The Republican economic playbook nowadays involves maintaining previous tax cuts permanently, reducing taxes even further, and implementing an extensive tariff policy to support tax reductions, finance government operations, and enhance domestic economic growth. Voters offered their support of this novel policy approach as they re-elected the former president for another four-year term. However, this economic strategy is likely to face challenges when confronted with economic realities, diminishing its chances of success. The United States is expected to have an average budget deficit of over $2 trillion in the next decade, even if the tax law changes from 2017 expire. Extending tax cuts will exacerbate the fiscal imbalance, and new tax reductions will not be self-sustaining. A comprehensive tariff program will result in increased prices (inflation) without significantly boosting domestic production or growth, as trading partners respond in a similar manner. The U.S. cannot continue borrowing indefinitely, and global investors have already started to respond by demanding higher interest rates on US bonds. A policy that relies on record borrowing, pushing up interest rates with the risk of higher inflation and minimal growth prospects is likely to fail.
Realities and Myths of Republican Economics
Extending the 2017 tax cuts will reduce the budget deficit (Myth).
New tax cuts will generate enough revenue to cover their costs (Myth).
Implementing broad and significant tariffs will increase revenue and foster growth (Myth).
Tariffs don't increase product prices & inflation. (Myth).
The notion that the US can borrow endlessly is true. (Myth).
US interest rates will not be impacted by a policy of higher tariffs, and increased deficits (Myth).
The US credit rating will not suffer if the Republican playbook of more tax cuts, and bigger deficits is followed (Myth).
A broad and big tariff program will shift production to the US as foreign trading partners fail to retaliate. (Myth).
A comprehensive tariff program will negatively affect a significant portion of the US manufacturing sector due to their reliance on imported intermediate and capital goods (Reality).
Implementing the Republican playbook of tax cuts, larger budget deficits, and tariff policy raises the likelihood of a financial crisis within the next year or so. This is particularly true when the "go at it alone strategy" conflicts with the fact that relying on foreign funding for the budget deficit is necessary. (Reality)
No answers here, just alleged "myth" designations for policy positions. The same thing could be written about the opposite of each myth listed. Such as, without tariffs, foreign businesses with government support will sell products into the US at a loss to destroy their US competition. (fact) Or, many analyses show the 2017 tax cuts resulted in more Federal revenue, not less. (fact) Or, higher taxes remove cash used for capital expenditures (1 for 1) and reduce American competitiveness at its heart. (fact) The "myths" listed here are really not myths, far from it, but instead are very complex subjects of disagreement. It is probably wrong to characterize any of them as myths.