Six months ago the Tax Cuts and Jobs Act was passed by Congress and signed into law by President Trump. Proof that Americans keep winning from pro-growth tax reform is evident with each new economic report.
So far more than 4 million Americans will receive bonuses and millions more are receiving additional benefits from at least “615 examples of pay raises, bonuses, 401(k) match increases, expansions, and utility rate reductions” due to the tax cuts, according to Americans for Tax Reform.
Adding to that stellar list is the latest benefit reported by the U.S. Bureau of Economic Analysis that American companies repatriated $305 billion of foreign earnings to America since the tax cuts. Comparatively, that total in the first quarter of 2018 was 10 times more than the amount repatriated in the first quarter of 2017. Before the tax cuts, companies were estimated to have $2.6 trillion held in foreign accounts, so more repatriated dollars may soon be on the way.
The BEA notes that the “TCJA requires U.S. parent companies to pay a one-time tax on their accumulated earnings held abroad, but generally eliminates taxes on repatriated earnings.” In other words, a primary cause of this extraordinary increase is foreign earnings no longer being taxed when brought back to the United States.
“U.S. firms that used to build their factories overseas in order to avoid U.S. taxes, they stopped in their tracks because of the tax bill, they are bringing all the money home,” said Kevin Hassett, chair of the president's Council of Economic Advisers.
The last time repatriated earnings saw a big boom was 2005 following the American Jobs Creation Act under President Bush. Much of those funds went to stock buy backs, increased dividends, and mergers and acquisitions, which did not necessarily translate immediately into more economic activity.
Economists, including Chairman Hassett, are more hopeful this time around as many have boosted projected annual economic growth rates. According to the Wall Street Journal, "Macroeconomic Advisers raised its second-quarter gross domestic product forecast to a 5.3 percent seasonally adjusted annual growth rate; as of Monday, the firm had been predicting a 4.6% growth rate. If the latest forecast holds up, it would be the strongest quarterly growth reading since the third quarter of 2003, edging the 5.2% growth rate recorded in the third quarter of 2014."
As expected, pro-growth tax reform contributes to more economic activity as production quickly ramps up. One such company increasing investment is Apple, the largest U.S. taxpayer, which recently announced it will invest more than $350 billion over the next five years because of the new tax law.
Congress should make these tax cuts permanent. But Congress must first do something about excess government spending, which is the driver of taxes and deficits. The national debt already exceeds our entire economic output at more than $21 trillion. We can’t afford to continue the downward spiral into more debt from a lack of spending restraint.
By restraining government spending so that taxes can be lower than otherwise, the benefits of the Trump tax cuts will continue and families will prosper.
This commentary was originally featured in The Gilmer Mirror on February 27, 2018.
Critics often claim Texas’ prosperity is based on abundant oil and natural gas production.
Others suggest it’s a “miracle.” Evidence, however, proves the Texas model, based on conservative fiscal policies, that ranks second best in economic freedom according to the Fraser Institute supports sustained human flourishing.
With less than 10 percent of the U.S. population, Texans have created 26 percent of all jobs added nationwide since December 2007. Texas’ two million new jobs exceed the combined populations of Wyoming, North Dakota, and Vermont.
This historic job creation has contributed to a near record low unemployment rate of 3.9 percent rate in December 2017. That rate marked the 42nd straight month of an unemployment rate at or below 5 percent, which some economists consider full employment.
There’s no doubt oil and gas played a role.
History shows Texas’ economy boomed when oil prices spiked in the 1970s, then bust when they collapsed in the 1980s. But Texas’ economy is more resilient to oil price fluctuations today.
The mining sector, dominated by oil and gas activity, accounted for roughly 20 percent of real private output and 5 percent of workers in the 1980s. Now, oil and gas activity directly represents only about 10 percent of output and employs just 1.8 percent of the labor force.
The drop in oil prices from nearly $110 in 2014 to around $60 today should have led to a severe recession in Texas had critics been correct. Instead, Texas’ real private economy grew by an annual average of 3.3 percent amidst the oil bust helping almost single-handedly pull the U.S. average growth up to 2.3 percent.
Contributing to Texas’ resiliency is diversification into healthcare, financial, and other professional sectors with high-paying jobs. Jobs in the lowest wage quartile increased by about 33 percent while the top two wage quartiles each increased by 25 percent in Texas from 2005 to 2014 according to the Federal Reserve Bank of Dallas. Comparatively, Texas’ job creation exceeded that for the rest of the nation in each income quartile, rebutting critics’ arguments that Texas creates only low-wage jobs.
The free enterprise system in Texas provides jobs for workers with all skill levels and experience — a key to individual prosperity.
Some point to Texas’ nearly worst ranking in the Census Bureau’s official poverty measure as evidence of a failed model. That measure, however, doesn’t include regional variations such as cost-of-living differences or non-cash government benefits, like housing and food assistance. The Bureau’s new Supplemental Poverty Measure does correct for these exclusions, putting Texas’ poverty rate instead at the national average of 14.7 percent, down from 14.9 percent in the previous report.
The Texas model has performed well over time.
The last major federal tax reform before what Congress just passed was in 1986. Since then Texas has practiced more fiscally conservative policies. A result was Texas’ real private economy quadrupling from 1987 to 2016. This translates to a compounded annual growth rate of 4.9 percent, which was 40 percent faster than the rest of the nation’s 3.5 percent rate.
