Cue the Trump tax reforms…



While President Donald Trump has recognized that America's private sector desperately needs reflating, he doesn't yet appear to have realized that this involves alleviating the personal and business debt overhang and enabling more equitable distribution of wealth and incomes, especially in favor of the poorest and lowest earners.

This can be achieved in several ways, including a combination of higher benefits and earned incomes, reduced real debt burdens (by devaluing the currency, by deflation and/or by debt forgiveness) and greater provision of free or low-cost services by the state.



Quite apart from the social value of these programs, this is merely a recognition of economic realities. Ultimately, the narrower the wealth and income bases are, the less efficient an economy is. If a single individual owns the entire productive asset base, then the only employment is indentured slavery. In other words, serfdom.



Although Trump has outlined indicative policies purportedly designed to promote higher economic growth (or in bloviated Trumpspeak "to make America great again"), the reality of the policies seemingly favored by the new administration appears to be a fast-track return to ruination and possibly serfdom. Despite the rhetoric of phenomenal tax reform supposedly for the benefit of everyone, it appears they may not have learned the lessons of counter-intuitive history.



Although we still await the final details, the proposed tax cuts appear to amount to a further distribution in favor of the wealthiest individuals (and the corporations primarily owned by them). Talk of cutting government expenditure also remains vague and Treasury Secretary Steve Mnuchin has repeated the mantra that the tax cuts will be funded by the additional growth generated (which will seemingly happen towards the end of next year and is only capable of being understood and accurately forecast by those inside the administration).



It seems that we can expect some redistribution of funds from the U.S. government (which has been spending with some degree of equity) to the wealthiest and those earning more than $1 million per annum (who will claim almost half of the tax cuts expected to be offered).



This represents a further redistribution away from those with the greatest need (and therefore the highest marginal propensity to spend) to those with the least marginal propensity to spend.

Corporate and personal tax cuts will simply take out of circulation money that was revolving, albeit at a sedentary pace. In doing so, this creates a curb on economic activity that disproportionately hurts those lower down the income ladder.