President-elect Donald Trump revealed his choice for Treasure Secretary last week and many experts believe that the US is headed for one of the most disastrous tax reforms since the 1980s. While many are comparing him to Ronald Reagan, critics are suggesting that the comparison is unfair as Reagan’s policies of cutting taxes for the middle class will not be effective as the US is economically stagnant.
The US economy has been showing little signs of growth since the beginning of the year as almost every industry has either been stagnant or dropping. This includes the industrial sector, retail sector and the automobile industry. Capital investments are the most noticeable and are already in the middle of the recession.
The retail sector is slowing down dramatically, in terms of transportation and restaurant related services. The sales trends are close to being the same as they were during the recession, however, there is a surprising increase showing recently. This increase is based on the fact that exports and inventories increased in the last few months. However, this is an unreliable factor for judging sales trends as the dollar is now at the same rate as 2009. This means that exports will eventually decrease as cheaper options become available for importers all around the world.
The automobile industry is on a similar trajectory with inventories rising high and sales hitting a plateau. The situation is so bad, that prices of used cars are also going down. The real estate sector is showing no better signs, as mortgage and refinancing is dropping rapidly with no signs of improvement, thus home sale trends are also on the way down. The rate of foreclosures in major cities has increased.
Overall, the forecast for Trump’s first year in charge looks gloomy at best and disastrous at worst.
Trump underline his policies last week and the main ones to note are the reduction of taxes on individuals and corporations, possibly cutting trade agreements with numerous foreign markets and a major investment in infrastructure. Without mentioning the possible amendments to the Dodd-Frank Act, the rest of the proposed economic plan clearly favors the top 1% of American citizens.
While his policies are similar to Reagan’s, it is worth noting that it is a completely different scenario and the implementation of his tax reforms spells long term disaster for the average American citizen.