The Texas model of reducing government barriers to competition lets people prosper more—a big reason why more people move here. In 2017 alone, Texas’ population increased by almost 400,000 from births and migration from other countries and states, particularly those from big government states noted by recent U-Haul migration trends.
Texas has taken strides to limit government’s growth and empower Texans in recent years. But there’s more to do.
The Foundation has launched the Texas Prosperity Promise (www.texasprosperitypromise.com/) campaign to promote and sustain the prosperity of all Texans by focusing on areas ripe for major reform. These areas include property taxes, education, spending restraint, government accountability, and self-governance.
But let’s not fool ourselves as we cast our ballots for folks offering a path towards greater prosperity, Texas is prime evidence that freedom works.
Excellent book with chapters written by different experts who are wisely skeptical of the "nudges" offered by behavioral economists. They explain how the major assumption made by behavioral economists that individuals act irrationally is incorrect because those individuals are purposefully acting to satisfy their desires given scarce resources and the rule of law.
To an outsider's perspective, a person's actions may seem irrational, but this determination is made ex-post by a third-party and not the individual making the decision. According to many behavioral economists, they would help nudge the individual, often through government intervention, to a more preferred choice that would help them act rationally. However, this can lead to many problems because the third-party, such as the government, doesn't have complete information or knowledge available.
There's also a relevant point made that in a free society we are able to "live freely" but we are also able to "fail freely."
If the government or some third-party is constantly nudging or directing someone towards a certain subjective outcome, there may be fewer times to fail freely so that they can learn by doing and thereby improve their livelihood over time without being forever dependent on the government or others. Self responsibility by sane individuals is essential for human flourishing.
These sort of nudges and decisions are made by private companies as well to incentivize people to purchase their products. While this may also lead individuals to outcomes that aren't ultimately in their best interest, in a free enterprise system, individuals are able to choose other options and not be locked into a decision or a maze of decisions put in place by government. We must also remember that government officials are human and fallible, so they may act irrationally given this line of thinking.
The key point is that irrationality is in the eyes of the beholder. Too often the decisions determined or incentivized for sane people by government, which is composed of people acting in their own best interest, reach a sub-optimal outcome that satisfies the desires of the third-party instead of the acting person.
There's no doubt that behavioral economics is an important field of economics with an insightful theory of how humans act that needs to be researched further, but the policy solutions so far often lead to worse outcomes than the subjectively determined problem.
I give this book 5 stars because it finally provides an excellent overview of behavioral economics with a sense of skepticism of nudges and the assumptions they are based on. Read it for yourself.
Jeffrey Sachs basically expands on the Millennium Development Goals (MDGs) by explaining the Sustainable Development Goals (SDGs) to address what he calls extreme poverty, environmental degradation, and political-economic injustice worldwide.
He provides valuable information throughout the book and some insightful solutions to address these issues, such as adaptation by communities to prepare for current and future social, economic, and environmental issues. However, as was the case with the MDGs, much of the focus is on governments solving these problems because there is an assumption that the free market fails to internalize the social cost, fails from asymmetric information, and fails from other reasons leading to the necessity of government intervention. Meanwhile, Sachs doesn't consider the poor choices made by government (public choice) and potential opportunity costs that are often substantially worse than outcomes in the private market.
There are key issues addressed in this book and some good ideas included in the SDGs, but it is too close to central planning for my taste and unlikely to resolve the major issues of our times as we live in a dynamic world where policymakers are often, if not always, behind the curve. However, works such as this might help us get closer to better understanding big social and economic issues and find ways to address them.
Overall, the book is rather repetitive and the recommended actions are based on many assumptions that aren't necessarily supported by data or research. In addition, the public policy choices are based on the precautionary principle that can be very costly.
For example, there is much discussion about getting the world off of fossil fuels (i.e. oil, natural gas, coal, etc.) as a source of energy but there is little to no discussion about the benefits of greening the earth and substantial improvements in well-being from fossil fuels and more greenhouse gases. So, if the world is to get off of fossil fuels and the potential gains from doing so, we must consider the large losses in economic activity and human improvement that would have happened over time. This is a common mistake in much of the environmental research as they focus on the social cost of carbon that's dependent on the discount rate and ridiculous assumptions in large-scale models but dismiss the social benefit of carbon.
I learned much from this book, which is why I gave it 3 stars, but I think there is still much that we need to learn about these issues before making radical global public policy choices. Check it out for yourself.
The authors provide an excellent overview of how to influence your child's whole brain so they can be better prepared for the future with specific examples of how to do so.
The left brain (logic) and right brain (emotion) are well-known, but the authors explore the upstairs brain (ability to stay in control and make decisions) and downstairs brain (lack of control and no ability to make decisions) whereby these constitute the pre-frontal cortex of the brain where decisions are made.
By helping your child, and adults, understand and mature the full integration of the brain, hence the "whole-brain child," they can become a more well-rounded individual who will be more ready to deal with different types of situations. There are 12 suggestions on how to achieve a whole-brain child throughout the book that are relevant and fairly easy to understand and implement.
I enjoyed this book and learned much about the science of the brain, my child, parenting, and myself that I hope to put into action. Because of these factors, I gave the book 5 stars.
Vance Ginn, Ph.D.