Tax Cuts and Jobs Act (2017)

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Markets and Corporate America Are Unfazed by Washington Chaos, for Now

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The federal budget debate has big implications for the economy. Businesses are betting that tax cuts will be extended and the math will work out.Even by Washington standards, the second Trump presidency has begun in frenetic fashion: mass firings at federal agencies, tariff threats against allies and foes alike, and haggling over how to get a Republican budget through a narrowly divided Congress.Business leaders and corporate investors are confident that things will turn out fine, at least for them. “Markets aren’t showing all that much concern,” Jason Pride, chief of investment strategy and research at the Glenmede Trust Company, noted.But that could change, with high-stakes implications for the markets and the U.S. economic outlook.Investors fully expect the tax cuts from President Trump’s first term, which mostly benefited businesses and the wealthy, to be fully extended before the end of the year. Trade groups including the Business Roundtable and the National Association of Wholesaler-Distributors are confident the extension will be taken care of — especially since not doing so “would impose, effectively, a tax increase,” Mr. Pride added.Still, the arithmetic remains tenuous. The cost of extending the tax cuts may total $4 trillion over 10 years. That means Congress is being left to barter over what else can save or raise money, and whose federal benefits might be cut.The bond market — where traders price the risk of both inflation and an economic downturn — has, for its part, shimmied off moments of worry brought on by Mr. Trump’s boomeranging style of negotiation over tariffs. The bet is that the threats of an import tax are more a geopolitical tool than a key revenue raiser, as the administration has portrayed the tariffs in budget discussions.Some of the underlying calm stems from Wall Street’s confidence in Treasury Secretary Scott Bessent. A billionaire hedge fund manager before assuming his new position, he has convinced many analysts that the ultimate suite of policies coming from the White House will be beneficial once it coalesces, and he “has also added to some optimism around lower deficits” in future budgets, according to Matt Luzzetti, the chief economist at Deutsche Bank.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Federal Debt Is Now Worrying Even Progressives

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    Long a focus of conservatives, the level of public borrowing is starting to concern left-leaning economists. Proposed remedies still differ radically.The 119th Congress began, as it so often has in recent years, with calls from Republican politicians for wrestling down the national debt, which is near a record level relative to the size of the economy.But this time, the G.O.P. had company: Progressive economists and budget wonks, who have often dismissed finger-wagging about debt levels as a pretext for slashing spending on programs for the poor, are starting to ring alarm bells as well.What’s changed? In large part, long-term interest rates look unlikely to recede as quickly as had been hoped, forcing the federal government to make larger interest payments. And the Trump administration has promised to extend and expand its 2017 tax cuts, which will cost trillions if not matched by spending reductions.“I find it easier to stay calm about this threat when I think the interest rate is low and steady, and I think in the past year or so that steadiness has been dented,” said Jared Bernstein, who led the Council of Economic Advisers in the Biden administration. “If one party refuses to raise revenues, and the Democrats go along more than is fiscally healthy, that’s also a big part of the problem.”To be clear, conservative warnings on the debt have generally been met with little action over the past two decades. A paper by two political scientists and an economist recently concluded that after at least trying to constrain borrowing in the 1980s and 1990s, Republicans have “given up the pretense” of meaningful deficit reduction. Democrats and Republicans alike tend to express more concerns about fiscal responsibility when their party is out of power.Historically, the stock of debt as a share of the economy has risen sharply during wars and recessions. It peaked during World War II. In the 21st century, Congress has not managed to bring the debt back down during times of peace and economic growth.Revenues Are Not Keeping Up With Projected SpendingIf not addressed, debt will probably mount to unprecedented levels.

    Source: Congressional Budget OfficeBy The New York TimesSpending Has Been Creeping UpAs a share of economic output, mandatory outlays — mostly Medicare, Medicaid, and Social Security — are growing fastest. But as debt rises, so do interest costs.

    Source: Office of Management and BudgetBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    What Did Trump’s Tax Cuts Do?

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    Economic upheaval caused by the pandemic has clouded analysts’ ability to understand the effects of the 2017 tax law. Republicans call it a huge success and want to extend it anyway.Seven years ago, when Republicans passed the most significant overhaul of the tax code in a generation, they were sure the law would supercharge investment, raise wages and shift the American economy into a higher gear.So did it?The answer, at least for now, is largely lost to history.A pandemic and a surge in inflation convulsed the global economy not long after the law passed in 2017, scrambling the data that analysts would have typically relied on to draw conclusions about whether the tax cuts helped the economy grow the way Republicans had promised.As a result, policymakers in Washington are now relying on only a partial understanding of the law’s past as they weigh committing roughly $5 trillion toward continuing it.“Basically, from 2020 the data is kind of useless,” said Alan Auerbach, an economics professor at the University of California, Berkeley, who counts Kevin Hassett, a top economic adviser to President-elect Donald J. Trump, among his former students.Economists have focused on just two years before the coronavirus pandemic, 2018 and 2019, to measure the law’s consequences for the most important economy in the world. But that’s a limited window for trying to discern whether the tax cuts prompted a cycle of investment and growth that can take years to play out.“In terms of looking at longer-run effects, pretty much just forget about it,” Mr. Auerbach said. “There’s just no way to control for the effects of Covid.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Can Wall Street Billionaires Deliver on Trump’s Blue-Collar Promise?

