Paul Krugman argues that the GOP's massive tax cut is revealing itself to be a disappointing failure

Paul Krugman argues that the GOP's massive tax cut is revealing itself to be a disappointing failure

While President Donald Trump's personal scandals and the ever-increasing number of criminal investigations arrayed against him dominate the news, the stock market has faced extremely tumultuous headwinds, wildly rising and falling, often by hundreds of points, each day. Though, as always, this reflects countless factors, economist Paul Krugman argued that its movements can tell us something about Trump's presidency.

"Well, the stock market doesn't seem too happy," he wrote in a new Twitter thread. "Does this mean recession? No. But it does look as if Trumpophoria is fading, which makes this a good time to ask how that tax cut -- the only major legislation Trump will pass -- is going."

Many defenders of the president's policies — and even some of his critics — have pointed to the elevated growth in the last two quarters as a sign that, even if it wasn't a great idea, the GOP's giant tax cut at the end fo 2017 has had some positive effect on the country's economy.

Krugman noted, however, that quarterly GDP growth figures fluctuate a lot, and the recent figures are hardly unheard of, despite what the president's most enthusiastic cheerleaders have said.

He also pointed out that the most recent figures appear to show the trend of elevated GDP growth appears to be diminishing:

"To a rough approximation, then, whatever bump in growth we got over the past year is most of what we'll ever see. Now, annual growth including those two good quarters was 3 percent. But that should be compared with a baseline of normal growth, maybe 2 percent," he explained.

So what caused the bump in the growth of about one extra percentage point? In fact, it's the factor the Republican Party and conservatives have derided for nearly a decade now: economic stimulus. When President Barack Obama passed the 2009 stimulus bill to fight the 2008 recession, conservatives derided the idea as nonsense. Now, they're seeking to claim credit for the effects of that very phenomenon on the current economy.

But, Krugman, noted, it was just the tax cut funds — most received by wealthy people and corporations — that boosted the economy. With Obama out of power, Republicans finally decided to let government spending rise again:

"What this all looks like to me is a small payoff given the bulge in the deficit -- a multiplier well under 1 even in the short run, and likely to shrink further as higher interest rates take their toll," said Krugman. "Oh, and what about the great investment boom the tax cut was supposed to unleash? It's looking about as real as Trump's wall."

Enjoy this piece?

… then let us make a small request. AlterNet’s journalists work tirelessly to counter the traditional corporate media narrative. We’re here seven days a week, 365 days a year. And we’re proud to say that we’ve been bringing you the real, unfiltered news for 20 years—longer than any other progressive news site on the Internet.

It’s through the generosity of our supporters that we’re able to share with you all the underreported news you need to know. Independent journalism is increasingly imperiled; ads alone can’t pay our bills. AlterNet counts on readers like you to support our coverage. Did you enjoy content from David Cay Johnston, Common Dreams, Raw Story and Robert Reich? Opinion from Salon and Jim Hightower? Analysis by The Conversation? Then join the hundreds of readers who have supported AlterNet this year.

Every reader contribution, whatever the amount, makes a tremendous difference. Help ensure AlterNet remains independent long into the future. Support progressive journalism with a one-time contribution to AlterNet, or click here to become a subscriber. Thank you. Click here to donate by check.

DonateDonate by credit card


Don't Sit on the Sidelines of History. Join Alternet All Access and Go Ad-Free. Support Honest Journalism.