Últimas entradas de Álvaro Martín (ver todo)
- LOS EFECTOS ECONÓMICOS DEL CIERRE DE GOBIERNO EN EEUU - 29 de enero de 2019
- Let’s Do It The American Way - 5 de diciembre de 2018
- La quijotesca política fiscal del Dr. Sánchez - 13 de noviembre de 2018
TRUMP BRINGS LAFFER BACK INTO ACTION
A lot of libertarians, if asked, have a clear image in their minds of what the Laffer curve is, as it has been one of the greatest advances in modern economics and has always backed up many of our arguments in terms of how lowering tax rates can help to achieve a greater economic growth and individual development. More than 40 years after that 1974, when Arthur Laffer presented his curve, Donald Trump has brought it into action again by applying it into real politics by bringing in deep corporate tax cuts from 35% to 15%, and what has been argued by many as being unrealistic economics, will be surely a great impulse for economic expansion and job creation.
We have already seen similar situations during Ronald Regan’s and George Bush’s mandates, when tax cuts where a prominent policy creating an expansion in labour demand and economic growth which followed it, cutting in many occasions the American debt, which in those ages was not even half of what’s nowadays. The problem is how we see social expenditure and subsidies as magnificent measures and normally excuse them for causing debt to rise up to overwhelming levels, up to the 19 trillion debt the US has accumulated, with more than 50% of that total national debt having been produced by Obama and its “Yes We Can” policies. Because, overall, we shouldn’t forget the 500 million annual deficits that Barack has left, or that American debt in Obama’s hands jump by more than 121% if we take into account federal and local debt, at the same time he now accuses Trump for an imaginary situation in which he will rise deficit due to his slashes on tax.
Trump’s budget has been deeply responsible and mostly libertarian in my opinion, making great cuts on some sectors and superficial services which could be paid for privately our through PPP (Public-Private PartnershipsThe greatest cuts have been produced in healthcare, when he expects to reduce 15.000 million dollars by eliminating Obamacare, and also reducing public servants in State agencies as NIH, being reduced only unnecessary and bureaucracy expenditure. In Education, he has also reduced expenditure by 13.5%, but Trump has increased on the other hand the number of offered scholarships for vulnerable people, while other educational programs could be perfectly financed by the private sector, adding more competition and consequently efficiency to the educational market. My favourite has been the 10,900 million dollars taken out of “climate development programs”, which were mostly destined to climate change studies and ecologist’s organizations.
The corporate tax cut, which has been the most significant these days, will serve also to liberate small business from their fiscal oppression and allow them to invest that exceeding capital in re-investment into the business to generate further expansions and increasing competition into the market, in search of greater efficiency. Even though some detractors think that the Income Tax cuts will only benefit the rich, reality is that they will mostly affect middle class Americans, which before were paying 10%,15% OR 25% depending on their rent will now be paying only 10%, and those most privileged earning wages of over 600,000 dollars, who before payed 39.6% will now be taken off just 35% of their income… so who has been most benefited?
These types of policies are the best ones to attract jobs and companies to the USA, generate larger levels of FDI coming into the US, and of course revaluating the dollar. This tax rates reductions will generate revenues by more than 2 trillion dollars value over the next 10 years, and this will follow a great impact on economic growth of more than 1.8%, as it has been