President Trump has signed the new tax bill, which was recently passed by the House and Senate. Through the country’s history, landmark legislation has always proven to show us the way. Results of past legislation show us, what not to do and what generally proves effective to improve the lives of most Americans. Do we sometimes need to learn lessons more than once? Yes we do, because each generation that comes along needs to learn just as we did as we became of age and began to make our way in the world.
Young adults will learn a great deal from the results of the new tax reform legislation. For historical perspective, allow me to go in the way back machine to a world far, far away—–the 80s. Yes, those of us who were young in the 80s will say, “It seems like only yesterday.” Or, “I cant believe the songs I grew up with are on the oldies and classic rock stations.” I graduated from high school in ’85. The economy was good. The Reagan Tax Cuts were in the midst of placing the country on the track to two decades of economic growth. Burgeoning corporate investment, plentiful jobs, high consumer spending and American pride coming out of the malaise of the 70s. This led to the successful economy and tax receipts collected by the Federal Government almost doubling in a fairly short period of time. Don’t discount the average citizen’s confidence as a factor in bolstering the economy. In 2017 we have experienced 3% plus growth for the first time in about a decade. What changed prior to the tax reform legislation being passed recently? Control of the government by one party, perhaps some regulatory changes? Yes, but mostly its attitude. The consumer confidence index has suddenly increased this year and that is one of the biggest indicators of future economic growth. Since the 80s there has been a steady drumbeat of politicians and pundits rewriting the history of this period of time and how the economic policies of the 80s were destructive. This narrative began as a way to detract from Reagan’s record and has now been the battle cry of the anti-capitalism crowd which is alive and well on college campuses. The evidence is clear and the statistics are readily available so I will not run through them here. I will speak to “Trickle Down” on a future post. During the 80s and beyond, the deficit has increased because government spending continued to have no basis in reality. One reason for our budgeting issues over the years, relates to the basic system of establishing budgets. Its called Baseline Budgeting. For example: the next year’s budget establishes a baseline increase in spending for a department or program of 5%. It is automatically set as a floor-not a ceiling. Any spending above 5% is an “increase” in spending. Any spending below 5% is a “cut” in spending. This is why you will consistently hear politicians over the years scream about cuts that are being proposed for sections of the Federal Budget, when in actuality there is say a 3 or 4% increase in spending proposed. The special interest groups and lobbyists jump on the no cuts train, the TV ads begin depicting people dying in the streets due to cuts, etc. You get the drill.
Back to today. Since the Senate passed the tax reform legislation, American corporations have announced huge investment plans, a raise for the company’s minimum wage, bonuses and other positive benefits. Corporations will experience a decrease in their tax rate, which will place our country in a more competitive position. The amount of off shore money held by American businesses has grown exponentially over the years. Capital will go where it is treated best and it will return to America and be put to work. Of all the lessons we will learn from tax cuts in the coming years, perhaps our most important lesson will be how to raise wages. NYS has aggressively increased its minimum wage the last few years and in 2018, it will be $10.40/hr. Is it good policy to artificially increase wages by selecting arbitrary numbers not driven by the market? Or is a better option to establish policies that increase economic growth, thereby creating jobs with private sector investment(not public sector), which leads to a tightening of the labor pool. The second option is market driven and therefore provides a real, genuine, lasting benefit. As the labor pool tightens, competition for labor intensifies. This reality rewards everyone by creating new and improved opportunities. But it especially rewards talent, hard work and the advancement of one’s individual qualifications. Is there anything more demoralizing than investing large amounts of money and time on a degree or skill and then you are unable to find a job that uses your qualifications? And the final result is an increase in wages for all! Perhaps the greatest lesson we learn is: How to truly raise the pay for all Americans. How to raise the standard of living of Americans through markets and private investment, not through bloated government programs that spend our money with little or no results. How do you know when we are successful? When fewer people give a damn what the government established minimum wage is today. They are on a path to prosperity and believe there is no end to what they can make, while not concerned with what the government sets as the minimum they should be paid. The corporations that have already announced minimum wage increases for their companies will leave the NY minimum wage in the dust. It is my hope most NYers that earn the minimum wage will be able to do the same.
Clifton Park and Beyond 