No Plans for Ruage (?)

In his most annoying New York accent, the only thing he shares with President Trump, the insufferable Senate Minority Leader, Chuck Schumer, just shared with America that the Republican Congress would "rue the day" that they passed the new tax bill into law, as was done yesterday.

That "ruing" would take place, the minority leader assured us, around the election this coming November, when the effects of "middle-class Americans", none of which he is acquainted with, getting their taxes raised [sic], would lead to a punishing election defeat for Republicans in the House and Senate.

Of course, the law won't lead to middle-class Americans having their taxes raised, despite what Sen. Chuck says, because, well, it doesn't raise their taxes.  That has never stopped him from saying things like that, because the Democrats have no earthly idea how to run an economy, as the last eight years before the Trump boom showed.  So Schumer took to the well of the Senate and to every camera he could stick his face in front of -- he does know he's not exactly distinguished, right? -- to declare, contrary to reality, how bad the tax-cut bill was.

I am not an economist, although I did take an economics class at M.I.T. from Paul Samuelson.  I absolutely did not play one on TV.  So I can't really tell you how much impact the tax-cut law is going to have on the economy in its first year, to where voters in November could actually cause anyone to rue anything.  And voters are pretty fickle, even when they're told the truth, which is rare.

But I have to think the good senator is blowing smoke from a nether orifice.

There will have been exactly zero tax returns filed under the new law by next November, since its effects do not show in the 2017 filing season.  If the president is able to make some good speeches and an occasional tweet during tax season 2018, he might take pains to point out that, although it's a bit onerous in spring 2018 (being under the old law), the new law's effects will not only save them money, but they will remove a lot of the ongoing 1040 struggles in favor of a simpler filing.

What will happen, and nothing Chuck Schumer babbles will stop it, is that come around the first of February, W-2 employees (as opposed to 1099-MISC consultants like, well, me) will get themselves a raise, as the withholding table for the new law kick in, and people get to keep more of their own money.  That's going to be a really popular event, for sure, and the only downside is that the voters will have already gotten used to that by November.

[Aside -- don't worry about 1099-MISC consultants; we'll just set less aside in estimates.  We're good.]

The stock market will continue to rise, a second impact.  That's because publicly-traded companies will be immediately more profitable and, therefore, their valuation will become much larger and their stock price increased.  The bulk of the population of the USA is invested, either through 401(k) plans and IRAs, or mutual fund or direct investing.  Come November, we'll have happy (and wealthier) people.

The other thing, though, is the one I can't predict.

I'm not exaggerating when I characterize the corporate tax cut from 35% to 21% as gargantuan.  It is, in the words of our president, "hyooooge."  For those companies, large and small, who had been paying at the top rate and now get an immediate positive to the bottom line, they have decisions to make.

I have noted in previous columns that it is harder to add an employee now than it used to be, and the economic permanence of that is hard to assess.  Companies facing enormous personnel expenses such as what Obamacare wrought have decided, long since, that if three better employees could do the work of four others, it made economic sense to do so.  That deleted jobs from the marketplace.  There's no reason that posture changes now.

Yet the hope of the corporate tax cuts is that many more jobs would be created.  So the "decisions to make" are simply what those corporations are going to do with the tax savings.  From the point that we started -- the beginning of the Trump Administration -- we had already seen the corporate retrenchment on hiring years earlier.  So that means that demand has to increase in order for hiring to increase, right?

At some point, all the money put back in the pockets of the taxpaying public will end up getting spent, and that means that the demand for those corporations' products and services will increase to where they can hire comfortably.  What I don't know is when that will happen, and whether it will happen enough to affect the 2018 elections.

Will companies "hire on the come", building up their workforce and training them, on the assumption that more orders will need to be processed before the increase comes to pass?  If so, the jobless rate will really show improvement before long (another reason I wish that the Trump-era Labor Department had switched to presenting multiple employment statistics rather than using only the very-flawed "unemployment rate").

Will the Trump Labor Department actually ease enough of those restrictions on private-sector hiring (i.e., burdensome regulations) to help employment on that side of the equation?

It just seems that the first-year, pre-election 2018 outcome of the tax-cut law will be somewhere between "OK" and really, really positive to the economy.  If that's the case, particularly on the latter end of that spectrum, there may be some ruage, but it won't be the way Chuck Schumer thinks.

It will be Democrat red-state senators ruing their voting "no" on the economy.

Copyright 2017 by Robert Sutton
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