A storm is gathering
UNITED States President Donald Trump has served up a tax cut dressed as a measure to increase jobs. He has signed the controversial Tax Cuts and Jobs Act, which reduces the tax rate for companies from 35 percent to 21 percent beginning in 2018. The wealthiest will gain the most since the top individual tax rate will drop to 37 percent, a decrease of almost 3 percentage points. The Act also doubles the standard deduction.
While tax cuts can and do help American achievers to generate more wealth and businesses to operate in a competitive world, there are serious grounds on which to question the rationale for the cuts just made by Trump. Tax cuts are a sword to be unsheathed in lean times, but the US economy is in its eighth year of expansion and unemployment is at a comfortable 4 percent, and falling. What is more, polls show that only about a third of Americans back the move. With the US already $20 trillion in debt, it may have been imprudent for Trump to change the tax law in a way that will increase that debt by $1.5 trillion over the next 10 years, in addition to how much the debt was going to rise anyway.
The tax cuts will widen alarming inequality levels in the US. There is credible evidence that America’s poor live 10 to 15 years shorter than the well-off and that average life expectancy fell for a second straight year in 2016. Widening deficits crimp the government’s ability to look after the weakest in society and invest in education, health and defence – keys to future prosperity and security. The counter-argument, of course, is that lower taxes will spur growth that will feed back as higher tax collections. While that remains to be seen, the sounds of today’s partying may well reverberate as tomorrow’s dirge if Washington is not careful.
For Asia, the tax cuts bear careful watching. Some American companies, especially those operating in Europe, may be tempted to “reshore” more of their operations to the US, feeding a trend brought on by automation and new technology. The tax breaks offered to US multinationals by Asian governments may look a tad less attractive. However, the biggest worry may not be so much on the economic front as on the strategic. A widening US deficit could lead the government to consider trimming defence spending. That may hurt the military rebalance to Asia, one of the few legacies of the Barack Obama administration with which Trump has hesitated to tinker so far. Given America’s preponderant global power, changes in its domestic economic direction have insistent international ramifications.
ASTORM is gathering, and there is every reason to believe that 2018 will be the most consequential political year of our lives.
The reckoning upon us follows a year that mercifully drew to a close this weekend. Over that horrid year, President Donald Trump has questioned the legitimacy of federal judges, used Stalinist barbs to attack the free press and cast contempt on the rule of law, while his campaign manager, his national security adviser and a foreign policy aide have been marched into federal courts. Those antidemocratic instincts were made all the more ominous by his praising of autocrats across the world as they were ruthlessly consolidating power in countries such as Russia, China and the Philippines.
It is difficult to pinpoint the nadir for a man who has savaged Mexicans, Muslims and Gold Star mothers while fatshaming beauty queens and face-shaming female news hosts. But the low moment in this presidency may have occurred four months ago, when Trump claimed a moral equivalency between neo-Nazis and those standing against them. Or perhaps it was three weeks ago, when the president told Americans to vote for an accused child molester who had called our country the focus of evil in the modern world and once suggested opposition to the constitutional amendments that ended slavery and gave women the right to vote.
Others would surely consider the president’s malignant idiocy in foreign affairs to be the most damning legacy of his first year. World leaders continue to watch dumbstruck as the US retreats from organisations that were created following the allies’ victory over Hitler. Those same alliances that Trump now undermines by reckless tweets and discarded treaties carried the United States to victory in the Cold War. But this is a White House that heaps contempt on history. And so, America’s dangerous retreat from the world continues.
“On the morrow of the Republican success isolationist conceptions prevailed,” Winston Churchill wrote in The Gathering Storm. The British prime minister believed Hitler’s rise proved, above all else, “how absolute is the need of a broad path of international action pursued by many states in common across the years, irrespective of the ebb and flow of national politics”. But this president is ripping apart the carefully woven fabric of US foreign policy that bound administrations together from Franklin D Roosevelt to Ronald Reagan to Barack Obama, and across the American century.
The Gathering Storm is on my holiday reading list because of Republican strategist Steve Schmidt’s insistence to me that Churchill’s ominous warnings to future generations will be more relevant to 2018 than at any time since it was written in the years after World War II. While Trump’s eroding of US prestige across the globe is disturbing, it is his administration’s undermining of democratic values that poses an even greater threat to our Constitution and country. Borrowing again from Churchill, America’s constitutional norms tremble in the balance as Trump unleashes furious attacks on First Amendment protections, independent counsels and law enforcement officers who refuse to be bullied. While the framers of the Constitution foresaw the possibility of a tyrannical president, they never let their imaginations be darkened by the possibility of a compliant Congress.
Again, Churchill: “The malice of the wicked was reinforced by the weakness of the virtuous . . . They lived from hand to mouth and from day to day, and from one election to another . . . The cheers of weak, well-meaning assemblies soon cease to echo, and their votes soon cease to count. Doom marches on.”
Schmidt is right. The storm is gathering. And how we respond in the months ahead may determine our fate for years to come.