One of the advantages of consuming quite a lot of economic information is that the really good providers of information write dispassionately of what is likely to occur and not what they wish would occur. Mauldin Economics is one of the very best at providing insight into what is likely to occur rather than what our partisan selves may be wishing will occur.
Their post today concerns tax reform and the Trump tax plan – worth your time to read it here.
Some gold from the post today
“But deficit spending isn’t really the problem. Our disease is excessive spending. Deficits and too-high taxes are merely its symptoms.
All government functions cost money to deliver; that’s why we have taxes. The real issue is, we have let government grow to a size where it now needs $7.03 trillion to get by (that’s how much federal, state, and local governments combined will make in fiscal year 2017).
Looking at the big picture, it doesn’t matter if the government funds itself with a) taxes now or b) borrowing now and taxes later. Both funding methods divert equal sums from private-sector uses that could be more productive.”
“Governments can’t finance themselves, since they don’t produce anything—so we have to pay for them.
Ideally, we’d have a tax system that is equitable and economically neutral, but we don’t. Our system is built to encourage and discourage certain behaviors by certain groups of people. Revenue is a beneficial side effect.
It works, too. Instead of resenting this brazen effort to manipulate us, we adopt the desired behaviors in return for tax breaks.”
In short – do not spend your Trump tax cut quite yet.