Monday, Feb. 24, the Dow began the week down 800 points. Meanwhile, the S&P slid 2.7 percent and the Nasdaq sank 3.2 percent. The low for the day was down 997 points. This is fearsome stuff that we haven’t seen for a while. What’s going on?
Coronavirus is already making itself financially felt throughout most of the globe. First reported in China, where it orginated, it’s now in places as far-flung as South Korea, Iran and Italy. Deaths attributed to the virus are common and exponentially-growing in number.
Also underway is President Trump’s proposed 2021 budget, already receiving negative reactions because it is full of outdated plans that would add to the Coronavirus’ financial impact as it will weaken the economy and undermine our nation’s ability to grow and prosper. Ultimately, by analysis, it will result, if implemented, in a national calamity.
What’s so threatening about it? For openers, it proposes massive and immediate cuts to the kinds of public services, protections and health care that help to strengthen short-term economic growth. According to a report by the Brookings Institution’s Hutchins Center Fiscal Impact Measure, government investment has been directly supporting overall economic growth for the past two years. Our federal government was contributing the most to the nation’s Gross National Product (GNP) over the past two years while to reverse that impact means to further limit growth that has recently slowed.
The proposed Trump administration cuts are so deep, so significant and so destructively targeted that they could be large enough to push the U.S. into serious recession. Programs such as Medicaid, food stamps and tax credits for low income families tend to have a positive impact throughout local economies while those are the main victims of President Trump’s budget: It seeks to cut or eliminate around $335 billion in the next four years. These cuts would effectively reduce economic activity and push growth potential for America to well under 1 percent over the next year and longer through painful economic contractions.
A key to economic prosperity is improving opportunities, as workers and consumers drive growth and prosperity. When those who work have the support to do their best, they have proven themselves able to innovate, create and improve everything around them. Trump’s budget wrecks havoc with the foundations of our society: education, health care, research and development.
Disappointing to an overwhelming majority of U.S. citizens and helping the wealthiest Americans, Trump’s budget includes an extension of the one-sided tax cuts. If extended, the richest 0.1 percent of Americans would receive additional tax cuts of about $100,000 per year. Meanwhile, cuts to public services for all who need help, would simply add significantly to the inequalities of the current American way of conducting the nation’s business: bad for our economics and our efforts to raise morale and opportunity among those left out of the American dream. Extreme inequality pulls the economy down and limits consumer buying to the few who can afford it.
What’s the bottom line on the consequences of Trump’s proposed budget? In all likelihood, Trump’s budget would yield the opposite of what so many of us want and need as it will produce less and weaken the U.S. economy overall.