President Donald Trumpâ€™s former chief economic adviser, Gary Cohn, spoke out against his former bossâ€™ trade policies recently. He said the result of Trumpâ€™s trade war with China as well as traditional U.S. allies could cancel out the economic benefits of the Republican tax cut package that passed last year.
â€śIf you end up with a tariff battle, you will end up with price inflation, and you could end up with consumer debt,â€ť Cohn, who served as director of the National Economic Council in the Trump White House until March, told The Washington Post last month. â€śThose are all historic ingredients for an economic slowdown.â€ť
Itâ€™s heartening to see a former member of team Trump speak out against the presidentâ€™s reckless trade policies. Certainly, those policies pose some danger to economic growth and could very well cancel out any economic benefit from the tax cuts, which were not widespread.
Itâ€™s worth noting, however, that the tax cut package doesnâ€™t offer an unqualified benefit to the nation. In fact, only 4 percent of American workers have received raises or bonuses tied to the tax cuts.
The experts conclude the tax cuts offer some economic stimulus in the short term, and that any stimulus shrinks over time.
The important consideration, however, is how the country pays for tax cuts that stand to balloon the federal deficit and the national debt. Thatâ€™s, perhaps, the most significant unanswered question.
Increased borrowing to finance the national debt, the experts note, will increase the costs of borrowing overall, raising interest rates for everybody else who needs to borrow money. If policymakers finance the tax cuts by cutting federal spending, the tax cutsâ€™ benefit likely turns into a liability.
Perhaps the GOP will garner a political benefit. But the partyâ€™s short-term political benefit, under any plausible scenario, appears likely to come at the expense of most of the voters who would be delivering that benefit.