President Trump on Wednesday reversed his position on cutting payroll taxes to spur economic growth, telling reporters on the White House lawn that "we don't need it."
The reversal comes after days of mixed messages from the administration. The White House had first denied that it was considering a cut to payroll taxes since the economy, top officials claimed, was sound. However, on Tuesday, Trump said "payroll tax is something that we think about and a lot of people would like to see that."
In another about-face on Wednesday, Trump announced that he is "not looking at a tax cut now." The remarks follow a growing number of economists who have publicly warned that a recession in the U.S. is on the horizon.
"I don't think [Trump] is particularly concerned if what he says one day disagrees with what his advisors said the day before," said Brian Brenberg, the chair of the Program in Business and Finance at The King's College. "It's classic message testing by the president" to see how the media and markets react.
Recession concerns largely emerged last week after the U.S. Treasury's yield curve inverted; in other words, short-term investments in government bonds are now expected to pay more than long-term ones. The inversion — the first since the economic collapse of 2007-2008 — sent the markets plummeting.
A survey released this week by the National Association for Business Economics also found that 74 percent of U.S. economists believe the country will go into a recession by 2021.
"We don't need [a payroll tax cut]. We have a strong economy," Trump said Wednesday.
Payroll taxes, which apply to both employers and employees, are ubiquitous in the U.S. economy and fund major federal programs like social security and medicare. The taxes were lowered as part of the economic stimulus package following the Great Recession a decade ago, and the cut was extended by President Obama in 2012. Republicans initially opposed the cut at the time, citing concern over the federal deficit.
Yet today, many economists caution against cutting payroll taxes given the country's historically low unemployment, the current strain on social security spending, and the government's growing deficit, which has ballooned under Trump following policies like the 2017 tax cuts.
"Payroll taxes are a significant source of government revenue, and payroll tax cuts have been found to have little to no impact on long-term economic growth," the Tax Foundation said on Twitter.
On Wednesday, moreover, the Congressional Budget Office said that the federal budget deficit is accelerating faster than expected. The agency updated its deficit forecast to $960 billion in 2019 and over $1 trillion in 2020.
Cutting payroll taxes, experts say, will also not address the core concerns of investors: tariffs and trade.
"Most investors are unified in believing the only thing that's really going to meaningfully change the conversation around recession is doing something on trade," Brenberg said, noting that Trump's remarks on Tuesday did little to boost the markets.
Adam Michel, a tax policy analyst at the conservative Heritage Foundation, said that "high tariffs and trade uncertainty" were the main impediments to economic progress. "If the administration wants to boost the economy, they should start there," he said.
Stocks closed lower Friday after a volatile week that saw investor skittishness over the COVID-19 omicron variant. Investors were also eyeing the mixed November jobs report, which showed a lower than expected number of 210,000 jobs added, but unemployment falling to 4.2%. Aadil Zaman, Partner at Wall Street Alliance Group, joins Cheddar News' Closing Bell to discuss today's close, the mixed jobs report, what impact the omicron variant could have on markets, and more.
Many restaurants across the country have lately turned off delivery and online orders during peak hours, as eateries are still struggling with labor shortages and as many are also seeing more customers return for in-person dining. Wall Street Journal reporter Heather Haddon joins Cheddar News' Closing Bell to discuss.
November's jobs report is tricky: nonfarm payrolls only increased by 210,000, following an October gain of 546,000. At the same time, the unemployment rate fell to 4.2% - and the labor force participation rate rose 61.8% to its highest level since March 2020. Also of note: the retail sector saw a decline of 20,000 jobs despite what was once a traditional late fall push to hire before the holiday sales rush. What's going on in the labor market, and can we expect more volatile numbers as the omicron variant spreads during the winter months? Adam Ozimek, Chief economist at Upwork, joins Cheddar News' Closing Bell to discuss the mixed jobs report, sector winners and losers, retail's flip-flop, and more.
Chinese regulators are reportedly behind China-based ride-hailing company DiDi exiting from the New York Stock Exchange, just days after listing earlier this year. The regulators stated prior that DiDi had not received the necessary clearances to list in the states. Gordon Chang, Asian affairs expert, joined Cheddar to break down what the delisting says about the relationship between nations. "This really strikes me as an attempt to really to force a decoupling of China and the U.S. in the financial markets," Chang said.
Hologram communication platform maker PORTL is looking to take communication to the next level. Founder and CEO David Nussbaum joined Cheddar to talk about the company's recent $12 million Series A funding round that will be used to bring the concept of holoportation to market. Nussbaum noted his hologram technology is just not comparable to augmented reality or virtual metaverses because the image projection is happening in real-time and in actual reality. "Well, unlike VR or AR, we're 'R.' We're real. You don't need a headset. You don't need wearables. You don't need to download anything. It's incredible," he said.
Wikipedia founder Jimmy Wales stopped by Cheddar's "Between Bells" to talk about his Birth of Wikipedia auction at Christie's putting two items linked to the origins of Wikipedia up for sale. On the auction block are his original strawberry iMac that was used to create the long-running online encyclopedia and what Wales described as an interactive NFT of his first Wikipedia edit rather than a static image. "Once it's been sold, the owner can turn it on, and anyone can edit the page and it will be reflected in the NFT," he said.
On this episode of Your Future Home, Carmine Satabella, Interior Designer & Television Host, joins to break down how to get the most out of your winter decor this year and basic kitchen fundamentals that go a long way; Max Child, CEO and co-founder of Volley, discusses the rise of voice games and how tech is continuing to change smart homes; Cheddar breaks down everything you need to know about how to start flipping homes.
China-based DiDi is delisting from the New York Stock Exchange after Chinese officials reportedly asked the ride-hailing company to do so. It will instead list on the Stock Exchange of Hong Kong.
