Wednesday, February 8, 2017

President Trump - Part 3 - Improving the Economy - Infrastructure spending

President Trumps two big ideas to boost the economy are:

1. Spend lots of money on infrastructure

2.  More tax cuts, particularly for the wealthy.

This blog addresses the notion of increased infrastructure spending.

At the current time our National debt amounts to about 104% of GDP. 
In the history of this country only twice has debt exceeded 100% of GDP, at the end of World War II (when it hit an all time high near 120%) and in the aftermath of the Financial Crash of 2008, where the previous round of infrastructure spending continued the explosion in the debt begun by the invasion of Iraq and pushed the debt to GDP ratio up each year since 2009. 

On top in infrastructure spending President Trump has talked about major increases in military spending.

President Trump says he can cut taxes and regulations and spur growth that will generate additional taxes that will reduce the debt.  As discussed in the last blog, history suggests that notion is a fantasy.  Even the vaunted Reagan tax cuts in the 1980's cost more than they produced in increased revenues (according to a Congressional Budget Office study a few years later) even though that was a period of rapid worldwide growth.  In fact the Reagan years were where our National debt began climbing again after falling continuously beginning a few years after the end of WW II.

Infrastructure spending is a good thing, but the current problem we have with crumbling infrastructure is a direct result of the Republican conviction that has dominated politics for the last 35 years that focusing on tax cuts and reducing Government spending are the keys to a good economy.  Their formula has not worked in the past and will not even come close to working this time.

Next - the flaws history reveals of the conviction reducing regulations will spur to growth.