The Economy: the boom before the bust

Today’s robust economy is being fueled by massive borrowing of money inflated by Trump’s tax cut. The US economy is heading for a cliff in the next recession.  As government revenues decline there will be even more explosive deficits . We are in uncharted water as to how much total debt the Federal government and economy can handle.

The economy is continuing on the strong momentum started from the 08-09 recession. Further stimulus from a tax cut was not needed. Trump signed a tax cut that largely went to corporations and their super-rich owners. The tax cut was supposed to increase revenues with some kind of cult-like math. Real world math happened and this exploded the Federal deficit to over $1 trillion per year.

The tax cut was supposed to stimulate investment but didn’t. There was a big increase in stock buybacks; dividend increases and CEO compensation. The Stock Market is at an all-time high due to the lion’s share of the tax cuts going to the richest who can buy stocks.

Worse yet, Trump is talking about bribing the voters with even more tax cuts and adding to the federal deficit and debt. One dangerous possibility is cutting the payroll tax for SS and Medicare. This would accelerate the depletion of their trust funds (similar to savings accounts built up while boomers were all working) that will run out of money in 10-15 years.

About 25% of SS checks come from its trust fund. Sooner or later, there will have to be tax increases or SS benefits cuts to make up for the shortfall.

About the same amount of Medicare spending comes from it’s trust fund. This situation is even more dangerous. Healthcare expenses are rising at near 5%. At that rate, healthcare will cost double what it does today in 15 years as our population ages. This will accelerate the depletion of the Medicare Trust fund. The country is heading for catastrophe.

Some kinds of tax increases and/or spending cuts will be needed. Yet the Trump cult presses for more tax cuts to get re-elected and stay in power.