Last week the New York Times said Trump had undoubtedly been ‘the worst American president in modern history’ – gravely harming the US and its interests around the world. He has unashamedly stoked racism and division, cut taxes for the rich, lied on an unprecedented scale and grossly mishandled a pandemic which has cost 232,000 American lives.
It went on to say that his administration has been nepotistic and corrupt. His foreign policy record has been equally abysmal: he has strained long-standing alliances, cosied up to dictators like North Korea’s Lim Jong Un, and abandoned any attempt to confront climate change. The Washington Post summed up Trump’s term in office as ‘uniquely incompetent’.
Wow harsh words – and yet despite this Donald Trump pulled off another ‘huge political surprise’ said The Wall Street Journal. The pollsters had expected Biden to win comfortably, so why was there a record turnout in absolute terms for the US, (expected to exceed 160 million of the American people, and its highest turnout percentage in more than a century) and Trump himself won 3,000,000 more votes than in 2016?
Clearly some people detest the man, but there are a lot of voters in the US who have been persuaded that they would be better off under Trump than Biden.
But we have seen it happen before.
In 1992 James Carville coined the phrase ‘it’s the economy, stupid’. Carville was a strategist in Bill Clinton’s successful campaign against incumbent George H. W. Bush.
Carville used the then-prevailing recession in the United States to unseat Bush. In March 1991, days after the ground war in Kuwait, 90% of polled Americans approved of President Bush’s performance. In August 1992, the following year, 64% of polled Americans disapproved of Bush’s performance.
In the last few weeks of his campaign Trump focused on his track record with the US economy. He put himself forward as the man to trust in the midst of a pandemic – it nearly paid off.
So, what is Trump’s track record? In 2017 the Trump administration introduced the biggest tax cuts ‘in history’ in a move to ‘simplify’ the US tax system. It, slashed taxes for businesses large and small – including Trump’s own – and eliminated inheritance taxes on death.
Individual income tax brackets were cut from seven to three (10%, 25% and 35%) and US corporate tax brackets were slashed from 35% to just 15%. Gary Cohen, chief economic adviser to Donald Trump said ‘This is about growing the economy, and creating jobs’
The critics saw these tax cuts as self-interest for Trump and for many of the billionaires in his cabinet – which was allegedly the ‘richest in history’.
But if the tax cuts benefited only the rich – there would not have been such a massive turnout for Trump, because the rich are a minority.
According to the BBC the US economy was doing well prior to the pandemic, and in the third quarter of 2020 saw a strong surge, although not quite back to the economic activity of pre-pandemic levels.
Trump claimed that the recovery was ‘bigger than any nation’, but according to the BBC this isn’t true. From July to September this year, the economy grew by 7.4% in the US (33.1% in annualized figures). This is less than Germany, Italy and the eurozone as a whole.
However, if you look at economic growth from the start of the pandemic to the present, the US has done better than Europe but "worse than China and some other Asian economies" such as South Korea, says Neil Shearing, chief economist at Capital Economics.
President Trump often highlights the rising value of US financial markets as a measure of success - in particular the Dow Jones Industrial Average.
The Dow is a measure of the performance of 30 large companies listed on US stock exchanges, and it reached record highs at the start of this year.
It then crashed as markets reacted to the coronavirus pandemic, wiping out all the gains made since President Trump took office.
But the financial markets have been remarkably resilient and have largely recovered back to near pre-pandemic levels, although there have been recent wobbles.
The large turnout and increase in votes for Trump is undoubtedly due to the focus on the economy; which half the American people believed, and the other half did not!
Whatever is your view, mine, as a Fellow of the Chartered Institute of Taxation, is that as we recover from the pandemic – or learn to live with it, now is the wrong time to raise taxes on businesses.
The only way the economy can recover to pre pandemic levels is to encourage wealth creators to grow their businesses and employ more people. If we don’t then we are in danger of seeing wealth creators move elsewhere such as to Portugal – (listen to our podcast professional of the week – Carlos Santos of Dixcart)
Episode 34 -
Taxes in Portugal, Carlos Santos: Dixcart
In Episode 34, Caroline Garnham talks to Carlos Santos Managing Director of Dixcart in thee Portugal office. Mark is responsible for the expansion of the office as well overseeing the existing client base and client management. Carlos established the Family Office line of service in Portugal which is focused in immigration and personal taxation of clients and their families.
But it is not just a matter of politics – we as Private Client Professionals should also do our bit. We act for wealth creators – and we need to serve our clients better by learning how each of us helps their clients and to share these Client Stories with each other so that we can assist our clients across all areas of their concerns; not just in the areas where we have expertise and knowledge. This is the ethos of Caroline’s Club.
If you would like to join Caroline’s Club, simply register, prepare a podcast and join our Client Stories Zoom meetings here.