Demographics and Taxes

Blog Post
Monday, January 28, 2019

On Facing the Future, economist Brian Gottlob joined the most recent program to discuss demographic trends, budget deficits during a period of economic growth, and feedback from the latest tax code overhaul.

“We’ve had deficits, and we’ve had big deficits for a while,” Gottlob said. “This situation is more concerning. . . we’re running very large deficits at a time when the economy has had really good growth over the last couple of years.”

“Typically, federal fiscal policy is counter-cyclical, meaning when the economy is strong, we collect a lot of revenues,” he added.

If the economy gets weaker, Gottlob said, revenues “are really going to plummet.” He continued: “Why is that concerning? Because when the economy weakens, we usually use fiscal policy to offset that weakness.”

“We have to borrow to fund these deficits, and while we’ve been really lucky on interest rates thus far, that won’t last forever,” he said. “The cost of the debt will be much higher.”

Gottlob discussed the 2017 tax cut legislation as well. He said its biggest benefits have been felt in the corporate sector, which has added some economic growth. However, he said it has not resulted in the level of private investment that many forecast, and it has not generated enough revenue to offset its cost.

“I would have argued that it wasn’t needed,” said Gottlob. “We were on a good growth path, so we’re losing revenue at a time when we probably didn’t need to lose revenue.”

Concord Executive Director Robert L. Bixby weighed in on the partial government shutdown, the longest in U.S. history and spanning more than a month. On Friday President Trump announced a deal with congressional leaders to at least temporarily end the shutdown while talks continue on his request for border wall funding.

During the Facing the Future program, Bixby said that Congress had been able to fund about 75 percent of the government, which is why it had been called a partial shutdown.

Twenty-five percent of federal spending has been stuck because seven out of twelve required bills had not been passed. Bixby said the other bills had been “held hostage, you might say, to a fight over the one bill, the Homeland Security agency bill, which has funding for a border wall.”

“It’s inexplicable,” Bixby added. He said elected officials should release the rest of the bills, send federal employees back to work and the government functioning while working to settle their differences on the Homeland Security bill.

Bixby also discussed a recent report by the Census Bureau on population growth trends.

“As the Census Bureau is telling us. . .population growth is slowing and that will have an effect on the future, on economic growth,” he said. “What we need is, frankly, more people as society ages and the economy matures.”

“We do need to have a steady supply of new workers in order to keep the economy growing,” Bixby said. “Meanwhile, the big debate right now is not how to bring in new workers . . . but how to keep them out.”

Hear more on “Facing the Future.” I host the program each week on WKXL, NHTalkRadio.com (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders, elected officials and candidates for public office. Past broadcasts are available here. You can now subscribe to the podcast on iTunes, Google Play or through RSS.