Question

Between the end of 2008 and the end of 2017, labor productivity in the US barely rose 1% per year on average. The labor force participation rate during that time dropped from around 66% in 2008 to below 63% where it has stabilizd for the last 3 years. In those three years, population growth was about 0.7% per year. Considering the aging of the US population an annual average growth of the labor force of 0.7% oer year seems like an upper bound.

What does this data suggest about Trump administration claims that despite their massive tax givewaway to the wealthiest 1% of the population and their massive increase in the Pentagon's budget, average growth rates of RGDP around 3% will keep the ratio of budget deficit to RGDP from ballooning over the next 10 years. Explain.

Answer 1

Trump announcement of reducing corporate taxes would benefit top notch wealth class immensely. It would benefit middle class moderately but lower section of society would be penalized in form of reduced taxes. Following facts can corroborate that budgetary deficit would be widened in near future:

• US economy is growing at 3 % which would continue to perform on similar line. But side by side, government expenditure is destined to rise as well.
• It is projected that reduction in taxes would add up $ 10 trillion debt over next decade which would be unsustainable.
• US economy is facing stiff competition from developed as well as developing countries. Thus, near revenue income of government will experience downtick near future.

Thus, initiative of Trump to reduce taxes would add up budgetary deficit in future.