Geopolitics on the rocks

Why if it were up to him, Trump’s tax plan simply wouldn’t be

North America

If Trump got his wish and turned the superpower into a conventional country, the US wouldn't be able to withstand such a reform

On December 20 US Congress passed the Tax Cuts and Jobs Act, a $1.5 trillion tax overhaul touted by many analysts as Trump’s major achievement in his first year at the White House.

Unfortunately, if it were up to Trump such a feat wouldn’t simply be.

Under the Act, the corporate tax rate is set to be slashed from 35 percent to 21%, while individuals will get roughly $1.125 billion in net benefits over 10 years (80% of individual filers will receive a tax break according to some estimates).

Trump has repeatedly bragged to have enacted the biggest tax cuts in history. If true, that’d be hardly his doing.  

Not only because under Obama larger tax cuts were enacted by making most of George W. Bush's cuts permanent and larger tax breaks overall were passed also under Ronald Reagan.

The Tax Cuts and Jobs Act is perfectly in tune with trickle-down economics orthodoxy, embraced by the Republican Party long ago.

The idea that a rising tide lifts all boats, namely that direct benefits for the entrepreneurial class creates indirect benefits for middle and lower-class, precedes Trump’s election by many decades.

That is why, unlike other proposals broached by the White House, which were flatly rejected by Congress, the tax overhaul has been warmly received by most republicans (and many democrats).

Even more importantly, if Trump got his way such a reform wouldn’t be sustainable.

The Congressional Budget Office calculated that over ten years the Act would add an estimated $1.455 trillion to the national debt, which already hovers around $20 trillion. A huge burden the US can withstand only by controlling maritime trade routes and by being the world’s buyer of last resort.

In a nutshell: by being a global empire, as its massive public debt is guaranteed by its armed forces and partly owned by those countries participating in its consensus.

Something Trump would dismantle, if he could.

As according to him the US should stop being the world’s policeman, while posting a trade surplus and retreating to its native hemisphere.

A dramatic shock which would force Washington to pay back its debt in full and to do so through higher interest rates.

An undertaking simply unaffordable for any human entity, given its gigantic size.

Although a concrete possibility, if only Trump got his wish and turned the US into a conventional country. Which would also deprive him of his main domestic achievement.