We need to take serious steps to prevent the next recession

Without serious action, President Trump’s trade war and $1.8 trillion tax cut will leave the economy in bad condition

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We need to take serious steps to prevent the next recession

Tanner Smith, JagWire assistant editor

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After 2008, the problem on everyone’s mind is how to prevent another recession. While many people have voiced conflicting ideas on how to prevent another recession, President Trump’s solution to the stagnating economy left by his predecessors was to adopt a mercantilist policy of starting trade wars with China and cutting taxes for the top one percent. For a time, these policies had positive effects, increasing jobs and helping the GDP, but now that the initial glow has worn off and these policies are pushing us closer to recession. 

The first major problem with his economic policy is the effects of the trade war. While Trump claims the trade war is helping make up the trade deficit with China and that making up these deficits will solve the economic system, this fundamentally misunderstands how the economy works. Trump understands the economy through a mercantilist lens – focussing solely on how much money the U.S. has. In reality, the economy is based on how much is produced, meaning we can have a trade deficit with China and still have a good trade relationship.

While this may not sound like a significant problem, his misinformed trade war has had real consequences for many Americans. For example, according to Reuters the trade war has had a massive impact on farmers through its effect on the trade of major exports such as soybeans, wheat and corn. In addition to hurting farmers, the trade war also has affected the price of steel and aluminium which indirectly affects every aspect of our lives, causing companies from General Motors to KFC to raise prices.

The second major problem with Trump’s economic policy is the Tax Cuts and Jobs Act of 2017. This $1.8 trillion tax cut that was designed to add jobs and spur innovation, has massively hurt the economy by relying on the economic principle of trickle-down economics. Trickle-down economics is based on the idea that if we give money to the rich then it will “trickle down” to everyone else. According to Vox, the tax cut disproportionately helps the wealthy and actually has increased taxes on the poor.

While this may seem like a good idea with the reasoning of trickle-down economics, the fundamental idea of trickle-down is flawed. In fact, according to the International Monetary Fund in their study of 150 countries, trickle-down economics has a negative impact on the economy and economic growth and increased the income divide.

We need to stop these terrible policies before it is too late. If we continue on the current path of misinformed tariffs and tax cuts, the economy will continue to barrel towards recession. The initial boom that these policies created are quickly wearing off, and the longer we continue with these policies the worse the impact on our trade and GDP will be. The only way to solve these problems is to elect leaders who will overturn these horrendous policies and not rely on disproven economic models. 

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