Rather than helping, the 2017 Republican tax law is failing to boost the economy, according to experts.
Economic growth in the United States slowed to just 1.9% in the past three months, far slower than promised Donald Trump made during his 2016 campaign. The sluggish growth is even worse than the second-quarter numbers, when the economy grew at 2%, NPR reported on Wednesday.
In his annual budget to Congress, Trump predicted a more robust 3.2% growth.
"That's not going to happen," Diane Swonk, chief economist at Grant Thornton, told NPR, adding, "we won't get a 3-plus% growth rate for the year."
While there are several reasons for the slowdown, Trump's trade war with China is certainly one of the key factors, according to Swonk.
"Businesses don't know where to place their bets and don't know where to invest when they don't know where the next tariffs are going to come from," Swonk said. "That's been one of the biggest weights on the U.S. economy."
Josh Bivens, research director at the Economic Policy Institute, agrees that Trump's trade war with China "is dumb and destructive," but cautions that the data linking market uncertainty to slow growth is spotty.
During a telephone interview Wednesday morning, Bivens said the trade war "undoubtedly" impacts some sectors of the economy more than others, such as farmers throughout the midwest, and pointed to other Trump policies as contributing to the slowdown.
The 2017 Republican tax law "is failing more spectacularly than I thought it would," Bivens said. "It's hard to throw $150 billion [per year] in the economy and not have an effect," but the GOP tax law was so tilted toward the very wealthy that it hasn't worked to boost growth. Bivens said that a broad stimulus focused on the poorest third of American families could have "noticeably increased economic growth."
The tax law was supposed to boost business spending, but "business investment has really cratered" in 2019, Bivens added.
While some of the blame can be laid at Trump's feet, Bivens also said that the Federal Reserve increased interest rates too quickly over the past several years, which also played a role in sluggish growth.
While some economists cite the recent strike by thousands of workers at General Motors as a possible reason for slower growth, Bivens disagreed, noting motor vehicle production actually increased over the last quarter. The grounding of Boeing 737 MAX jets might also have contributed to the sluggish growth, according to NPR.
Americans across the country are beginning to feel the impact of slowing growth. The manufacturing sector is facing a recession, leading to 27,000 manufacturing job losses this year in just four states: Michigan, North Carolina, Pennsylvania, and Wisconsin.
Earlier this week, the largest privately owned coal producer in the country, Murray Energy, filed for bankruptcy.
When Trump was on the campaign trail, he promised at least 4% economic growth, adding, "I think you can go to 5% or 6%."
Thus far, Trump has not even been able to get up to 3% annual growth, and the latest numbers indicate he won't get there in 2019 either.
Published with permission of The American Independent Foundation.