­čö║Ineffectiveness of the United States Tax Cuts and Jobs Act (USTCJA)

(Note: Originally published 7/8/2018 @https://patreon.com/diamond1)

In a general sense, the larger and more bloated a government becomes from a combination of reckless fiscal spending, unsound monetary policy, and oppressive laws, the more that government will have to increase taxes on citizens, goods/services, other countries, or financial markets.

The United States Tax Cut and Jobs Act (USTCJA) was heralded by republican think tanks as a tax cut for the middle and lower classes and touted as bringing investment into the United States. There were arguments that the tax cuts would confer the same benefits that occurred during the Reagan Era. However, the analysis did not account for changes in underlying business dynamics post the Reagan Era or the size of the budget deficits in the United States. 

To recap, the GOP tax cut and jobs act was marketed as a tax cut for the middle-classes or lower and was done intentionally during the holidays as a means to provoke spending in the US via consumer credit cards while juicing numbers during Q1. It was known it would benefit the wealthy and corporations. It was known corporations would 1. Buy-back stock, pay-dividends, sit-on-cash, or partake in M&A while laying-off employees. The bonuses reported in the news were few and far between to cover up these shortcomings. Also, analysts for particular companies in the US indices lowered estimates so there would be earnings surprises while everyone was managing expectations higher. In totality, all of this was done to support the markets. Confidence is supposed to be as good as gold in the markets, but the more you have to rely on managing expectations the weaker the markets and economy actually are. The more expectations are managed, the more credibility is lost if not supported by figures that are not manipulated. The other steps being used to prop up the US markets also include continued usage of margin financing, banks allowed to trade for their own accounts again, and dismantling important aspects of the Dodd-Frank Act. 

It is better to look at the total amount of debt in the USA which could include USA government debt, USA corporate debt, USA household debt, USA pension shortfalls, and off-the-books USA military spending to get a true sense of the total debt. You would also want to include the increase in the deficit from the Trump Administrations Tax Cut and Jobs Act (TCJA). For the pension programs in the USA, the required return has been kept at an artificially high-level as a means to keep liabilities low, but this impacts those dependent on the pensions by requiring additional contributions, limiting increases in wages, or requiring additional funding via borrowing, unfortunately. The use of investor proxies is also used a means for reform in other other countries to look more Western in nature which is not always appropriate at all given their stage of development including double standards. 

When the USA can no longer tax its citizens any longer it would then have to 1. tax other countries (directly and/or indirectly), 2. sanction other countries, 3. force support for the USD. There are already capital controls in the USA that impacts regular everyday citizens but it is disguised and is actually utilized solely to prevent a run on the bank. Due to all of the above, this is why Trump and the Trump administration are unfortunately cutting all of the programs in the USA and Internationally that have any social value while attacking President Obama. It should be noted that Donald Trump rushed the movement of the US embassy to Jerusalem which led to massive bloodshed. He also authorized Syrian bombings that went against protocol. On the second occasion, Donald Trump did not even wait for an inspection. The release of US prisoners is being utilized as a bargaining chip but also to mitigate the disasters done so far while trying to get Trump to win the Nobel which doesn’t make sense as arms deals are still being supported with other countries internationally. Trump, the Trump Administration, and ultra-conservative players continue to stick to their campaign while making up for any shortfall in as public a manner as possible via various tactics, just look at the timeline. 

Despite all of the above, and in a general sense, I do think that a value-added tax system is a better model. As a caveat, the value-added tax system is only as good as to where the underlying taxes are viewed as value-added. If you think lowering tax rates for coal is value-added while increasing taxes for new/renewable energy then that is probably not value-added, however, it might seem value-added but that is because there is a disconnect between the policy and values in the first place.

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