Brace for autumn storms

HoLiDaYS are over, schools go back, and in the US, Labor Day on Monday marks the end of the vacations there too.

This autumn the focus here will be the Brexit negotiations, which will continue in their bad-tempered way. Do not expect any breakthroughs; the trench warfare will continue for a while yet. But across the atlantic something big may happen that will rebound on us in the UK too.

The question is whether Donald Trump can get sensible tax reforms through Congress when it resumes on Tuesday.

if he and his administration can – and if those reforms are well-judged – then the US economy gets new impetus. if they make a mess of it, then people will start to wonder how long the recovery can continue.

The plan is simple. Cut tax rates for companies and individuals but also cut some of the allowances that both can claim.

US companies can avoid corporation tax if they generate profits abroad and keep them there. That is why apple held $1.3trillion offshore at the end of last year.

For individuals it is trickier, but aside from obvious exemptions such as charitable donations and pension plans, there are quirks such as deducting the cost of moving your pets, if you move home for a job.

are the tax cuts just for the rich? The chief white House economic adviser Gary Cohn rejects that.

He told CnBC that simplifying the tax code actually could mean higher earners would pay more because they were the people who benefited most from deductions.

But whether you accept that or not, Trump has to be able to get legislation through Congress. one danger is that he might get the rate cuts through but not the corresponding cull of allowances.

if that happens the US budget deficit, which has been creeping downwards, could balloon again.

another is that Congress is so cussed that it refuses to increase the US debt ceiling, so the government finds it is running out of money in the next couple of months. This happened in both the Clinton and obama administrations, and knocked US growth back as a result. The US stock fell 15pc as a result of the obama shutdown.

as we reported in these pages yesterday, the ratings agency Standard & Poor’s has warned that a US default could cause more damage to the economy than the collapse of Lehman Brothers.

american politics matter to Britain for two reasons. one is that the US remains the largest market for UK exports, bigger than Germany. The other is that financial markets are in a twitchy mood.

The real economy, in the US, Europe, and indeed in the UK is cantering along fine.

There were slightly soft job numbers in the US, but European businesses are confident. But we know from the past that distress in financial markets leads to a loss of confidence in the real economy – and we know what happens then.

americans need the president and Congress to get along.

we rather need them to do so too. To misquote the 19th century austrian diplomat, Klemens von Metternich: ‘when america sneezes, all Europe catches a cold’.

Future of work

SHoULD we be pessimistic or optimistic about the way automation is changing the world of work?

That probably depends on temperament: is the glass half-full or half-empty?

But the McKinsey Global institute has brought some insights to the question in new study – The digital future of work: what will change?

it comes in the form of a series of interviews with US academics and executives, together with McKinsey partners. The first key message is that while roughly half of present tasks that people do can be automated, only 5pc of those can be entirely automated. we will go on working, but use technology to do so more efficiently.

The next message is that this changes the organisation of work, including the move from full-time employment to a variety of non-employed working arrangements.

Put these together and how should we react? Perhaps the most insightful comment came from allen Blue, a co-founder of Linkedin, who said: ‘we have no idea what the future of work looks like ... So the most important thing for us to do is to build a system which allows us to be immediately responsive to changes that exist in the workforce.’

or, to simplify slightly: don’t over-plan for change, but be resilient when it happens.