The GOP Tax Plan Will Grow the Economy…and the Trade Deficit Too

A new study from Boston University has some great news for the GOP. According to Boston’s research, the GOP plan for tax reform could increase GDP by as much as 5 percent and wages by as much as 7 percent depending on the year considered.  This translates to almost $4,000 dollars in take-home pay for the average American.  Not only that, but the study found that the GOP tax plan could also be revenue neutral. Meaning all these newfound liberal deficit hawks would have nothing to complain about. Unfortunately, good news usually sometimes comes with bad. The bad news is that according to the same analysis the growth would come from something that President Donald Trump has railed against for years, trade deficits.

Many argue that President Donald Trump’s screeds on the campaign trail about manufacturing and the United States “losing” to foreign countries is the reason he was elected. There is some truth to that. Voters in rust belt states like Michigan and Wisconsin, who have arguably been most hurt by global trade, helped Donald Trump gain the 270 electoral votes necessary to win. Of course, most economists at the time criticized Trump’s arguments as antiquated and noted that the country is overall better off with globalization than without it. This latest study seems to prove these economists right.

The huge GDP growth that the Boston University study predicts comes from something called capital inflows, “…The inflow of foreign capital increases U.S. output and the productivity of U.S. workers. Depending on the year, it raises GDP by 3 to 5 percent and real wages by 4 to 7 percent”

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