Categories: Market Overview

The US deficit grew by 77%, tax reform does not work

The data is in, and it doesn’t look good if you’re a fiscal hawk. As reported by CBS, the US deficit is up by 77% compared to the same time in 2018. There are plenty of reasons, but apparently, the decision by Donald Trump’s administration to cut taxes had an impact. Interestingly given that it was marketed as a significant benefit for individuals, revenue from tax cuts was only down 3%. Such a small dip in income suggests that Americans received a negligible tax break.

The real winners were corporations as the Feds reported a 23% drop in corporate income tax. A decline here still might be a net positive for the US consumer as 23% is a hell of a lot of cash for businesses to invest in higher wages, or employing more staff. One area where people definitely saw a benefit was the bump in earnings and subsequent bounce in the stock market (although a number are now well off their highs.) Revenues increasing from tariffs (some $25 billion) were up, but it’s hard to get excited about these as they are just an additional tax on US taxpayers as the tariffs don’t hit foreign entities but rather US importers which result in a cost of living increase.

Trump had made bold claims about GDP, and the tax cut was a way to make those claims a reality. In many ways, it was not his fault that Corporations did not act more in the public interest. The President was either naive or looking to pad the market regardless of the outcome. There were many economists who cried lunacy at the prospect of applying such dramatic stimulus to an aging bull-market, but despite the worst December since the great recession in 2018 markets have steadied. The Old bull continues to chug along for now, mainly thanks to such anemic growth in the major economies overseas.

US Deficit Up 77%, Tax Cuts Not Working, But is it Donald Trump’s Fault!?, CCN, Mar 06

The FxPro News Team

This team of professional journalists announces the most interesting and influential articles from the major financial media as a brief summary. All such news may have sufficient potential to affect the course of trading assets.

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