Monday, November 19, 2018

Why the Trump Tax Plan will not Pass Congress Part 1.

November 21, 2017 by  
Filed under Business, Money, News, Opinion, Politics, Weekly Columns

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( “Excerpts from the book titled, “The Fix This Time”@ Here is an administration that is approaching the American economic dilemma in regard to consumer demand and job creation like Republican administrations of the past. Mr. Trump’s budget cuts call for major cuts in programs that have enhanced the quality of life of a great many American citizens in our nation. His budget totally disregards why so many Americans voted for him. American voters are highly intelligent people. They did not vote for Mr. Trump to lower their quality or standard of living but to enhance it, with real doable and wise economic policies. They did not elect him to execute the policies of the traditional Republican politicians whom he defeated, who also championed steep budget cuts to programs, tax cuts for wealthy Americans disguised as tax cuts for the middle class, and tax cuts for businesses and corporations. They elected him to present new alternatives. After all, he said, “I can fix this.”

His failure to bring forth new ideas and new ways of attacking the key issues of job creation and consumer demand will be his undoing. Doing it the way traditional Republicans have suggested, got those traditional Republicans sidelined by the American voter. And now because of his persona, he thinks he can execute these same policies of axing favored American programs and get away with it, when the other guys he defeated were unable to do so. What he will learn is that new ideas matter.

Let’s take a look at Mr. Trump’s tax cut initiative which he states will create jobs and raise our GDP (gross domestic product) to 3.00 percent or more annual growth. Mr. Trump is calling for a dramatic cut in taxes, he states for the middle class and the wealthy. However, if his tax plan is based on President Reagan’s era tax cut plan, it will end up pushing more money to the top 20 to 10 percent of the population. Here is the clear take away when it comes to tax cut plans and giving wealthy people more money; those tax cuts have to be financed. In other words, if you are going to reduce the income coming into the U.S. Treasury through tax cuts, you have to initiate draconian budget cuts over the duration of the tax cut period or increase the deficit over the same period or show specifically how the tax cuts will grow the economy bringing in new revenue. Mr. Trump and his team have failed to convince every day average Americans how his tax cuts will create consumer demand and bring in new revenue.

Additionally, there has to be a better alignment of wealth distribution in this country if we are going to grow. The economy is unbalanced and not working properly when it comes to the amount of wealth being held by the top 10 percent. Too much wealth has already been pushed upward through low interest rates, which provides fuel to a rising stock market while depriving savers and those who depend on interest income a safe haven for their capital. Also, contributing to and driving this upshot of wealth to the top was the mismanagement of the Social Security trust fund, hefty tax cuts for the wealthy during other Republican administrations, schemes like the saving and loan scandal under President Reagan, which cost taxpayers $100 billion dollars and the sub-prime housing debacle.

Following, is a good example of why more money in the hands of millionaires and billionaires will not work in creating long term consumer demand. Take a single billionaire who has an estimated wealth of $10 billion dollars, which is not hyperbolic as Bill Gates, the richest man in America has wealth estimated at $40 billion dollars or more. Our billionaire can with his wealth only drive so many cars, purchase so much fuel, and have so much maintenance done on his vehicles even if he purchases a hundred vehicles at one time. Moreover, he can only live in one house at a time even if he owns several. He can eat just so many meals even if he eats out every day and night. And he can only wear one set of clothing at a time. Now, take that same $10 billion dollars, chop it up into $40,000.00 dollar increments and put that $40,000.00 dollars in the hands of individual consumers; a different picture of consumption emerges which generates increased economic activity and creates jobs.

Ten billion dollars divided among consumers in $40,000.00 increments amounts to 250,000 consumers sharing that money. Now you get some idea of the kind of economic punch consumers can generate, because you are now talking about the purchase of 250,000 cars, if each decided to buy one; 250,000 oil changes; and one million tires if all four tires are changed on those automobiles. Of course, the same impact is logically true when it comes to buying clothing, dining out, buying and renting living quarters. Please, there is no suggestion here, that the federal government should increase the taxes of millionaires and billionaires, I just think we have given them enough of the peoples’ tax money under the pretense that they, by some miracle, will create consumer demand and jobs. They have right now by some estimates more wealth then they have had in recent history, yet we do not see the needed consumer demand that would grow the economy.

Many Republicans refer to the Ronald Reagan era as a demonstration of what tax cuts for the very wealthy can accomplish, however when you look at the Reagan era in some detail, we can get a better picture of what specifically happened and it is not at all the picture painted by Republicans.  A conversation between  President Jimmie Carter and Paul Volcker who was at that time Chairman of the Federal Reserve, is revealing. Volcker stated in an interview on the Federal Reserve Bank website under the subject titled “Commanding Heights,” that he asked President Carter if he had cost him the presidential election and Carter’s response, as he smiled, was “…there were a few other influences as well.” What Volcker was referring to was his raising the prime interest rate creating a recession, which pushed the national unemployment rate to 10.8 percent.

The appointment of Paul Volcker by President Carter as Federal Reserve Bank (Fed) Chairman in August of 1979 was the major factor in the rise of interest rates. Volcker as Fed Chairman would push the prime rate to 21% by 1981 to bring inflation under control caused by the OPEC (Organization of Petroleum Exporting Countries) oil embargo just as Ronald Reagan was coming into office. Raising the prime rate to 21% brought inflation under control. Thus Reagan, not Carter, got the benefit of seeing the unemployment rate fall from 10.8 to 5.3%, as Volcker lowered interest rates from 21% during Reagan’s term in office, igniting an expansion of the economy.

Additionally, Mr.Trump as he cuts taxes will not have the benefit of the Social Security trust fund to fund programs popular with the average tax payer. The public was led to believe during the Reagan Administration that the surplus money from the Social Security trust fund was being saved. The money was deposited directly into the general fund of the federal government and spent for non-Social Security purposes, while wealthy tax payers walked away with a huge tax cut in 1986.

The bottom line here, in order for President Trump’s tax cuts to become a reality, the programs he has identified for cuts have to actually be cut! There is no Social Security trust fund to bail him out or plug the holes in his budget left by the tax cuts, as has been done in the past by other Republican administrations. American tax payers will actually expereince a loss of  some of their favorite programs in order to give the rich more money; and I suggest to you that is why the Trump tax cut plan will not pass Congress.

Staff Writer; James Davis

This talented brother is a graduate of Florida A. and M. University(FAMU), a former stockbroker, and a human rights activist who resides in Sanford, Florida. He was awarded the prestigious Governor Haydon Burns Scholarship to attend FAMU and while at FAMU was awarded the first Martin Luther King Scholarship. He is also author of three books, among them are “The Fix This Time,” Expanding Social Security Benefits to Create Jobs and Spur Demand( ) and “Hey…God’s Talking To You,” The Study Book ( ).

He can be reached through his blog @, (

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