President Donald Trump on Wednesday outlined the framework for his administration’s plans to reform taxes in the throughout the United States. This plan is fresh off the heels of a new Job growth and GDP report that exceeded expectations.
One notable piece of information was however missing: concern that has risen over the effect that tax cuts will have on federal budget deficits and federal debt levels.
President Donald Trump’s speech placed significance on overarching themes rather than details about tax cuts and other changes to the United States tax system.
During the speech President Trump announced four underlying principles that would guide his administration’s efforts on taxes: a tax code that is simple and easy to understand, a globally competitive rate on business taxes, tax relief for middle class families, and a tax break for corporate profits repatriated from abroad.
This was seen a departure from the principles of tax reform announced during the Trump 2016 campaign. During the campaign, then candidate Trump said his tax plan would be designed to meet “four simple goals.” Those goals included at the time: tax relief for middle class Americans, simplify the tax code, grow the American economy with changes to corporate code, and not add to the debt or deficit of the federal government.
What seems to have happened is that President Trump dropped debt and deficit neutrality as a goal for his ‘new’ tax reform effort, breaking the corporate goal into two separate and different principles: lowering corporate tax rates and repatriating dollars. During the 2016 campaign, those were treated as a single goal. (Related: Mnuchin vows ‘biggest tax cut’ in US history, confirms plan to slash corporate rate)
Deficit neutrality is a major concern inside of The Beltway. Many of the regulations around legislation make it seemingly easier to pass bills if they don’t increase the deficit over the next ten years. Ironically enough, this could mean that the feds winds up taxing American workers even more, even when incomes are decreasing and or stagnant, in an apparent attempt to avoid borrowing more, even when borrowing costs have achieved historic lows.
However, its is not clearly obvious if these changes in the goals or principles underlying tax reform reflect a change of policy. That is, its not clear if the announced tax plan will be built to not result in higher deficits or if Trump was signaling that tax reform is too important to allow deficit neutrality to stand as a roadblock.
President Trump warns Congress not to disappoint him on tax reform
President Donald Trump on Wednesday gave a stern warning to members of Congress, do not disappoint him and the United States in regards to tax reform, forecasting that legislators would make a “comeback” to pass a comprehensive measure to overhaul the United States tax code.
“This is our once-in-a-generation opportunity to deliver real tax reform for everyday hardworking American, and I am fully committed to working with Congress to get this job done, and I don’t want to be disappointed by Congress,” Trump said during a speech in Springfield, Mo., focused on tax reform. “Do you understand me?”
“I think Congress is going to make a comeback. I hope so. I’ll tell you what, the United States is counting on it.”
Trump has openly fumed over the Senate’s narrow rejection last month of a scaled-back measure to repeal and replace ObamaCare and has carried on a feud with Republican lawmakers in recent weeks.
The president’s relationship with Senate Majority Leader Mitch McConnell (R-Ky.) has become frosty in the ensuing weeks. McConnell said earlier this month that Trump has “excessive expectations” of Congress’s ability to advance his agenda. (Related: Obama created regulations that will drain $2 trillion from economy)
Trump’s comments came as lawmakers head into a busy month, in which they must pass legislation to fund the government and raise the debt ceiling.
GOP leaders have signaled that, in the wake of the healthcare legislation’s failure, comprehensive tax reform will be a top legislative priority.
Trump on Wednesday called for simplifying the process of individual income taxes, lowering the corporate tax rate and encouraging corporations to bring the profits and workers back from overseas.
Meanwhile, the nation’s attention has turned in recent days to the devastation caused by Hurricane Harvey in Texas and Louisiana. Emergency funding for the recovery effort will join an already crowded September schedule for lawmakers.
United States revised second-quarter GDP up 3.0% vs 2.7% rise expected
- The American economy grew faster than initially thought in the second quarter, achieving its quickest pace in more than two years.
- There are hints that the momentum was sustained at the start of the third quarter.
- Gross domestic product increased at a 3.0 percent annual rate in the April-June period, the Commerce Department said.
The United States economy grew faster than initially expected in the second quarter, achieving its quickest pace in as many as two years, and there are signs that the momentum was actually sustained at the start of the third quarter.
Gross domestic product increased at a 3.0 percent annual rate in the April-June period, the Commerce Department said in its second estimate on Wednesday. The upward revision from the 2.6 percent pace reported last month reflected robust consumer spending as well as strong business investment.
