President Donald Trump confirmed Tuesday that he is considering "various tax reductions," including a payroll-tax cut, to stimulate the economy as many of the indicators his administration has used to showcase a Trump-fueled economic "boom" have fizzled on the back of the president's escalating trade fights.
Companies that Trump has pointed to as signs of economic strength are now warning of weakness. U.S. Steel, an early champion of Trump's metal tariffs and a frequent mention in the president's Twitter feed, is idling workers and slowing production at a plant in Michigan. Home Depot on Tuesday lowered its sales outlook for the year as it expects consumer spending to take a hit from Trump's Chinese tariffs.
Consumer and small-business optimism has fallen, and 2 in 5 economists surveyed by the National Association of Business Economists now expect the economy to slip into recession this year or next. Blue-collar job growth has fallen to its lowest level since Trump took office, and key surveys of manufacturing activity are near recession levels. Economic growth, which Trump once promised would soar as high as 5% or 6% annually, is now running at about a 2% annualized pace.
Trump, speaking to reporters at the White House, continued to portray the economy as "incredible" and played down any chance that the United States could enter into a recession. Any tax cut, he said, would not be done as a defensive move.
"I've been thinking about payroll taxes for a long time," he said. "Whether or not we do it now, it's not being done because of recession."
In addition to potentially cutting payroll taxes, which would benefit workers by putting more money in their paychecks, Trump told reporters that he was thinking about unilaterally reducing capital-gains taxes, and that he believes he can do it without approval from Congress.
Such a move would largely benefit wealthy investors by reducing the amount of taxes owed on profitable sales of stocks, bonds and other investments.
Trump said the majority of his economic advisers support the idea of reducing taxes on profits that investors earn when selling assets like stocks or bonds. This would be done by indexing capital gains to inflation, which the president believes could be accomplished with his executive authority.
"We've been talking about indexing for a long time," Trump said. "And many people like indexing, it can be done directly by me."
Economists estimate that such a move would add $100 billion to the national debt. It also would provide the greatest benefit to the top 0.1% of taxpayers, according to an analysis by economists at the Penn Wharton Budget Model.
The economy is still growing and unemployment remains at a 50-year low. But several of the administration's favorite economic data points now show unmistakable signs of a slowdown. Business investment has stalled and it slipped backward in the spring.
The indicators suggest that the effects of Trump's trade fights with China and Europe and a slowdown in global growth are dragging on the U.S. economy and eroding the short-term boost from the president's 2017 tax cuts. Economists, including those at the Federal Reserve, say uncertainty from Trump's trade policies and the impact of higher tariffs are the biggest threat to the U.S. economy. Trump is prepared to impose new rounds of tariffs on imports from China in September and December, which will affect a large batch of consumer goods, and he has threatened to impose tariffs on imported automobiles next year.
Trump suggested Tuesday that his fight with China would be worth some economic pain -- including a brief recession -- if it helped reduce America's $500 billion trade deficit in goods with China.
"Whether it's good or bad, the short term is irrelevant," he said. "We have to solve the problem with China because they're taking out $500 billion a year plus. And that doesn't include intellectual property theft and other things. And also, national security, so I am doing this whether it's good or bad for your statement about, 'Oh, will we fall into a recession for two months?'"
In September last year, administration officials walked reporters through a series of charts that they said showed the economy, under Trump, outperformed what had been its trend in the second term of President Barack Obama.
"I can promise you that economic historians will 100% accept the fact that there was an inflection at the election of Donald Trump and that a whole bunch of data items started heading north," Kevin Hassett, then the chairman of the White House Council of Economic Advisers, told reporters.
Nearly a year after that briefing, almost every data point the administration presented has headed south.
Perhaps the most significant shift has come in capital investment, which Republicans inside and outside the administration promised would skyrocket after Trump signed a $1.5 trillion tax package that included steep cuts in the corporate tax rate and other incentives for companies to invest immediately. The charts showed nonresidential investment -- money pumped into things like plants, property and equipment -- surging to 8% growth under Trump.
New versions of those charts, updated by The New York Times to include more recent economic data, show investment growth was already slowing, or was on the cusp, in September. By spring, it had fallen below the average quarterly growth rate for Obama's second term. That's also true for equipment.
Information for this article was contributed by Alan Rappeport of The New York Times.
Business on 08/21/2019