Donald Trump's Promised Tax Cuts and the Reality of Economic Growth and Deficit
When former President Donald Trump took office, he promised his tax cuts would not only pay for themselves but also reduce the national debt to zero. These promises were based on the idea that tax cuts would stimulate economic growth to such an extent that they would generate more revenue than they cost. However, history has not been kind to this theory. Let's explore what actually happened.
Unfulfilled Promises and the Reality of Economic Policies
Trump's promise to achieve ‘trickle-down’ effects from his tax cuts was akin to a myth. In reality, his policies led to an increase in the national debt by borrowing $1 trillion and cutting an additional $0.4 trillion, both of which pushed the debt further into the red. This action, rather than reducing the deficit, only increased it. This is just another example of Trump's lack of understanding of economic history, a characteristic that has become a hallmark of his presidency.
Historical Context: Reaganomics and Trickle-Down Economics
During the Reagan administration, similar promises were made regarding economic growth and the trickle-down effect of tax cuts. These policies were later labeled "Reaganomics" or "Reaganism," which entailed supply-side economics and trickle-down economics. Unlike what was promised, these policies did not lead to the desired economic growth or reduction in the deficit. Instead, they benefitted the ultra-rich while harming the broader economy.
The Economic Reality Post-Trump
The promised economic boom that Trump envisioned never materialized. While the GDP growth rate did not meet expectations, household income did see significant growth. The real median household income saw a 6.8% increase in 2019, marking the largest one-year increase since 1967. This growth was even more impressive compared to the entire eight years of the Obama administration. However, this growth was not evenly distributed, with the bottom 20% of earners experiencing an increase in their share of national income for the first time in over 50 years. But the introduction of the COVID-19 pandemic and the associated lockdowns disrupted this trend, leading to a significant economic downturn.
Misplaced Trust and the Role of Congress
The continuity of economic policies and their implementation can also be attributed to the political structure in place at the time. The majority in the US House of Representatives, which is constitutionally responsible for budget authorization, plays a crucial role in the passage and implementation of economic policies. Despite the optimistic projections of tax cuts leading to economic prosperity, the actual outcomes were far from what was initially promised.
For more detailed insight and sources, refer to the related question and answer provided by Glenn C. Rhoads titled: Why was the US economy strong during the Trump administration?