Economic Analysis Policy
Introduction
Economic policies are governments’ regulations that are used to influence the economy towards prosperity. Economic policies include setting tax rates, capping interest rates, as well as regulate government spending. Economic policies are the channels used to achieve economic goals such as stabilization of markets, ensure business development, achieve full employment, and overall to ensure economic prosperity. The government can use any or all the economic policies to drive the economy to prosperity, and the outcome will be judged based on the success the policies have achieved.
As mentioned above, economic policies have a significant hand in driving the economy to prosperity. On the other hand, poorly formulated policies can lead to stunted innovation, starved growth and job opportunities, waste of limited resources leading to the overall decrease in economic growth. Citizens expect the government to formulate policies per what will put their interests first. The IRS is given the mandate to collect taxes. The government is mandated to come up with a budget to regulate how the money will be spent on essential services such as education, healthcare, safety, and business development (Auerbach, 2018, p.100).
Considering that taxes are the major vital contributors to government revenue, any reduction of the taxes collected will negatively impact the money available for the government to spend. A good example is the tyranny of Trump’s tax cut on corporate businesses. The uncalculated tax cut move saw to it that in 2018, corporate taxes were reduced from thirty-five per cent to twenty-one percent. Initially, this government regulation was meant to increase employment and improve living standards for the Americans by ‘putting more cash into their pockets’ due to increased wages (Tankersley & Phillips, 2018, p.2).
Sadly, the effects of the tax-cut policy were contrary to what it was meant to achieve. One of the adverse impacts of the regulation policy was that most corporations were left with an extra cut that the big players of the corporate businesses used to buy back shares and stock in their own company (Tankersley & Phillips, 2018, p.3). The move was meant to make them have more control of these companies by owning more shares and boosting the management’s remunerations and bonuses. At the end of it all, the tax-cut policy positively affected the big business owners while negatively affecting the US treasury and its citizens.
As a result of Trump’s tax cut policy, the US treasury experienced a deficit in the annual revenue collection; thereby, less money was allocated to improve social programs like healthcare, education, and security that benefit ordinary citizens. Besides, the availability of a large amount of cash indicated the availability of large sums of capital, thereby decreasing the interest rates in the country. Most firms opted to invest the extra-large amount of cash on their shareholders; by buying back shares in their own company; rather than re-investing the extra money in firms (Auerbach, 2018, p.116).
Conclusion
The tax-cut regulation policy on corporate firms has had detrimental effects in the United States. The move has created power imbalances between the US workers and the employers, created inequality, and also increased the gap between the poor and the rich. Above all, since taxes are the major contributor to government revenue, the treasury continues to suffer from deficits year after year. This is a clear indication that the tax-cut regulation spelled more of doom than success to the economy.