Is Trumponomics a Failure?

Plus, the health care debate Democrats should be having By Yuval Rosenberg and Michael Rainey Is Trumponomics a Failure? The economic boost from President Trump’s tax cuts may already be gone. The tax cuts, combined with a big jump in government spending, produced a period of faster economic growth over the last year and a half, according to an analysis by Howard Gleckman and Aravind Boddupalli of the Tax Policy Center, but that burst of elevated activity appears to have come to an end. “The US economy grew robustly in late 2017, perhaps partly due to expectations for a coming tax cut, (which Congress passed in late December of that year),” Gleckman and Boddupalli [write](. “But the rate of growth peaked in the second quarter of 2018 and has been slowing ever since.” According to last week’s latest [GDP growth estimate]( from the Commerce Department, the economy is now growing at about 2.1 percent annually — the same rate as before the tax cuts took effect. “The economic benefits of the Tax Cuts and Jobs Act (TCJA) seem to have petered out,” Gleckman and Boddupalli conclude. The latest economic data also show that business investment — one of the key factors Republicans cited in their argument for the tax cuts, which were supposed to motivate companies to make long-term investments and thereby boost economic growth on a permanent basis — has not only dropped off but turned negative. “This slowdown in business purchases of plant and equipment contrasts sharply with President Trump’s rosy forecast of a long-term investment boom that would lead to annual wage increases of $4,000 or more,” Gleckman and Boddupalli write. At the same time, the tax cuts are a major contributing factor to the soaring deficit, which is expected to reach about $1 trillion this year despite solid economic growth and remain at that level for years to come. The Reason for the Flop Economist Paul Krugman has a similar take on Trump’s track record, [arguing]( in The New York Times Friday that Trump’s two main economic policies — tax cuts and tariffs, both intended to boost manufacturing — have flopped. The tax cuts failed to produce a surge in business investment while the tariffs imposed as part of the president’s trade war with China are now dragging on the economy, so much so that Federal Reserve Chair Jay Powell announced the first interest rate cut in more than 10 years as part of an effort to ensure that the economy keeps growing. Citing the long history of failed tax cuts, including those by President George W. Bush and Kansas Gov. Sam Brownback, Krugman says that “[t]here was never any reason to believe that cutting corporate taxes here would lead to a surge in capital spending and jobs, and sure enough, it didn’t.” Business investment is complicated and tax rates are “way down the list” when it comes to making decisions about expansion, the economist says. The bottom line: No one is arguing that the economy is in ruins due to Trump’s policies. Growth is still positive, job creation is chugging along and wages are finally rising, especially for lower-income workers — factors Trump will cite as proof that his policies have worked. But Trump and Republicans promised that their economic plans would result in lasting, structural improvements, and those don’t appear to have materialized. Krugman says the real question is how much stronger the economy could be if Trump’s policies had been different. “Imagine how much better shape we’d be in if the hundreds of billions squandered on tax cuts for corporations had been used to rebuild our crumbling infrastructure,” he writes. “Imagine what we could have done with policies promoting jobs of the future in things like renewable energy, instead of trade wars that vainly attempt to recreate the manufacturing economy of the past.” Op-Ed of the Day: The Health Care Debate Democrats Should Be Having Democrats should skip the debate over Medicare for All and turn their attention instead to the most important issue in health care, affordability, says Ezekiel J. Emanuel, an oncologist at the University of Pennsylvania who advised the Obama administration on health care policy. Writing in The New York Times Friday, Emanuel argues that achieving universal coverage, a goal shared by the Democratic presidential candidates, is relatively easy, but getting a handle on high and rising costs is much harder. “For the … 295 million Americans who have some form of health insurance, the problem is high costs,” Emanuel writes. “Even with health insurance, high premiums, deductibles and co-pays, surprise hospital bills and exorbitant drug prices inhibit people from accessing care and taking their medications, threaten to drain their savings, or even force Americans into bankruptcy. Democrats need a plan to deal with this problem.” Emanuel cites four policies he thinks lawmakers need to address in order to get prices under control, with potential savings of $200 billion a year: - Drugs: Americans pay far more for drugs than citizens elsewhere, and the U.S. could save billions of dollars by negotiating prices at the national level and using a “value-based pricing framework.” - Hospitals: Costs of care for patients with private insurance are soaring, driven in part by local monopolies in hospital systems; the U.S. would save more than $30 billion a year if hospital prices were capped at 140% of the current Medicare rate, and more with more aggressive reductions. - Billing practices: Billing and administration account for nearly 15% of all health care spending in the U.S, or roughly $500 billion a year. Standardizing and streamlining could save as much as $90 billion. - Limiting fee-for-service payments: Move physicians away from a fee-for-service payment system toward a value-based payment system that would reduce unnecessary tests and procedures. [Read Emanuel’s full analysis here](. Senate Budget Chair Unveils Plan to Overhaul Congress’s Broken Budget Process Senate Budget Committee Chairman Mike Enzi (R-WY), who is retiring after his term ends in 2020, this week unveiled a set of proposals to reform the congressional budget process — among them, remaking the committee he now leads into a Fiscal Control Committee that would include the heads of the appropriations and finance committees as nonvoting members if they are not already voting members. “We can all agree that the current budget and spending system has broken down,” Enzi said. “I am hopeful that through this process, we will be able to reach bipartisan agreement to end the current dysfunction and put our country back toward a more sustainable fiscal future — and on time, so we don’t have government shutdowns.” The draft [proposals]( which Enzi said reflect suggestions from both Republicans and Democrats as well as outside groups spanning the political spectrum, reportedly include: - Moving to a two-year budget and appropriations cycle as part of a re-orientation of the process around long-term planning. - Establishing a debt-to-GDP target as part of the budget resolution, with adjustments made as necessary in the second year of the cycle to reduce the deficit. - Raising the debt limit automatically as part of the budget resolution. - Adjusting the Congressional Budget Office’s schedule for producing baseline projections, and requiring the agency to publicly release its cost estimates for appropriations bills. Is there any appetite for budget reform? Lawmakers and outside watchdog groups generally agree that the congressional budget process is in dire need of repair. But as The Hill’s Niv Ellis [notes]( bipartisan joint select committee established to reform the budget and appropriations process last year failed to agree on a set of recommendations after months of work. The bottom line: There isn’t all that much reason to think another attempt would yield different results, though Paul M. Krawzak of Congressional Quarterly suggests some reason for optimism: With deficits projected to top $1 trillion as soon as this year and spending caps established under 2011 law set to expire, he [writes]( “Congress could be more open than usual to ways to revamp the budget process.” Number of the Day: $32 Million Special Counsel Robert Mueller’s investigation into Russian election interference cost nearly $32 million, according to a [new report]( released by the Justice Department and cited by [CNN](. That sum reportedly includes about $16 million spent directly by Mueller’s office as well as spending by parts of the Justice Department not under the special counsel’s direct control. But as [previous analyses]( [have suggested]( — and Democrats have pointed out — the investigation may have yielded positive financial results for the government, beyond the indictments and convictions it generated. “You secured the convictions of President Trump’s campaign chairman, his deputy campaign manager, his national security advisor, and his personal lawyer, among others,” House Judiciary Committee Chairman Jerry Nadler (D-NY) [said]( before Mueller’s congressional testimony last week. “In the Paul Manafort case alone, you recovered as much as $42 million, so that the cost of your investigation to the taxpayers approaches zero.” Your Prize for Making It Through the Week Now you know: Someone made a [font]( using [gerrymandered congressional districts](. As always, send your feedback to yrosenberg@thefiscaltimes.com. Please tell your friends they can [sign up here]( to get their own copy of this newsletter. And have a great weekend! News - [Trump Signs 2-Year Budget Deal, Despite Conservative Complaints of Runaway Debt]( – Washington Post - [Pentagon Puts $10B Contract on Hold after Trump Swipe at Amazon]( – Politico - [Senate Democrats Push Repeal of State and Local Tax Rule]( – Roll Call - [Kamala Harris Wants to Undo Democrats’ Favorite Part of the GOP Tax Law]( – Bloomberg - [US Hiring Is Chugging Along at a 'Slow but Still Solid' Rate]( – CNN Business - [Health Care Comes in Focus, This Time as Risk for Democrats]( – Associated Press - [Warren Has Lots of Plans. But Not on Health Care.]( – Politico - [Hospitals Are Safe in the Debates, but Not in Washington]( – Axios - [Yep, Medicare Advantage, Still Booming]( – Axios Views and Analysis - [Democrats Are Having the Wrong Health Care Debate]( – Ezekiel J. Emanuel, New York Times - [We Can’t Fund the Progressive Agenda by Taxing the 1% Alone]( – Jared Bernstein, Vox - [Why Is Everyone Obsessed with the Fed?]( – Jeff Spross, The Week - [The Labor Market’s Weak Spot: Jobs Making Stuff]( – Neil Irwin, New York Times - [Harris’s Fake Medicare-for-All Plan]( – Robert Kuttner, American Prospect - [These Are the Health-Care Questions That Matter Most]( – Max Nisen, Bloomberg - [Did Andrew Yang Succeed in Stoking a Debate on AI and Universal Basic Income?]( – Cat Zakrzewski, Washington Post - [How Not to Make Government More Efficient]( – Bloomberg Editorial Board [Like Us on Facebook]( [Like Us on Facebook]( [Read Us On the Web]( [Read Us On the Web]( Copyright © 2019 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com, or through Facebook. 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