Trump's Legislation Falls Short on Support for America's Economically Struggling Citizenry
The recently signed US tax and spending bill, known as the "big, beautiful bill," has significant implications for American economic dominance and global financial norms. Here are some key aspects and their potential impacts:
## Economic Dominance
1. **Tax Cuts**: The bill makes most of the tax cuts from the 2017 Tax Cuts and Jobs Act permanent, which can boost economic growth by increasing business investment and consumer spending. However, this could also lead to increased income inequality if benefits disproportionately favor higher-income individuals.
2. **Increased Spending**: The legislation increases spending on defense, border security, and energy production, which could enhance national security and energy independence. However, these expenditures might be offset by cuts in other areas, potentially affecting social welfare programs.
3. **Deficit Impact**: The Congressional Budget Office estimates that the bill will add $3.4 trillion to federal deficits over the next decade, which could strain the national debt and potentially undermine economic stability in the long term.
## Global Financial Norms
1. **Fiscal Policy Influence**: The bill's emphasis on tax cuts and spending increases could influence other countries' fiscal policies, especially if they seek to maintain competitiveness in global markets. This might lead to a global trend of reduced taxes and increased spending, depending on the economic environments of other nations.
2. **International Trade and Investment**: The bill's focus on energy production and defense could impact trade dynamics, potentially leading to increased investment in these sectors. This might affect global trade balances and investment flows, depending on how other countries respond to these changes.
3. **Global Economic Stability**: The significant increase in U.S. deficits could impact global financial stability. If other countries perceive the U.S. fiscal situation as unsustainable, it might lead to a decrease in confidence in the U.S. dollar and potentially destabilize global financial markets.
China, in particular, has expressed concerns about the US's runaway debt and the potential devaluation of the dollar. China has reduced its holding of US debt paper from about $1.3 trillion to about $700 billion and has reinvested in gold and other assets instead. The devaluation of the dollar could potentially drag down the US assets that China holds. China is also concerned about the US reneging on its debt in the future.
The effects of the tax cut bill may have implications for American economic dominance in an interconnected world. The bill has significant implications for national defense, border security, and social welfare programs in the US. The wealthiest households may benefit by $13,000 per year from the tax cuts, while the poorest could be hit by up to $1,600 a year. The bill will increase the US deficit by $3.4 trillion over the next 10 years, adding to the existing national debt of $36.22 trillion.
The Democrats are betting on making capital of the tax cut bill's effects for the 2026 polls. However, the effects of the loss of Medicaid and cuts in food stamps may take time to be felt. The federal spending cuts could leave 11.8 million more people without health insurance by 2034. The bill also includes provisions for deductions on tips, overtime, and auto loans, as well as a provision that will eliminate a $200 tax on the purchase of gun silencers, short-barrel rifles, and shotguns.
The bill has disregarded traditional economic theories and financial practices that have shaped global financial norms, raising concerns about long-term economic stability and global financial market dynamics. The bill's impact on American economic dominance and global financial norms will depend on how effectively it stimulates growth without exacerbating debt and inequality issues, and how other countries respond to these changes in US fiscal policy.
[1] https://www.cbo.gov/publication/57085
- The permanent tax cuts in the bill may boost personal-finance for businesses and consumers, but could potentially increase wealth-management inequality.
- The increased spending on defense, border security, and energy production in the bill might have positive effects on national-security and business interests, but potential negative impacts on social-welfare programs.
- The Congressional Budget Office predicts that this bill will add $3.4 trillion to the personal-finance deficits over the next decade, which could strain the national debt and long-term economic stability.
- The changes in US fiscal policy brought about by the bill could influence global-news and policy-and-legislation, especially regarding international trade, investment, and currency stability, as well as potential concerns about crime-and-justice regarding US debt and financial conditions.
