The boom and bust cycle that naturally occurs in an economy, has been unable to happen given that the U.S. administration has yet to pass a new tax code. Some economists are predicting that a recession could not be far away and may happen as soon as two years from now.
Adam Posen, the president of the Peterson Institute for International Economists stated that he believed the U.S. could face a possible recession due to the excessive fiscal stimulus that is currently being made by the Trump administration.
Posen stated that “first, like a lot of people, but I’ll take it on myself, I got wrong the timing of the tax cuts. I couldn’t believe they would spend this long before getting to a budget with Congress, that they would waste all this time on non-proposals with health care.”
Posen served at the Federal Reserve Bank of New York during the early to mid-1990s is currently stating that his opinion is, business tax cuts will not have any funding behind them and will not happen for at least a year.
He further stated that “that pushed back the date at which the Fed will have to raise interest rates, by a lot.”
Posen’s prediction surrounding the tax cuts show that a new tax plan’s delivery may do nothing but harm to the economy.
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Posen stated that “they can’t go into the mid-term elections, face constituents and have done nothing. the failures in health care and everything else means they have to deliver and tax cuts are the most obvious thing. Secondly, I’ve always been very cynical of Congress’ so-called budget hawks on the budget. The history of the Y.S. basically since 1974, every time Congress passes a rule on itself to restrict the budget, it violates that rule within two to four years.”
Hopefully Congress can pass some sort of tax reform as to avoid any economically detrimental situation.