President Trump: The NEW one and only politics thread

You are largely correct. They used a lot of BS in how they sold the tax cuts.

In a healthy economy, more money retained by businesses could conceivably fund investment in the business. Businesses that want to grow behave that way. There is absolutely no incentive for that in the 2 percentish economy we have stagnated with for the last decade. Why would you build a new factory when the demand isn't there for your products and you can't foresee any return on your investment. Earnings have been largely stagnant, except for the last 2 quarters, which corresponds with one last liquidity injection from various central banks and the tax cuts. Most businesses themselves aren't growing (save a few tech names). Many are getting killed, actually. One way to financially engineer a higher stock price in that environment is to buy back your own stocks -- trillions of dollars of it, and it has gone on for the last 5 to 8 years as money was artificially cheap. Borrow, use the money to buy back your stock, which sends the stock price up. It was coming to an end, but the tax cuts gave it one last gasp. Executives love it, because while they approve those buybacks they are cashing in on their own stock and reaping the profit.

You are right. They sold the tax cut as, "This is going to lead to sustained 4 percent growth." As in, it was going to create investment that would pay for itself. It's nonsense. It gave us a one-time sugar high that may last another quarter, if that. But we are drowning in debt, because the fiscal and monetary shenanigans work hand in hand, and we have been running up more and more debt just to get that 2 percentish growth for the last decade, and the only reason that has been possible has been central banks furiously injecting more and more leverage and liquidity into the world. We are not just living on debt. The amount of leverage (and potentially dangerous areas that have been kept alive like zombies on cheap money) is staggering at this point.

The way you create growth is through saving and investment. We have done the exact opposite. We have had a central bank that has been robbing savers to encourage debtors on this misguided notion that what that debt buys is growth. What it actually does is create misallocated capital and credit crises and discourages HEALTHY investment.

I'm all for zero taxes. As much as anyone. But in the environment I am describing, it was irresponsible to cut the amount of money our Federal government was bringing in at the same time they wer increasing spending (much of which are entitlements that are locked in and are just going to become greater and greater). We have a runaway debt problem in this country, at every level -- state, local and our Federal government. Corporate balance sheets that are loaded with debt (much of which went to buying back trillions of dollars of stock to engineer a stock market bull run -- what the Federal Reserve stupidly engineered because they never learn). And at the consumer level, where there are trillion dollar student loan, credit card, subprime auto loan messes that have built up.

It's an unsustainable path.