Retail Sales, The More Immediate Problem

How quickly hope can sour. That is if it is based on suspect assumptions and a misreading of the general situation. It would then be more like irrational pleading than derived from solid analysis.

One year ago, thereabouts, President Trump delivered upon one campaign pledge. He pushed a tax reform bill through Congress aiming to offer benefits to both the supply and demand sides of the economy, workers and businesses alike.

And just as I promised the American people from this podium 11 months ago, we enacted the biggest tax cuts and reforms in American history. Our massive tax cuts provide tremendous relief for the middle class and small business.

Initial reactions from Economists were quite positive (excluding those who are strictly partisan carnival barkers). Estimates varied as they always will with something new, but one widely cited expectation from the Heritage Foundation started the law off with positivity and optimism.

We project that the final bill will increase the level of gross domestic product (GDP) in the long run by 2.2 percent. To put that number in perspective, the increase in GDP translates into an increase of just under $3,000 per household. Though we only estimate the change in GDP over the long run, most of the increase in GDP would likely occur within the 10-year budget window.

These numbers didn’t mean Heritage’s statisticians were projecting an additional $3k in the average American’s paycheck, just that there was supposed to be $3k per household in economic benefits spread out across the whole system – in the long run. In other words, there should definitely have been some significant benefit which workers as consumers would see for their own purposes.

There is some evidence the tax cuts did have an immediate effect, but increasingly it appears to have been short-lived no matter the debate. For a few months, spending seemed to rise, perhaps due to the payroll tax rollback though it may just as much have been attributable to gasoline prices. In the end, it doesn’t seem to have mattered, either way, a bitter proposition befitting the spreading disappointment that is 2018.

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Gary Anderson 3 months ago Contributor's comment

China retail drops to 8 percent growth and the world worries. US growth has declined from 2014 according to the last chart. Labor is weak. The tax cuts should have come with strings attached, like forced spending of a portion of the cuts on the real economy.