I was wondering how long it would take for the Republicans to reverse their rhetoric... or would the conservatives actually pull something off the Republicans have never done - cut spending.
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While the Republicans run on smaller government and blame the Democrats for large government, they are the ones with the track record of increasing the budgets once in power. If they control both Congress and the White house, the increases have been even larger.
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You will see a lot of misleading articles about spending under Obama. But the first year budget was set before he had veto power. Since he entered after the financial crisis, government spending was used to make up for the shrinkage in the private sector. He ended up increasing the budget as a percent of GDP more than any other Democrat, but he came in third overall in the last 50 years. Reagan and Bush II were the largest growers of the US budget!
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Another myth is that tax cuts grow the economy. History does not agree with this. "Tax cuts" for the most part have been about who pays the taxes, not actually cutting overall revenue taken in as a percentage of GDP. The corporate tax cuts under Reagan were offset by increasing in social security taxes to obtain a "surplus" that only exists on paper. The economy did not grow any faster under Reagan than all the Presidents up to the financial crisis. What has happened slowly over these years has been a shift of wealth and income to the upper 5%. That is what "tax cuts/transfers" do.
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So it should be no surprise that the Republican budget "hawks" no longer care about cutting spending. They know this would slow the economy on their watch. Not good for re-elections. They do want "tax cuts" and have finally admitted the rich will get the cuts because, well, they make most of the income these days. See
The Goldman Sachs' White house Update: Pre-Stock Market Crash for some charts to help understand this. (https://report.tspsmart.com/2017/10/18/the-goldman-sachs-white-house-update-pre-stock-market-crash/)
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The only way tax cuts stimulate the economy is if the deficits are monetized by the Fed. I am sure this is coming too with Trump selecting a new Fed chair. But if higher inflation sets in and interest rates keep rising, it may not translate into a positive outcome for the markets.
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Michael Bond
TSPsmart.com
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Posted by: Michael Bond <michaelhbond@yahoo.com>
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