Friday, March 2, 2018

How Taxpayers Will Be Scammed by the Tax Cut

By Robert Wenzel

You can never find a full Paul Krugman column where he gets everything right but once and awhile he writes something that makes sense. Such an event occurred yesterday when he led his New York Times column off this way:
So you go out for dinner with a wealthy acquaintance. “I’ll take care of everything,” he says, and orders you a hamburger. Then he orders himself an expensive steak and a bottle of wine, which he doesn’t share. And when the waiter comes with the check, he points at you and says, “Charge it to his credit card.”
Now you understand the essence of the Trump tax cut, signed into law a little over two months ago.
I hasten to add that he went off the rails from there talking Keynesian gibberish, but the first two paragraphs do in a way explain Trump tax cuts. They are in a way hamburgers thrown at the masses. Hamburgers the masses will have to pay for along with the steaks for Trump's crony friends, paid for in complex fashion since Trump didn't cut any part of the government budget to pay for the hamburgers and steaks. Thus the money will have to come out of the economy somehow. And when that money comes out it will screw the masses, either through the crowding out of private sector borrowing, which will make the economy less productive or by accelerating price inflation if the Fed monetizes part of the borrowing. Whatever the mix of these two, it will result in a smaller cut of the pie for the masses and likely a destruction of a part of the savings held by the masses.

Please pass the ketchup.

Robert Wenzel is Editor & Publisher of and Target Liberty. He also writes EPJ Daily Alert and is author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics and on LinkedIn. His youtube series is here: Robert Wenzel Talks Economics. The Robert Wenzel podcast is on  iphone and stitcher.

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