Michael Bloomberg criticizes that the Trump administration's tax reform is a trillion dollar blunder.

Fiona Sydney

2017-12-09 08:37:00 Sat ET

Michael Bloomberg, former NYC mayor and media entrepreneur, criticizes that the Trump administration's tax reform is a trillion dollar blunder because it adds another $1.5 trillion federal budget deficit to government debt over the next few years. The corporate tax cuts may restrict the U.S. government's ability to invest in education and infrastructure, may render health insurance more expensive, and may have no impact on real wage growth. Harvard public finance professor Martin Feldstein, however, says this tax overhaul is worth its costs because U.S. corporations will use their tax cuts to boost real wages and capex investments, and these firms will repatriate $2.5 trillion offshore cash to invest in job creation, manufacturing automation, and R&D innovation. In line with some economists' op-ed articles and blog posts on the probable effect of the Trump corporate tax cuts on real wage growth, a firm invests up to the point that the after-tax return on its labor and capital investments equates the return that investors require to allow the firm to expand its factor inputs. As the firm receives income tax breaks, it finances the purchase of new machines, plants, and computers. These capital expenditures make the typical worker more productive. Then the firm wants to hire more workers to run the new machines and computers etc. As a result, the typical firm raises real wages until the economy restores its steady state. Hence, tax cuts can effectively boost real wage growth ceteris paribus.

 


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Oxford macro professor Stephen Nickell and his co-authors delve into the trade-off between inflation and unemployment in the dual mandate of price stability and maximum employment.

Apple Boston

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Thomas Sowell argues that some economic reforms inadvertently exacerbate economic disparities.

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Blue-ocean strategists shift focus from current competitors to alternative non-customers with new market space.

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Spotify considers directly selling its shares to the retail public with no underwriter involvement.

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Warren Buffett points out that American children will be better off than their parents in the next decades.

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2018-01-05 07:37:00 Friday ET

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Warren Buffett cleverly points out that American children will not only be better off than their parents, but the former will also enjoy higher living stand

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