According to the more cynical pundits, government programs usually achieve the opposite of their intended goal. And sometimes they do.
For example, Richard Nixon’s “War on Drugs†is still in progress, but the drugs are definitely winning.
Some government programs, however, are more effective. Firefighters are doing a pretty good job extinguishing fires. The US Coast Guard saves lives every day. Public school teachers educate students who would rather be elsewhere.
And then there’s our increasingly dysfunctional Congress. Where to begin?
I’ve written recently how Congress’s new tax plan misses a chance to boost economic growth. Now I think it may be even worse. Instead of merely failing to stimulate growth, the tax changes could actually launch a recession. I’ll tell you why in a moment.
Image: Renegade98 via Flickr
Long and Weak Expansion
I explained two weeks ago why written recently as much as Republican lawmakers think. Most CEOs say they will use any tax savings for stock buybacks or dividends, not new hiring or expansion.
Since then, the Joint Committee on Taxation, Congress’s nonpartisan scorekeeper, found the Senate tax bill would spur only 0.8% of economic growth, split over 10 years, and add a net $1 trillion to the national debt.
But let’s set aside debt for now. What if, instead of little or no growth, this tax bill sets off an outright contraction?
The current economic expansion is now the third-longest since World War II. It’s also the weakest. Here’s a chart I showed last summer.
Source: BCA Research
The yellow line is the current recovery that began in 2009. Only the 1960s and 1990s growth periods went on longer—and both had much higher growth.
So, just by length of time, we’re already due or overdue for recession. Yes, the economy could improve further from here… but probably not for long.
