Donald Trump’s flagship tax reform bill could cause a severe recession, an economic historian has warned.
Professor Robert McElvaine, a leading expert on the Great Depression, said the Republicans are “sprinting towards an economic cliff” as they attempt to introduce sweeping tax cuts that will be “catastrophic” for the US economy.
The Republicans’ Tax Cuts and Jobs Act is currently being debated by the Senate and could be approved this week. The changes constitute a key part of Mr Trump’s agenda and he has repeatedly boasted of his plans to cut taxes.
Supporters say the bill will generate economic growth and create thousands of jobs but critics, including Professor McElvaine, have highlighted a Congressional Budget Office finding that people earning less than $100,000 will see their taxes rise while the super-rich, including Mr Trump, will pay less.
The history professor said the provisions in the Act are similar to those passed by the Republicans in the years prior to the Great Depression. The 1929 crash was caused by the GOP’s “trickle-down policies”, including significant tax cuts for the rich, he added.
Claiming that Republicans have failed to recognise “that the trickle-down approach has never worked”, Professor McElvaine wrote in an article for the Washington Post: “The party is now trying to pass a scam that throws a few crumbs to the middle class (temporarily — millions of middle-class Americans will soon see a tax hike if the bill is enacted) while heaping benefits on the super-rich, multiplying the national debt and endangering the American economy.
“As a historian of the Great Depression, I can say: I’ve seen this show before.”
He added: “Republican policies in the ’20s…pushed to concentrate more of the income at the top. Nine decades later, Republicans are rushing to do it again — and they are sprinting toward an economic cliff. Another round of Government of the People, by the Republicans, for the super-rich will be catastrophic. The American people must call a halt before it’s too late.”
Professor McElvaine said Mr Trump “and other fabulously rich people” will benefit from the bill far more than almost every ordinary American will.
Criticising measures in the Act, he attacked Mr Trump’s plans to repeal inheritance tax, stop authorities taking into account the state taxes people already pay when determining their national tax bill, and repealing the Alternative Minimum Tax that ensures rich people always pay a certain amount.
He also said plans to stop large medical expenses, student loan payments and educational supplies being tax deductible would be “disastrous” for the American people.
Parts of the bill that reform the Affordable Care Act will see 13 million Americans lose their health insurance, the academic added.