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The Failed Promises of the 2017 Tax Cuts and Jobs Act (TCJA)

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We all remember the promises for the 2017 Tax Cuts and Jobs Act (TCJA):

1) "Boost growth to 3.5 percent per year on average, with the potential to reach a 4 percent growth rate."

2) Boost business investment

3) Pay for itself (No increase in the deficit)

4) Give the typical American household around a $4,000 pay raise

Here are a few quotes from 2017:
"This change, along with a lower business tax rate, would likely give the typical American household around a $4,000 pay raise." Donald Trump, October 19, 2017

“Not only will this tax plan pay for itself, but it will pay down debt,” Treasury Secretary Steve Mnuchin, Sept 2017

“I think this tax bill is going to reduce the size of our deficits going forward,” Sen. Pat Toomey (R-PA), November 2017

First, on that $4,000 pay raise, from Motley Fool: Want a Tax Cut? Here's How Much Typical Americans Saved in 2018. The analysis suggests around $1,600 to $1,900, not $4,000.

And from the Heritage Foundation: The Truth About How Much Americans Are Paying in Taxes.
"the average American household paid about $1,400 less in taxes"
And on GDP, the following table shows quarterly real GDP growth (annualized) from the BEA since the TCJA was signed.   The average growth in the first eight quarters was 2.4% - nothing special - and definitely not the promised "3.5 percent per year on average".   And basically the same growth rate prior to Trump taking office.

Note: There was some pickup in early 2018 (as expected), but growth slowed in 2019.   This does not include the economic collapse in the first half of 2020.

QuarterReal GDP
Growth Annualized
Q1 20183.8%
Q2 20182.7%
Q3 20182.1%
Q4 20181.3%
Q1 20192.9%
Q2 20191.5%
Q3 20192.6%
Q4 20192.4%

What about investment?

Investment TCJAClick on graph for larger image.

This graph shows a 4 quarter average growth in Gross private domestic investment (Blue) and Nonresidential Private Investment (Red).

There was a slump in investment in 2015 and 2016 due to the collapse in oil prices, but there has been no discernible pickup in investment growth since the passage of the TCJA.

In fact, Gross private domestic investment had turned negative prior to the impact of the pandemic!

And what about the deficit?

The deficit has increased sharply during the pandemic, but the deficit had already increased significantly prior to the impact of COVID-19.

From the CBO December 2019 monthly budget review:
The federal budget deficit was $358 billion in the first quarter of fiscal year 2020, the Congressional Budget Office estimates, $39 billion more than the deficit recorded during the same period last year.
Compare that to December 2017 (before the TCJA):
The federal budget deficit was $228 billion in the first quarter of fiscal year 2018
So the TCJA didn't pay for itself and caused a significant increase in the deficit.

In summary, there was no discernible boost in investment (investment actually fell). No sustained increase in GDP growth. No $4,000 pay raise. And the TCJA didn't pay for itself.
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toddmichaelryan
26 days ago
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PBones
26 days ago
It seems we didn’t cut taxes enough. The solution is obvious, we need another tax cut.
toddmichaelryan
25 days ago
@PBones: Yes, and for the wealthier!!!
PBones
25 days ago
It’ll trickle down. Like urine on a leg.
toddmichaelryan
25 days ago
Ah @PBones, I can see your mistake: you’re not using a pee funnel. Then you get to keep all the trickle. https://www.outsideonline.com/2311596/our-favorite-pee-funnels
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💧 Caution, Do Not Store Vertically

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This is a package of “Beyond Sausages”, made by Beyond Meat:

These faux-meat vegan sausages are absolutely delicious, and it would be easy to miss that they are plant-based. They cook up incredibly well, and are likely to be enjoyed by anyone and everyone.

Beyond Sausages can be found in or near the meat department of many grocery stores around the United States. As you can see in this press image provided by Beyond Meat, they should be stored horizontally.

Unfortunately, my local supermarket has other ideas.

If I asked you “Can you make something look like both a flaccid male member and literal dog shit at the same time?”, you’d surely guess no. And yet, here we are!

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toddmichaelryan
63 days ago
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‘Now meatier’ means something different in The final picture
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Has anyone seen any studies on the efficacy of masks held dangling from one&rsqu...

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Has anyone seen any studies on the efficacy of masks held dangling from one’s hand? Based on my own observations, I’m assuming it must be quite high.

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toddmichaelryan
83 days ago
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Paul - I assume it is as effective as carrying around a book without reading it.
PBones
83 days ago
Ah, I’m not sure I agree. Carrying around a book without reading at least has the possibility of making you look smart, rather than dumb.
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💧 We All Hear a Yellow Multipurpose Machine

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Planning for an extension of transit service north of Boston began all the way back in 1990, but it took more than two decades of planning and delays before the Green Line Extension finally broke ground in 2012. Though it’s likely difficult for residents to believe it, the project is now getting somewhat close to completion. Some of this construction is taking place relatively near me, and I receive occasional updates on it.

Last week, I was alerted to some night time work which will be done over the next several weeks. Here’s an excerpt from that email:

Somerville and Medford residents living near the GLX MBTA rail alignment— especially residents between Lowell Street and College Avenue—may experience elevated nighttime noise levels over the next few weeks.

“Elevated nighttime noise levels” certainly sound unpleasant, but I suppose to make an omelet, you need to break a few eggs. The email detailed the work to be done, and then explained:

The yellow Multipurpose Machine will be on the rails most nights to support this work and the vehicle is required to sound its horn when it stops and starts. Additional heavy machinery in the rail alignment is expected to produce elevated noise levels which may be disruptive at times. The scheduling of the work at night is because its completion requires at least one line of track to be out of service.

The emphasis in the above quote is added, and it bears repeating. In addition to all the noise which naturally accompanies the laying of new train track, a support vehicle used in this construction is required to sound its horn when it stops and starts. That sounds like it’ll be quite a night, or several weeks of nights. It also seems like adding real insult to injury for those living near this construction.

Fortunately for me, I don’t live near this construction, so I won’t be impacted. As a result, I’m most interested to know more about the “yellow Multipurpose Machine”. It’s capitalized as if it’s a proper noun, and yet at present, the only Google search results for it are from this exact press release.

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toddmichaelryan
128 days ago
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#MightyMachines
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Weekly Initial Unemployment Claims decrease to 3,169,000

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The DOL reported:
In the week ending May 2, the advance figure for seasonally adjusted initial claims was 3,169,000, a decrease of 677,000 from the previous week's revised level. The previous week's level was revised up by 7,000 from 3,839,000 to 3,846,000. The 4-week moving average was 4,173,500, a decrease of 861,500 from the previous week's revised average. The previous week's average was revised up by 1,750 from 5,033,250 to 5,035,000.
emphasis added
The previous week was revised up.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 4,173,500.

This was lower than the consensus forecast.

The second graph shows seasonally adjust continued claims since 1967 (lags initial by one week while increasing sharply).

At the worst of the Great Recession, continued claims peaked at 6.635 million, but then steadily declined.

Continued claims have already increased to a new record high of 22.647 million (SA) and will increase further over the next few weeks - and likely stay at that high level until the crisis abates.
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toddmichaelryan
134 days ago
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Crazy numbers - note the continued unemployment claims: 22.6MM out of a workforce of 165MM. That is a minimum unemployment rate of 13%.
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Error Types

2 Comments and 6 Shares
Type IIII error: Mistaking tally marks for Roman neumerals
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toddmichaelryan
134 days ago
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Error type VII is most common in industry; type VI in academia.
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1 public comment
alt_text_bot
135 days ago
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Type IIII error: Mistaking tally marks for Roman neumerals
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