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    The president-elect has named wealthy financiers for key economic positions, raising questions about how much they will follow through on promises to help the working class.When Donald J. Trump first ran for the White House in 2016, his closing campaign advertisement lamented the influence of Wall Street in Washington, flashing ominous images of big banks and the billionaire liberal philanthropist George Soros.Now, as president-elect, Mr. Trump has tapped two denizens of Wall Street to run his economic agenda. Scott Bessent, who invested money for Mr. Soros for more than a decade, is his pick for Treasury secretary, and Howard Lutnick, the chief executive of Cantor Fitzgerald, will be nominated to lead the Commerce Department. Mr. Trump’s choices to lead his economic team show the prominence of billionaire investors in setting an agenda that is supposed to fuel a “blue-collar boom” but that skeptics think will mostly benefit the rich.As Mr. Trump prepares to assume the presidency in January, business owners and investors are closely attuned to which of his economic promises he will ultimately follow through on. He has promised to slash tax rates, impose hefty tariffs on China and other countries, and deport millions of immigrants who work in American farms and businesses.The selections of Mr. Bessent and Mr. Lutnick cement a hold by Wall Street executives over the two most important economic posts in any administration. The picks are drawing blowback from Democrats and left-leaning groups, who assailed Mr. Trump for giving top jobs to rich donors and suggested that they would soon be working to create new tax breaks for the rich, not those who are struggling.“For all his talk of looking out for working-class Americans, President-elect Trump’s choice of a billionaire hedge fund manager to lead the Treasury Department shows he just wants to keep a rigged system that only works for big corporations and the very wealthy,” said Tony Carrk, the executive director of the government watchdog group Accountable.US.Yet the decision to tap Mr. Bessent and Mr. Lutnick is raising speculation that Mr. Trump could take a more market-friendly approach to many of his economic policies than some had feared because of his professed love of tariffs, which had the potential for igniting a global trade war.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    How Trump’s Tax Cuts and Tariffs Could Turn Into Law

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    Republicans are juggling complex political and tactical questions as they plan their congressional agenda next year.Republicans are starting to sketch out how to translate President-elect Donald J. Trump’s economic agenda into law, putting plans in place to bypass Democrats and approve multiple bills reshaping the nation’s tax and spending policies along party lines.With total control of Washington, Republicans have the rare — and often fleeting — opportunity to leave a lasting mark on federal policy. Some in the party are hoping to tee up big legislation for early next year and capitalize on Mr. Trump’s first 100 days.Much of the early planning revolves around the sweeping tax cuts the party passed and Mr. Trump signed into law in 2017, many of which will expire at the end of next year. Key Republicans are holding meetings about how to maneuver a bill extending the tax cuts through the Senate, while others are consulting economists for ideas to offset their roughly $4 trillion cost.Several questions loom over the Republican effort. They range from how fast the party should move next year to deeper political disagreements over which tax and spending policies to change. The overall cost of the legislation is a central preoccupation at a time of rising deficits. And whatever Republicans put together will most likely become a magnet for other issues the party has prioritized, including immigration.Here’s what to expect.A Difficult ProcessMost legislation needs a supermajority of 60 votes to pass the Senate. But for bills focused on taxes and spending, lawmakers can turn to a process called budget reconciliation that requires only a regular majority of 51 votes in the Senate.Reconciliation is a powerful but cumbersome tool. Its rules prevent lawmakers from passing policy changes unrelated to the budget, and lawmakers are only allowed to use reconciliation a limited number of times per year. Republicans could also raise the debt limit through the process.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Trump’s Tax Proposals Face a Fiscal Reckoning

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    No tax on tips? Lower corporate taxes? No tax on Social Security benefits?The slew of tax cuts President-elect Donald J. Trump proposed in loosely defined slogans over the course of his victorious campaign will now face a fiscal reckoning in Washington. While Republicans are poised to control both chambers of Congress, opening a path for Mr. Trump’s plans, the party is now grappling with how far they can take another round of tax cuts.Mr. Trump’s ambitions for a second term will ultimately have to compete with the signature accomplishment from his first: the giant tax package that Republicans passed and Mr. Trump signed into law in 2017. Large swaths of that tax cut expire at the end of next year, setting up an expensive debate that could overshadow Mr. Trump’s other goals.“Nobody wants to acknowledge at all the sheer enormity of the challenge,” said Liam Donovan, a Republican strategist. “There’s a reckoning coming.”Unlike in 2016, when Mr. Trump’s victory surprised many in Washington, Republicans have spent months preparing for their return to power. They have been discussing using a fast-track budget process that skirts the supermajority requirement for legislation in the Senate, a tactic that would allow for a party-line passage of more tax cuts if Republicans ultimately keep control of the House.But lawmakers and advisers to Mr. Trump are undecided about how much money they can commit to lowering the nation’s taxes again. The cost of just preserving the status quo is steep. The nonpartisan Congressional Budget Office has estimated that continuing all of the expiring provisions would cost roughly $4 trillion over a decade, and Mr. Trump’s campaign proposals could add trillions more to the debt.In interviews before the election, some Republicans said the party would have to show some fiscal discipline.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Can Democrats Win Back Voters From Trump on Trade Policy?

