Trump’s New ‘New Deal’ Isn’t Enough

In my previous post, “Goldman’s Take on Trump’s Corporate Tax Cuts,” I discussed how these tax cuts are supposed to work to create new jobs for Americans, and the obstacles which might keep them from accomplishing that end.

Here is how Martin Wolf of the Financial Times describes the very real problem in the U.S. that voters on both sides of the aisle want to change:

Workers have not only suffered from declining shares of the pie [by over minus 4% of GDP over this century]. Just as significant is the steady rise in the proportion of men aged 25 to 54 neither in work nor seeking it from about 3 per cent in the 1950s to 12 per cent now…

This increase in the number of jobless prime-age American men since 1990 has made the US the second-highest jobs-loser among the thirty-five developed countries in the OECD (Organization for Economic Development). And it’s not just men having trouble:

After 2000, the declining trend in non-participation of prime-age women also halted. The proportion of US women…[age 25-54] in employment is now among the lowest of all members of the OECD.

We’ve been told repeatedly that tax cuts on the rich will somehow “trickle down” to the poor via new job creation. History shows that just isn’t true. I’ve discussed why in my post, “Taxes — Impact on Income Inequality”.

In addition, I’ve shown in “Goldman’s Take on Trump’s Tax Cuts” why corporate tax cuts are not likely to bring back manufacturing jobs from abroad. Now its time to look at the second part of the Trump’s job creation plan.

Trump’s New ‘New Deal’

To remedy the misery of jobless and low-wage Americans, Mr. Trump is proposing a $1 trillion infrastructure project.

So why not? Mrs Clinton floated the same idea. And hey, it worked for Franklin D. Roosevelt!

Why not? Who’s paying that trillion dollars?

Not the private corporations who are going to make money and create the new jobs – they are looking to the government to pay.

Not the current workforce. They are working Americans who have been losing real income over the past thirty years.

The new workforce? They won’t be paying taxes for at least a year or so. And when they’re finished with the projects, they’ll become unemployed again.

Or will the US be printing a trillion dollars and letting inflation send prices soaring upwards?

Financing a trillion dollars is not an easy task, especially by those who have been so critical of the federal deficit level.

While the current US  government’s 76 percent debt-to-GDP ratio is barely acceptable, it won’t remain so if we cut corporate and estate taxes while tacking on another trillion dollars of debt!

So who paid for FDR’s New Deal?

The government went into debt to pay for job creation, and World War II bailed out President Roosevelt’s spending spree to offset the effects of America’s Great Depression.

Anyone who studied economics using Paul Samuelson’s Econ 101 textbook learned the lesson of that war. American consumers had to forgo “butter” [stockings, sugar, gasoline, etc. too] during the war in order that the government could buy “guns.”

Production of those “guns” not only ensured a decline in numbers of US young male workers, it also  brought in lots of money from sales of our weapons to other countries—enough money so we could bail out our enemies after the war.

OK, that’s the past. So what’s the long range plan now?

Are users going to pay tolls on all of these infrastructure projects? With what new money? And do we really want to let private companies charge whatever they want for our bridges, roads, and rails?

Or will the Wall Street/US government financiers of these projects take the profits, while the rest of us see tax loopholes (if any!) closed and our current average tax rate of 30% increased?

Could Treasury print 1 trillion dollar bills and let inflation send prices soaring upwards?

Or will Trump’s new ‘New Deal’ bailout be a big war—a war that all those new ships Donald Trump wants to build for our navy will make possible?

Here’s what US citizens need to keep in mind

Trump’s corporate tax cuts are not likely  to create enough new jobs for Americans, and recent ‘tax holidays’ in 2004 for US corporations located abroad resulted in job cuts.

Joblessness and wage declines in the United States go back decades—they are a long-term trend, growing worse. This trend is here to stay. That’s why we need to find short- and long-range solutions for the future.

Infrastructure repairs, while badly needed, will only provide a temporary boost. When the repairs end there will be more unemployment. Rest assured these repairs will create a heavier burden on US taxpayers’ shoulders.

Infrastructure modernization makes perfect sense because it will benefit everyone, but if big business gets corporate tax breaks, it must pay for these projects just like other taxpayers.




1 comment so far ↓

#1 Raoul Martinez on 11.17.16 at 2:50 pm

Great write up Nancy, on a timely subject. If Trump has convinced the country we are in a depression we certainly need help. I think its difficult to convince prosperous Californians of this. We don’t see any “bread lines” with unemployed workers clamoring for help, so this proposed 1 trillion dollar infrastructure project seems far fetched to me. We need modernization, of course, and improvements to our infrastructure. A balanced effort is in order. We’ve always had joblessness and wage declines in the past, as you’ve indicated. RAOUL

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