15th September 2020
Hugues Chevalier, Economist
The US presidential election is just two months away. The current president prides himself on a ‘huge’ economic success. What is his economic record? We had presented four years ago Trump’s program of tax reduction and deregulation. Since the arrival of the new administration, economic growth has been maintained at a rate of around 2.5% (until the start of the pandemic crisis back in February). Tax reform is the US government’s main achievement, reducing the corporate tax rate from 35% to 21%, and from 39.6% to 37% for individuals. As a result, corporate profits have jumped, which has benefited mostly to the stock market. The share prices rise was also supported by the buyback programs made possible by these tax cuts. But, contrary to what had been expected, these tax cuts did not benefit to investments, which have remained stable. In addition, companies have not repatriated jobs “exported” to Asia. Further to this, the fall in tax revenue has widened the deficit and the public debt. Then, the $ 2 trillion infrastructure investment plan failed to materialise. Finally, the trade war against China and other trade partners has penalised not only household’s purchase power through import price increases, but also agricultural exports. All in all, the economic record of the past four years is quite poor and has recently been swept away by the pandemic crisis.