No one knows the future direction of the American economy, but several danger signs are ahead. One is continued inflation at 40-year highs. Another is a potential recession triggered by high interest rates designed to fight inflation.
Yet President Joe Biden and his allies in Congress still have failed to learn the economic lesson that governments cannot tax and spend their way into prosperity. They keep believing that a brighter outcome is just one more giant deficit-financed program or tax-the-rich scheme down the road.
Fortunately, policymakers have an opportunity to steer the nation in a genuinely hopeful direction by making the Tax Cuts and Jobs Act permanent and working to reduce government spending.
The Tax Cuts and Jobs Act passed during former President Donald Trump’s administration and, along with unshackling businesses from excessive regulation, created a strong economy.
Pete Sepp, president of the National Taxpayers Union in Washington, D.C., was — and still is — a big proponent of that legislation because it benefited individuals as well as businesses. “Employment increased, and many businesses offered bonuses to their employees. And contrary to the opposition’s fear mongering, the wealthy have paid more income taxes, and the poor have paid less,” he recently wrote.
Income levels also increased as many Americans were earning higher wages. “In 2018 and 2019, real median household income in the U.S. rose by $5,000 — a bigger increase in only two years than in the entire eight years of the preceding recovery combined,” point out economists Kevin Hassett and Tyler Goodspeed, who both served as chairmen of the White House Council of Economic Advisers under Trump.
The economic growth generated by the Tax Cuts and Jobs Act brought increased revenues to the federal government. This is often overlooked, and the tax cuts were blamed for causing deficits, while the real culprit was government overspending. Between 2000 and 2019, federal delays adjusted for inflation rose 69 percent — and that was before trillions more were spent during the pandemic.
Critical parts of Tax Cuts and Job Act that affect business expenses, research and development, small business relief, and low individual tax rates already have expired this year or are scheduled to do so in the next Congress. Action in Washington, D.C., is needed to fix these problems, but it won’t happen if Democrats remain in control.
It’s another reason to hope that conservatives regain a majority in November’s elections so that changes can take place that will improve the U.S. economy as compared to the tax-and-spend philosophy of the Biden administration that has made it much worse.