Trump weighs payroll tax cut
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.