Trump weighs pay­roll tax cut

The Morning Call - - NATION & WORLD -

many U.S. com­pa­nies.

Last week, White House of­fi­cials re­jected any sense that the econ­omy was weak­en­ing, even in the face of nu­mer­ous sig­nals that the U.S. and global econ­omy had be­gun to slow. In­stead, they blasted the Fed­eral Re­serve, al­leg­ing that any weak­ness in the econ­omy was the fault of cen­tral bankers who had raised in­ter­est rates last year.

In the past few days, how­ever, a new process has kicked off within the West Wing. Nu­mer­ous top of­fi­cials have met with Trump and each other to try and de­ter­mine what is hap­pen­ing with the econ­omy and what — if any­thing — they should do about it. Trump has also dis­cussed the econ­omy with a range of con­fi­dants and busi­ness lead­ers, and the con­tent of those con­ver­sa­tions hasn’t al­ways been shared with se­nior White House of­fi­cials.

The anal­y­sis of a pay­roll tax cut cen­ters on a be­lief among White House of­fi­cials that they need to do what­ever they can to en­sure that con­sumers con­tinue spend­ing money. Con­sumer spend­ing has been a bright spot of the econ­omy this year, and con­sumer spend­ing and re­tail sales have helped pull the econ­omy through weaker busi­ness in­vest­ment num­bers.

But pass­ing a pay­roll tax cut could be un­pop­u­lar with law­mak­ers from both par­ties. Many Democrats tra­di­tion­ally sup­port pay­roll tax cuts, be­cause they tend to dis­pro­por­tion­ately ben­e­fit mid­dle-class Amer­i­cans. But Democrats could be ret­i­cent to back an­other tax cut less than two years af­ter Repub­li­cans pushed through a con­tro­ver­sial $1.5 tril­lion tax cut pack­age that has had mixed ef­fects on the econ­omy.

Mil­lions of Amer­i­cans pay a pay­roll tax on their earn­ings, a 6.2% levy that is used to fi­nance So­cial Se­cu­rity pro­grams. The pay­roll tax was last cut in 2011 and 2012, to 4.2%, dur­ing the Obama ad­min­is­tra­tion as a way to en­cour­age more con­sumer spend­ing dur­ing the most re­cent eco­nomic down­turn. But the cut was al­lowed to reset to 6.2% in 2013.

Repub­li­cans have long resisted pay­roll tax cuts, be­liev­ing the ef­fect of such changes to be in­ef­fi­cient and tem­po­rary. Also, the last pay­roll tax cut that was put in place in 2011 and 2012 was costly, pulling away more than $100 bil­lion in fed­eral rev­enue each year. The deficit is al­ready pro­jected to hit $1 tril­lion this year and worsen next year.

The White House scram­ble comes as ad­min­is­tra­tion of­fi­cials grap­ple with dim­ming eco­nomic pro­jec­tions ahead of the 2020 elec­tions. White House of­fi­cials had in­sisted that the econ­omy would grow at a roughly 3% pace this year, a clip that many econ­o­mists be­lieve is too rosy.

One of Trump’s top trade ad­vis­ers, Peter Navarro, has es­ti­mated that the Dow Jones In­dus­trial Av­er­age will hit 30,000 by Christ­mas.

It closed at 25,962 Tues­day and could slip.

White House of­fi­cials have not pre­sented a co­or­di­nated plan for how to deal with the chang­ing econ­omy. Just a few hours be­fore Trump con­sid­ered that he has thought about a pay­roll tax cut, spokesman Ho­gan Gi­d­ley de­nied it.

“It’s not be­ing con­sid­ered at this time, but he’s look­ing at all op­tions out there to try and give peo­ple back so much of the hard-earned money they’ve made,” Gi­d­ley said.

The White House is try­ing to jug­gle an ef­fort to calm the pub­lic about the state of the econ­omy while si­mul­ta­ne­ously search for ways to prop the econ­omy up. They are fo­cused on but­tress­ing con­sumer and busi­ness con­fi­dence, two fluid mea­sure­ments that can de­ter­mine how much spend­ing oc­curs.

One rea­son for the weak­en­ing econ­omy, many busi­ness lead­ers and econ­o­mists be­lieve, is the pro­longed trade war Trump has launched against China. Trump has im­posed tar­iffs against $250 bil­lion in Chi­nese im­ports and plans to im­pose tar­iffs on an­other $100 bil­lion in goods Sept. 1.

And he has an­nounced that he will im­pose tar­iffs on an­other large batch of Chi­nese im­ports — many of which are pop­u­lar con­sumer goods like lap­tops and phones — on Dec. 15.

J.P. Mor­gan Chase is­sued a re­port Tues­day that said these tar­iffs could cost the av­er­age Amer­i­can fam­ily roughly $1,000 each year.

Trump has given con­flict­ing sig­nals about the prospect for cut­ting a deal with China. He has said he will im­pose tar­iffs on China in­def­i­nitely and sug­gested that lead­ers in Bei­jing are go­ing to wait un­til af­ter the 2020 elec­tions to de­cide whether to ne­go­ti­ate.

But Sun­day, he tweeted that dis­cus­sions with China had restarted.

On Tues­day, he ap­peared less op­ti­mistic, say­ing the fight he had launched against the Chi­nese was nec­es­sary, but that his life would be eas­ier if he hadn’t done it in the first place.

“The fact is, some­body had to take China on,” he said. “My life would be a lot eas­ier if I didn’t take China on. But I like do­ing it, be­cause I have to do it, and we’re get­ting great re­sults.”


Pres­i­dent Trump fo­cuses on the state of the U.S. econ­omy Tues­day in the Oval Of­fice.

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