“It’s the economy stupid!” was the mantra used by candidate Bill Clinton during his 1992 presidential campaign referencing the temporary economic decline during the latter part of George H. W. Bush’s administration. The effective use of the slogan combined with H. Ross Perot’s third-party candidacy were sufficient to overcome Bush’s 91 percent approval rating following the successes of Desert Shield and Desert Storm (the First Gulf War) from August 1990 through February 1991. Clinton won with a plurality (43 percent) of the popular vote.
The economy was one of Donald Trump’s major platforms during the 2016 presidential campaign, emphasizing broad-based tax cuts to stimulate the economy and job growth to increase the gross national product (GNP). The parade of naysayers from the left intensified following election night. The next day, Paul Krugman, the 2008 Nobel Prize winner for economics, wrote for the New York Times predicting “plunging markets” ... ”So we are probably looking at a global recession with no end in sight.”
Senate Minority Leader Charles Schumer chided the tax bill as primarily benefiting the rich at the expense of the middle class; that the corporate tax cuts would not benefit their employees but only enrich their profits; that “trickle-down economics” never works; and so on. House Minority Leader Nancy Pelosi said, “This is Armageddon!” California Senate Leader and U.S. Senate candidate Kevin de Leon referred to the tax bill as “The Republican Tax Scam."
An article by CNN political analyst and nationally syndicated talk show host Bill Press — A Tax Bill Only Millionaires Could Love! — appeared in the Dec. 26 Californian after the tax bill was signed four days earlier. Press wrote that 80 percent of the tax benefits would go to the top 1 percent — those making more than $730,000 annually. He failed to say how much of the tax burden they carry and that the bottom 40 percent pay nothing. He also didn’t disclose that the marginal tax rate for a couple earning $250,000 was reduced from 28 percent to 24 percent, while those in the highest tax bracket had their rate reduced from 39.6 percent to 37 percent.
Press also stated that tax cuts (“trickles down to the middle class”) never work — referencing Ronald Reagan — even though Reagan’s reducing the highest marginal rate from 70 percent to 28 percent actually doubled the revenue to the U.S. Treasury! Press also wrote, "cutting corporate taxes will result in new investment, more jobs and higher wages is pure hogwash.” Really?
Apple CEO Tim Cook announced on Jan. 17 that Apple was going to repatriate $250 billion to the U.S. and invest $350 billion domestically over the next 5 years, creating 20,000 new jobs to add to its 170,000 employees and will pay $38 billion in new taxes. In addition, Apple is giving $2,500 in stock to its employees. Cook indicated this wouldn’t be happening were it not for the new tax law.
Jim Cramer, host of CNBC’s Mad Money and former hedge fund manager, dubs the tax reform “a Repatriation Tax Holiday.” And he calls it a modern-day Marshall Plan. Toyota and Mazda have announced they will build new factories in Huntsville, Ala., to build 300,000 vehicles a year, creating 4,000 new jobs. AT&T and hundreds of other companies have indicated they will pay employee bonuses and/or raise wages resulting from the corporate tax rate cut from 35 percent to 21 percent. “U.S. Jobless Claims Fall To 45 Year Low” was the headline in the Santa Barbara News-Press business section on Jan. 19. The story said that the labor market is near full employment with a jobless rate at a 17-year low at 4.1 percent. The stock market has risen by 31 percent and 2 million new jobs were created during Trump’s first year as president.
Often overlooked are the significant increases in the values of millions of people’s IRAs, 401(k) plan accounts and the pension plans for SEIU, STRS and PERS public unions. Consumer confidence is at its highest level since 2000. Press should have waited 3 weeks before positing his cynical economic trifecta because it’s the economy, brother!
Angelo Haddad is a lifelong resident of Bakersfield, holds the Chartered Financial Consultant designation and is a past president of the Estate Planning Council of Bakersfield.