Trump Eyes New Middle-Class Tax Cut – and a Massive Break for the Rich

Trump Eyes New Middle-Class Tax Cut – and a Massive Break for the Rich

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Plus, a new shutdown deadline
Wednesday, November 13, 2019

Trump Advisers Eye New Middle-Class Tax Cut – and a Massive Break for the Rich

President Trump’s economic advisers are considering whether he should make the promise of a middle-class tax cut a central element of his reelection campaign, according to various reports.

The internal deliberations have focused on a proposal to lower the middle-class tax rate to 15%, with the new rate likely covering those who earn between $30,000 and $100,000. Some advisers have embraced the idea “as a simple way of selling Republicans’ economic agenda as not merely beneficial to the rich,” The Washington Post’s Jeff Stein reported Tuesday.

The GOP’s 2017 tax cut package proved to be unpopular and was widely criticized as disproportionately helping corporations and the rich. Many Americans who had gotten tax cuts said they hadn’t noticed any change and did not believe they had benefited from the new law.

But, but, but: The current discussions are still at a preliminary stage, and it’s not yet clear where they might lead. Trump had floated the idea of a 10% middle-class tax cut before the 2018 midterm elections, but that talk did not result in a concrete proposal after the election.

Larry Kudlow, director of the White House National Economic Council, is reportedly leading the latest White House effort. He told CNBC Tuesday that Trump had asked him to “pursue something called Tax Cuts 2.0,” but that it is “way too soon” to get into specific details like a 15% rate. “I don’t know, sounds like a pretty good idea to me,” Kudlow said. “But I’ve got to consult with a lot of people, and I’ve got to get the president’s sign-off before anything comes out ... Those conclusions will not come for many months.”

The costs: The 2017 GOP tax cuts are projected to add $1.9 trillion to the deficit over 10 years, and any new cuts would likely add hundreds of billions of dollars to the deficit unless they were accompanied by major spending cuts. “I love tax relief, but this is getting ridiculous,” conservative budget and tax expert Brian Riedl of the Manhattan Institute tweeted. “Deficits are already headed towards $2 trillion within a decade. Unless Republicans are actually willing to cut spending accordingly, no additional tax cuts will prove sustainable. Pick a level of spending, and then pay for it.”

Another big tax cut for the rich? Cutting marginal rates would benefit those in higher tax brackets as well, but The Post’s Jeff Stein reported that other options have also been discussed, including “a payroll tax cut, revamping how capital gains are taxed, exempting savings from taxes, and reducing the number of tax brackets from seven to somewhere around three or four, according to Stephen Moore, a conservative tax expert at the Heritage Foundation who has worked with the White House on tax policy.”

Moore’s capital gains proposal would allow investors to avoid paying taxes on their stock market gains if they reinvested the proceeds in shares of other companies. That would represent a massive tax break for wealthy investors.

Congress Plans Stopgap Spending Bill Through December 20

Mark December 20 on your calendars. Congress plans to pass a second stopgap spending bill to keep the government running through that date, House Appropriations Committee Chair Nita Lowey (D-NY) told reporters Tuesday after meeting with Senate Appropriations Chair Richard C. Shelby (R-AL). Without that stopgap measure, known as a continuing resolution, the government would face a shutdown once current funding expires after November 21.

The House is expected to take up the new spending measure next week. The White House has said it is prepared to support a short-term continuing resolution, depending on the details.

“Lawmakers had discussed extending funding into early next year,” The Washington Post’s Erica Werner reports. “But they were concerned that if they attempted that, the process could falter and they would end up continuing to fund all agencies at current spending levels. That would mean the Pentagon and domestic agencies would have to forgo significant spending increases, an outcome lawmakers of both parties oppose.”

The question is what happens as the new December deadline nears. Lawmakers reportedly hope that the additional month of funding will allow them enough time to reach agreement on 12 required full-year spending bills allocating some $1.4 trillion in discretionary funding for fiscal 2020.

But key issues must still be resolved, including the contentious question of funding for President Trump’s barriers along the border with Mexico.

“Six weeks into the fiscal year, top Republicans and Democrats still have no game plan on how to reach an agreement,” Politico’s Sarah Ferris and John Bresnahan report. “The two parties can’t even agree on how to carve up the budget — basic details that are typically finalized in the early weeks of the process.”

And the December 20 deadline will also arrive at around the time when the House is expected to take a politically explosive vote on impeaching the president, potentially complicating the government-funding process and raising fears among some Democrats that Trump might prompt another shutdown.

Cost of Wars Since 9/11 Pegged at $6.4 Trillion

The total cost of the wars fought since 9/11 is approaching $6.4 trillion, according to an annual report published Wednesday by the Watson Institute for International and Public Affairs at Brown University.

The cost estimate includes $5.4 trillion in federal appropriations through the end of the 2020 fiscal year, plus at least $1 trillion in obligations for the care of veterans over the coming decades.

The report says that while the “global war on terror” began in Afghanistan with a focus on fighting al Qaeda and its affiliates, it has expanded into more than 80 countries. That effort has been paid for at least in part with deficit spending, and the Watson Institute incudes the ongoing cost of interest on the associated debt in its long-term estimate.

“[E]ven if the United States withdraws completely from the major war zones by the end of FY2020 and halts its other Global War on Terror operations, in the Philippines and Africa for example, the total budgetary burden of the post-9/11 wars will continue to rise as the US pays the on-going costs of veterans’ care and for interest on borrowing to pay for the wars,” the report says. “Moreover, the increases in the Pentagon base budget associated with the wars are likely to remain, inflating the military budget over the long run.”

Number of the Day: Deficit Up 34% in October

The federal budget deficit for October, the first month of fiscal year 2020, grew to $134 billion, up from $100 billion a year ago, the Treasury Department said Tuesday.

Fed Chief: Get the Deficit Under Control While the Economy Is Still Strong

Federal Reserve Chairman Jerome Powell told lawmakers Wednesday that Congress needs to get the deficit under control while the economy is still growing and the outlook remains positive. Failing to do so, he warned, could make it harder to fight the next downturn.

Powell said that the Fed, which has cut interest rates three time this year, would not likely cut rates again unless economic conditions deteriorate. The interest rate benchmark is currently set at a range of 1.5% to 1.75%, leaving little room for further cuts, and Powell told the Joint Economic Committee that “the current low-interest-rate environment may limit the ability of monetary policy to support the economy.”

That means that lawmakers may have a bigger role to play in fighting the next downturn through fiscal policy — a task potentially complicated by the growing deficit. “The federal budget is on an unsustainable path, with high and rising debt,” Powell said. “Over time, this outlook could restrain fiscal policymakers’ willingness or ability to support economic activity during a downturn.”

Powell also pushed back against President Trump’s comments about negative interest rates earlier this week. Speaking at the Economic Club of New York Tuesday, Trump said that the U.S was at a disadvantage to countries that have negative interest rates and thereby generate revenue from their debt. “Give me some of that money. I want some of that money,” Trump said, before complaining that “our Federal Reserve doesn’t let us do it.”

Powell said Wednesday that negative rates “would certainly not be appropriate in the current environment.”

Chart of the Day: Americans’ High Out-of-Pocket Health-Care Costs

Americans’ out-of-pocket health-care costs are higher than those in almost all other wealthy countries, according to OECD data highlighted by Axios. "The main regulatory difference is that other similarly large and wealthy countries’ governments play a role in either directly or indirectly controlling prices," the Kaiser Family Foundation’s Cynthia Cox told Axios.

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