Economic Implications of Tax Cut Essay Paper

Economic Implications of Tax Cut

With Clinton set to make tax cuts part of her platform for the 2016 election campaign, the implications of a tax cut on the U.S. economy are something to consider (Meckler). However, the fact that the political elite are using “tax cuts” as a stumping platform should indicate exactly how much “impact” that would really have on the economy. Considering the history of the U.S. economy, the system of state-sponsored usury that exists, the tight control of the Fed over interest rates (the control of which effects the economy a great deal more than “tax cuts” — a point which will be discussed in this paper), the trillions of dollars of debt currently being carried by taxpayers, and the relationship between the financing giants of Wall Street and the political staples of Washington who supposedly represent “Main Street” but in reality represent the vested interests of their financial backers, one can only view the assertion that tax cuts would have any impact on the U.S. economy at this point as absurd. Today’s economy is held hostage by the global banking cartels (see Greece, for instance — which simply offers a microcosmic version of the U.S. economy) and the politicians who serve them. Politicians and their “tax cuts” are ruses for an American public eager for positive change and frustrated by status quo initiatives which do nothing but drag the economy (see the Obama administration as a continuation of the Bush administration, as a continuation of the Clinton administration, and so on) through the gutter. The “deep state” is and has been in control of the economy for years (Scott 2). One could say that 1913 (the year in which the Fed was given its charter) was the turning point when the economy became the plaything of bankers. All that “tax cuts” could possibly do in such a situation is feed the bubble.

Tax cuts are little more than a talking point for pundits and politicians. Everyone likes tax cuts and the American public would love to have to pay less in taxes. But the reality is that the economy today is at best stagnant: it is not growing and many signs indicate that it is actually dying a slow death (Durden). Confidence in the money supply is gone (see the rise of crypto-currency Bitcoin). The money “saved” from tax cuts (the notion of whether it is actually “saved” has to be questioned as the State has now mandated that everyone must purchase health insurance, the price of which is set to rise now that the healthcare cartel is being propped up just like the banking cartel) is not going into the economy. Instead, it is either being hoarded for fear of the bursting of the next bubble (whether it is housing again, stocks, gold, FX, etc.). Because interest rates have been kept low by the Fed, money “saved” from tax cuts would not go into banks. Signs indicate that people are storing up for a foreseeable economic collapse (Orlov) brought about by unsustainable debt and a third world war, which will (once more) shake up territorial lines and acquisitions. These are things that affect the real economy — as the threat of Grexit has indeed shown.

In the U.S., however, there is more to fear than just Grexit. There are more jobs being created in the service sector than anywhere else (see bartending, waitressing, etc.), which reflects the servile condition of Middle America, itself shrinking and resembling more and more the indentured servant class of olden times (see the college tuition debt burden) (Durden). Consumerism, after having been pumped to the hilt for half a century, is finally consuming itself — and with consumer markets asphyxiating, big suppliers are in perpetual need of bailouts (see TARP and QE). With the Chinese stock market now being propped up by the Chinese government, one should expect global ramifications. Yet, because the banks apparently have near total control of all economies, it remains to be seen how long their policies will continue to be implemented before all manufacturing comes to a screeching halt and the balance of power is shifted. How long can “extend and pretend” go on? How long can fiat be sustainable?

Without answering those questions, tax cuts are simply a dream for anyone yearning for the post-War production surge of the ’50s. That surge was mainly due to the fact that the U.S. And her allies had wiped out the competition (see Germany). The belief that tax cuts can save the economy is essentially unfounded, as William G. Gale and Andrew A. Samwick of the Brookings Institution point out: “It is by no means obvious, on an ex-ante basis, that tax rate cuts will ultimately lead to a larger economy” (1). On the contrary, the researchers show that tax cuts without cuts in federal spending simply lead to more national debt. In the unreal world of finance today, debt can be monetized and sold to other investors — that is, until debt becomes toxic. (But does that ever happen anymore? Or are there merely sacrificial lambs like Lehman that are offered up every decade or so?). Historically speaking, debt has always been problematic for nations once they find that they have been cut off from their lenders. Could this happen in the U.S. It is a question worth asking, far more in fact than whether tax cuts would impact the economy — especially since there is no substantial empirical data supporting the claim that tax cuts boost economic prosperity. The fact is that there has been little research into correlation between tax cuts and stimulus effects. On the contrary, what research that has been done actually points to the opposite conclusion: “tax cuts can do more harm than good” (Johnston).

While a tax cut might sound good and look good on paper — the most important part of the cut “is the way a tax cut is structured and how it affects behavior” (Johnston). Short-term stimulation can be one immediate effect of a cut — but, as Gale and Samwick show, if cuts aren’t backed up by cuts in federal spending, they are meaningless. Tax cuts can also undermine domestic savings investments — which is what happened under Reagan and Bush era tax cuts. Considering also that interest rates are kept artificially low, tax cuts don’t encourage individuals to save but rather to invest in the rigged market, which is pumped up by QE and nothing else (see why the Fed is so nervous about raising rates — as soon as they do, the markets crash). Tax cuts are little more than a political talking point used to garner support for the political elite. Their effect on the real economy is largely dependent on too many other factors — and the factors that matter today, such as Fed fiat, commodity surplus, trillions in debt, shrinking markets, collapsing markets, bankrupt cities (and nations), and the ramping up of Cold War 2.0 war rhetoric — all of this tends to have a drain on the economy. Tax cuts would have the effect of pouring bubble bath into the tub as the water goes down the drain.

In conclusion, today’s economy is in far more need than mere tax cuts can do. Plus, fundamentally speaking, tax cuts by themselves do not necessarily mean economic growth, especially when government spending is not cut at the same time. The economy is weak because, in one sense, it has reached saturation point. This is true of the global economy — not just the U.S. economy. What happens when there are no more markets? See the stockpiling of crude and cars: there is an overabundance of goods — yet a high percentage of people remain out of work. The question that should be asked the next time the political elites bring up tax cuts is: how can tax cuts help a country that is already so far in debt that any extra savings it has go straight to the bankers? The answer goes back to what the bankers did in 1913 — but no one wants to say that.

Works Cited

Durden, Tyler. “All of ZeroHedge.” ZeroHedge. 13 July 2015. Web.

Gale, William G., Samwick, Andrew A. “Effects of Income Tax Changes on Economic

Growth.” Economic Studies at Brookings. September 2014. Web.

Johnston, David. “Tax Cuts Can Do More Harm Than Good.” AlJazeera America. 18

Sept 2014. Web.

Meckler, Laura. “Hillary Clinton Economic Plan to Chart Center-Left Course.” The

Wall Street Journal. 12 July 2015. Web.

Orlov, Dmitri. Club Orlov. 7 July 2015. Web.

Scott, Peter Dale. The Road to 9/11. Berkeley: University of California Press, 2007.


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