America’s Financial Problems – How Will the Current Administration Fix Them

America’s Financial Problems – How Will the Current Administration Fix Them

It has already been eight years after the end of the Great Recession – one of the largest financial crashes that rocked the foundations of the global economy, but Americans have yet to recover from the global crisis. The aftermath of the event has left a number of citizens scarred financially and psychologically – one reason why the economy remains the top concern of the 2016 presidential candidates.

Donald J. Trump, in particular, upon winning the 2016 elections has promised to “make America great again” by putting the economy at the top of his agenda. It might be easy to lay down promises, but how can his current administration actually fix America’s financial problems?

Reduce the national debt

The current administration promised to reduce the nation’s debt that is well above 20 trillion dollars by committing “to restraint while prioritizing funding to rebuild our national defense and strengthen America’s borders.”

Among other Trump’s promises is to grow the economy by 6 percent annually. However, it was revised to 3.5 percent, and then 4 percent. Now, his administration’s projected growth rates – as stated in the Fiscal Year 2018 budget – between 2.4 percent and 2.9 percent annually.

And how will he do this? Tax cut plan.

Calling his plan – the “TAX REFORM THAT WILL MAKE AMERICA GREAT AGAIN” or the Tax Cuts and Jobs Act, which final version has already been drafted and finished by the House and Senate leaders on December 15, 2017, Trump claims that it will directly meet the current challenges that America is facing.

The proposed tax cut, that is – cutting the top corporate tax rate to 20 percent from 35 percent, was said to generate enough growth to replace lost revenues. Also, the President and his fellow Republicans believe that the proposal will be the biggest in the U.S. history.

In the short-term, according to The Balance, tax cuts will boost the economic growth. That is primarily because confidence is the generator of economic growth and Trump has the support of the Republican majority.

However, in the long run, 4 percent annual growth is not okay. It was estimated by the Committee for a Responsible Federal Budget that Trump’s plan will increase the nation’s debt by 4.5 trillion dollars over the next ten years. Furthermore, if Trump’s administration will be successful in repealing and replacing the Obamacare, an additional 1.2 trillion-dollar worth of debt will add up.

Fix the U.S. trade

In his op-ed in USA Today, Trump wrote that “The great American middle class is disappearing.” And the factors that he was blaming for the “economic devastation” are America’s “disastrous” trade policies.

In January 2017, shortly after his inauguration, Trump withdrew the United States from the Trans-Pacific Partnership (TPP) – a 12-nation trade deal that includes Australia, Brunei, Canada, Chile, China, Japan, Malaysia, New Zealand, Peru, Singapore, U.S., and Vietnam – through signing an executive order.

According to Trump, “TPP is the biggest betrayal in a long line of betrayals where politicians have sold out the U.S. workers.”

In addition to yanking the TPP, on August 16, 2017, Trump began the negotiations for the North American Free Trade Agreement (NAFTA) – a treaty between Canada, Mexico, and the U.S. making it the world’s largest free trade agreement. Trump’s aim is to have Mexico cut its value-added tax and ends the maquiladora program.

The plan to fix the U.S. trade is hotly debated and Trump’s capacity as a President is being questioned. Trump Today argued that the U.S. President’s exit from the TPP might leave America’s economy suffering as it will open doors for China and other major players to successfully create multilateral and bilateral trades with other countries.

Similarly, economists have been worried and warning the current administration that bashing trade deals could cause an economic war that will leave Americans even worse off.

Categories: Finance

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