October 31, 2018
In the early nineties, President George H. W. Bush reneged on his campaign promise of “Read my lips, no new taxes.” It arguably cost him reelection for a second term, but it also set the seeds for an economic recovery. President Clinton worked out a grand compromise with a Gingrich-led Congress, and put through a package of spending cuts and tax increases, which led to a booming economy, a roaring stock market, and budget surpluses as he left office.
President George W. Bush used the surpluses to push through a major tax cut, which ultimately led to massive budget deficits, an overheated economy, and financial collapse. President Obama rescued the economy, and set it on its current trajectory through a combination of tax cuts, stimulus, and bond buy backs. So what do the Republicans do? At exactly the point in the recovery where we should have been “removing the punch bowl,” they put through a $1T tax cut. Some people have likened it to throwing gasoline on a fire. All I can say is that if you gave me $1T, I could give the economy a boost also. It is easy when you don’t have to pay for it. Do we have any reason to believe that this story is going to end any differently. The rise in market volatility should concern everyone. It is telling you something.
Now Donald Trump and his followers are talking about a 10% middle class tax cut with no details, an impossible time table, and no thought about how to pay for it. It is obviously pure campaign rhetoric, but really? Vote for candidates who understand economics, and who are not proposing balancing the budget on the backs of people who need it the most.