Growth last quarter was the best since the first quarter of 2015 and followed a 1.2 percent pace in the January-March period. Economists had expected that second-quarter GDP growth would be raised to a 2.7 percent rate.
Retail sales and business spending data so far suggest the economy maintained its stamina early in the third quarter. Economists saw a limited impact on growth from Hurricane Harvey, which devastated parts of Texas.
“The impact on the national economy will be minor,” said Gus Faucher, chief economist at PNC Financial Services in Pittsburgh. “While some output will be lost in the wake of the storm, most of the difference will be made up in the months ahead.” (Related: Opinion: United States’s “Deep State First” Policy Should Have EVERY American Worried For The Future)
Growth estimates for the third quarter are as high as a 3.4 percent rate. Other data on Wednesday showed private employers ramped up hiring in August, adding 237,000 jobs to their payrolls. That was up from 201,000 jobs in July.
The ADP National Employment Report was released ahead of the government’s more comprehensive employment report on Friday, which is expected to show solid job gains in August and diminishing labor market slack.
The dollar rose against a basket of currencies on the upbeat reports, while prices for U.S. Treasuries fell. Stocks on Wall Street were trading higher.
Strong growth and a labor market that is near full employment support views the Federal Reserve will lay out a plan to start unwinding its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities next month and increase interest rates in December.
With GDP quickening in the second quarter, the economy grew 2.1 percent in the first half of 2017. While that was up from the 1.9 percent reported last month, economists said it was unlikely growth this year would breach Republican President Donald Trump’s ambitious 3.0 percent target. (Related: Making America Great Again: Economic Optimism Surges To Record High As Trump Gets Credit For The Economy)
“Underlying domestic demand in the economy is consistent with near three percent growth but the supply-side of the economy is not capable of delivering such a pace of growth at this point,” said John Ryding, chief economist at RDQ Economics in New York.
The Trump administration is targeting tax cuts, deregulation and infrastructure spending to boost growth. However, it has so far failed to pass any economic legislation and is yet to articulate plans for tax reform and infrastructure.
Chances are slim that the Republican-controlled U.S. Congress will debate and pass tax reform legislation before the end of the year. So far, the political gridlock in Washington has not hurt either business or consumer confidence.
Robust consumer spending throughout United States
Consumer spending, which makes up more over two-thirds of the United States economy, grew at a 3.3 percent rate, the fastest in over a year, reflecting more spending on vehicles, cellphones, housing and utilities than previously expected.
That was revised up from the 2.8 percent pace reported in July and accounted for the bulk of the pickup in economic growth in the second quarter.
But stronger consumer spending came at the expense of saving amid sluggish wage gains. The saving rate slipped to 3.7 percent from 3.9 percent in the first quarter. The second-quarter saving rate was previously reported at 3.8 percent. (Related: Are Central Banks Nationalizing The Economy? What Could Go Wrong…)
Households can’t, however, continue to rely on savings forever to fund their consumption. This has raised doubts on the sustainability of the robust pace of consumer spending.
Despite the rise in consumer spending, inflation remained benign in the second quarter.
The governments’s preferred inflation measuring tool, the personal consumption expenditures (PCE) price index excluding food and energy, increased at a 0.9 percent rate as was reported previously. Last quarter’s rise was the slowest in more than two years and followed a 1.8 percent rate of increase in the first quarter.
Corporations/Businesses helped to carry the economy across the finish line in the second quarter, in part levied by a rebound in business and corporate profits. Equipment spending jumped at a rate of 8.8 percent. That was the quickest rise in nearly two years and was an upward revision to the 8.2 percent pace reported last month.
Investment on nonresidential structures increased at a 6.2 percent pace, rather than the previously reported 4.9 percent rate. Inventory investment had a neutral effect on second-quarter GDP as previously reported after chopping off 1.46 percentage points from output in the first quarter. (Related: Alert: United Nations Makes Its Move – Issues “Concrete Measures” Order to U.S. Authorities)
U.S. trade added two-tenths of a percentage point to economic growth. Housing was a drag on growth in the last quarter, with investment on home-building recording its worst performance in almost seven years.
U.S. Government spending shrunk for a second straight quarter, brought down by decreasing state and local government spending. Vehicle production saw a rebound after two straight quarters of declines.
President Trump’s Full Speech On Tax Reform:
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