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    The Biden administration has pursued a big shift in trade policy, but it’s not clear whether that will be enough to win votes.Since Donald J. Trump won over many working-class voters in 2016 with his vows to impose tariffs and rework “disastrous” trade deals, Democrats have been scrambling to win back supporters by taking a more protectionist trade approach.Over the last four years, the Biden administration spent more time emphasizing the harm trade policy has caused to American communities than the benefits. It hit the brakes on negotiating trade deals with other countries and chose to maintain and even increase Mr. Trump’s tariffs on Chinese products. And it pumped billions of dollars into new American factories to make semiconductors and solar panels.It’s a significant shift from the decades that both mainstream Democrats and Republicans spent working to promote trade and lower international barriers.For Vice President Kamala Harris, next week’s election will be a moment of truth for whether the strategy worked.Mr. Trump has helped bring trade to the forefront in presidential elections with his vitriolic criticisms of past policy and his proposals for high tariffs. It is an issue that resonates strongly with voters in Northern swing states like Pennsylvania, Michigan and Wisconsin, where manufacturing employment fell steeply in recent decades as factories moved abroad.Biden officials have been trying to persuade more trade-skeptical voters that their policies to encourage manufacturing in the United States are working, pointing to a recent surge in U.S. factory construction.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Trump Keeps Promising New Tax Cuts. Other Republicans Are Wary.

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    Former President Donald J. Trump’s costly tax agenda undermines the changes he signed into law in 2017. Some Republicans are wary.When former President Donald J. Trump started proposing new tax cuts on the campaign trail, pledging “no taxes on tips” in June, Republicans rallied around his idea. Even Vice President Kamala Harris, his Democratic rival, copied it.Four months and half a dozen proposed tax cuts later, Republican lawmakers and aides on Capitol Hill, as well as some economists in touch with Mr. Trump’s campaign, are taking a more circumspect approach. Asked whether they supported Mr. Trump’s proposals, a typical response was: Let’s see after the election.“I’ll decide what my position is on it once we see what the whole picture is next year,” Senator Michael D. Crapo, an Idaho Republican who could lead the chamber’s tax-writing committee if his party regains control of the Senate, said last month.The caution is a sign that Mr. Trump’s ideas may be too expensive and outlandish for Republicans in Congress to embrace. The rest of the party had been focused on extending the 2017 tax cuts that Mr. Trump signed into law. Some of Mr. Trump’s recent proposals undercut changes that were made as part of that tax package.Even if Mr. Trump and his party control Washington next year, Republicans will be in a far different place on tax policy than they were in 2017. Back then, Republicans on Capitol Hill spent years making plans for a tax overhaul, with a focus on cutting the corporate tax rate and simplifying elements of the code.Once they were in office, they put those plans into motion. Mr. Trump’s general desire to cut taxes fit in with the party’s pre-existing agenda, and conservatives achieved many of their goals with the 2017 Tax Cuts and Jobs Act.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 138 Shares119 Views

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    Trump and Harris Embody a Stark Partisan Divide on Fighting Poverty

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    The two presidential candidates can both point to records of pushing poverty rates down, but their approaches could hardly be more different.Follow the latest updates on the Harris and Trump campaigns.The presidential race between Vice President Kamala Harris and former President Donald J. Trump presents the sharpest clash in antipoverty policy in at least a generation, and its outcome could shape the economic security of millions of low-income Americans.As the onset of the pandemic in early 2020 threatened to decimate the economy, Mr. Trump signed a large stimulus package that included substantial aid for the poor. When President Biden and Ms. Harris took office in 2021, their administration pushed more big aid expansions through Congress as part of their pandemic-recovery plan, driving the poverty rate still lower.But if the two candidates’ responses to that extraordinary period had elements in common, the lessons they took from it were very different.In the pandemic-era programs, now mostly expired or reduced, Ms. Harris and other Democrats found reinforcement of their faith in the government’s power to ameliorate hardship. If elected, she would seek to sustain or expand many of them, including subsidies for food, health care and housing, and revive a change to the child tax credit that essentially created a guaranteed income for families with children. Those policies helped temporarily cut the poverty rate by more than half from prepandemic levels.She backs a $15 federal minimum wage, which Republicans have fought, and is a vocal supporter of programs like subsidized child care and paid family leave meant to help balance work and family.Mr. Trump says little about his role in pandemic-era poverty programs, which many Republicans view as having been excessive and fraud-ridden. Instead, he touts his 2017 tax cuts, which he credits for boosting the economy and reducing poverty to a prepandemic low, and he has vowed to extend them when they expire next year. Most of the direct benefit from those cuts went to corporations and the wealthy.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More