and exceptions and proving causality is a lot harder to pull off than causation.

As such, this is a huge part of what leads Stewart and Auerbach to tap the brakes on any optimism or assumptions about what the tax cut packages will do. Things may or may not get better economically. Even if they do, the tax cuts may or may not be the lone or primary cause (Stewart). The article relates to economics and global capitalism in a lot of ways. Indeed, the national economy of the United States is very complex.

It is not something that can be measured or assessed easily. When one considers how the national economy interacts with state and local economies, things get even murkier. When one tries to gauge the motives and reactions of the spenders of the country, there is even more complexity. This does not even take into account that there are national-level economies around the world and they often tend to react to and interact with each other. When the bigger economies of the world (e.g.

China, the United States) have economic problems, it tends to affect the whole world. The economic crisis that occurred from 2007 to 2009 is a good example. The article chosen for this report and the class for which this assignment has been done are.