Will the U.S economy grow if Trump passes tax reforms?

The economic data of United States shows that the economy is in the recovery phase. The published figures show an inherent strength of the U.S economy. Further, President Trump plans to boost the economy through tax cuts. However, the looming conflict with North Korea can strike a devastating blow to the U.S economy. The prospect of war has made the markets wobble.

The economic data of United States is healthy. According to Thomson Reuters, on August 29, the consumer confidence for August was 122.9%, on August 30, the US GDP annualized for the second quarter showed a healthy 3.0%, and on September 1, the U.S ISM manufacturing for August showed 58.8 which is higher than what the financial analysts had predicted.

In addition, President Trump’s tax speech in Missouri promised Americans lower taxes, more jobs, and higher salaries. President Trump wants to lower taxes for middle-class Americans and companies. Lower taxes can boost consumer spending and can amplify the expansionary phase of the business cycle. Tax cuts can also stimulate further economic growth and productivity.

North Korea

The possibility of nuclear exchange with North Korea casts a gloom on the U.S economy. The offensive against North Korea can lead to higher taxation and higher public debt. Military hostilities can lead to lower investment, lower consumption, and higher inflation. High war-related spending by the government can delay and derail productive non-military spending in areas such as infrastructure, research & development, and higher education.

High government spending on the military can impact long term economic growth.

Long-term impact

If there is military action there may be some economic boost because of higher government spending during the war. At the same time, the harmful economic effects kick in and hinder the growth of the economy in the long run. The looming armed conflict has confused the U.S stock markets and depressed the US dollar.

The markets are apprehensive because the U.S economy can be tattered after a military conflict. The unintended effects of war can include disruptions, property damage, and loss of life. The funds of government are diverted to war leaving other welfare schemes of the government with little money. If fighting breaks out, United States will face tremendous budgetary pressure. President Trump will have to roll back his plans for tax cuts.