The President would have us believe that his tax cuts are the panacea for a great economy. One could hardly argue that tax cuts for the middle class are beneficial. The problem with the administration’s cuts is that they are modest for the middle class (and ephemeral) while they are huge for the already wealthy (and permanent). Tax cuts for corporations, many of whom already successfully avoid much of the taxation, will probably only make corporate executives richer unless the government demands mandatory assistance for workers through education, training programs and benefits.
The administration claims that these tax cuts plus elimination of many government regulations will result in wage increases for the middle class. There will be some wage increases, though most of them will go to management employees. Wage increases for across the board middle class employees will be limited and (my guess is) will eventually fade.
Furthermore, when wages increase, prices also increase, particularly in the absence of wage and price controls. This results in inflation, causing the Federal Reserve Board to raise interest rates. Interest rates can be a boon for investors, but they profoundly will affect the cost of homes for potential home buyers, reducing both the housing and realty markets.
The primary business of business is to make profits for management and shareholders, and the easiest way to do that is to limit wages and/or cut full time employees. Regulations, on the other hand, can in some cases, be reduced or simplified, but eliminating them poses a serious threat since most were intended to protect the American public.
The stock market may reflect what is occurring generally in the economy, but it has only a modest effect on the middle-class public since it is largely premised on the buying activities of wealthy entrepreneurs– and many middleclass Americans don’t own elaborate stocks. The recent ups and downs in the market clearly indicate that the administration has little direct control over market activities.
The best resolution for the American economy is wage and price controls which could help allow middle class workers permanent tax cuts, guaranteed wage increases and benefits, and help control prices on manufactured goods. Both John F. Kennedy and Richard Nixon supported the idea of wage and price controls, but business lobbyists have effectively eliminated these from congressional consideration.
Then there is the deficit. The huge tax cuts for the wealthy and corporations will undoubtedly expand the deficit, so Republicans will go after what they conveniently characterize as “entitlement” programs: social programs designed to help stabilize middle class civilization such Medicare, Medicaid and Social Security. In a country that cries for socialized medicine, cutting or eliminating these programs would be disastrous. Those who oppose welfare programs should note that these are relatively minor expenses.
When we think about an effective economy, let us carefully consider all the implications.