Trump Flip-Flops on Tax Cuts 08/22 06:34
A day after considering cutting taxes to promote economic growth, President
Donald Trump changed course and said he would abandon the idea because the
nation already had "a strong economy."
WASHINGTON (AP) -- A day after considering cutting taxes to promote economic
growth, President Donald Trump changed course and said he would abandon the
idea because the nation already had "a strong economy."
Trump's flip-flop on Wednesday came after recent market volatility and
economic uncertainty, and amid a debate about whether the United States was
heading for a slowdown that would imperil his reelection chances. Trump earlier
this week acknowledged, for the first time, that his China trade policies may
mean economic pain for Americans, though he insisted the tariffs are needed for
more important long-term benefits.
But his consideration of cutting payroll taxes appeared short-lived.
"I'm not looking at a tax cut now," he told reporters at the White House.
"We don't need it. We have a strong economy."
Trump also knocked down the idea of indexing to the capital gains tax, which
applies when investors sell assets, to inflation. He said he feared "it will be
perceived, if I do it, as somewhat elitist."
Analysts have warned that a slowdown, if not full-blown recession, could hit
before next year's election. Trump, however, has largely praised the economy's
performance and his handling of it. He has often blamed the Federal Reserve
(and Chairman Jerome Powell) and the global slowdown for creating dark clouds
"Jay Powell and the Federal Reserve have totally missed the call. I was
right and just about everybody admits that," Trump said Wednesday. "He raised
interest rates too fast, too furious, and we have a normalized rate. And now we
have to go the other direction."
Some White House advisers fear Trump has undercut Powell's credibility. They
worry that the president's calls for rate cuts and his discussion of indexing
or a payroll tax cut could spook, rather than reassure markets.
Trump indicated he had no choice but to impose the trade penalties that have
been a drag on U.S. manufacturers, financial markets and, by some measures,
"Somebody had to do it. I am the chosen one," Trump said on the White House
lawn, looking skyward. "Somebody had to do it. So, I'm taking on China. I'm
taking on China on trade."
China, though, said trade with the U.S. has been "mutually beneficial" and
appealed to Washington to "get along with us." A foreign ministry spokesman,
Geng Shuang, expressed hope Washington can "meet China halfway" in settling
The U.S. economy appears to be showing vulnerabilities after more than 10
years of growth. Factory output has fallen and consumer confidence has waned as
he has ramped up his trade fight with China.
Trump rattled the stock and bond markets this month when he announced plans
to put a 10% tax on $300 billion worth of Chinese imports. The market reaction
suggested a recession might be on the horizon and led Trump to delay some of
the tariffs that were scheduled to begin in September, though 25% tariffs are
already in place for $250 million in other Chinese goods.
The president has long maintained that the burden of the tariffs is falling
solely on China, yet that message was undermined by his statements to reporters
Tuesday. "My life would be a lot easier if I didn't take China on," Trump said.
"But I like doing it because I have to do it."
The world economy has been slowing in recent months, and recent stock market
swings have added to concerns that the U.S. economy is not immune. A survey
Monday showed a big majority of economics expect a downtown to hit by 2021.
Addressing that possibility, Trump focused anew on pressuring the Fed to cut
interest rates. Presidents have generally avoided criticizing the central bank
publicly. Trump, however, has shown no inclination to follow that lead,
positioning Powell to take the fall if the economy swoons.
"I think that we actually are set for a tremendous surge of growth, if the
Fed would do its job," Trump said. "That's a big if." Trump recommended a
minimum cut of a full percentage point in the coming months.