U.S. President Donald Trump listens to questions by members of the media before boarding Marine One on the South Lawn of the White House in Washington, D.C., U.S., on Saturday, Dec. 2, 2017. © Bloomberg
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Donald Trump hailed the tax bill passed by the US senate in the early hours of Saturday morning, saying the cuts it proposes are the “biggest . . . in history”. They are certainly sweeping, reducing corporate tax rates to their lowest level for decades. The reductions promised for individuals are more modest.

But if the legislation ultimately passes, argues Rana Foroohar in her column, “it will create a fiscal mess that America will be digging itself out of for the next 30 years”. The Republican sponsors of the bill say that their trickle-down tax cuts will spur growth. However, the evidence for that claim is thin, Rana insists. Tax cuts have not stimulated “real economic growth” in the past 20 years. There was growth after Ronald Reagan cut taxes in the mid-1980s, but it was accompanied by a huge increase in the deficit in his second term. This plan is a “Bizarro version of Reaganomics — all the downside . . . with none of the upside”.

The most likely effect, Rana suggests, is an increase in wealth inequality as any gains made by corporations (the principal beneficiaries of these tax cuts) are ploughed into stock buybacks.

Polls show that a majority of Americans believe that the Republican plan will benefit the wealthy. But it's unclear, given the dramatic polarisation of US politics, that this will have any electoral effect — at least not straightaway and not in the 2018 mid-terms. But sooner or later, Rana concludes, senators who backed the bill will have to answer the following question: “when consumer spending accounts for 70 per cent of the US economy, if people don’t get a raise, the maths will eventually stop working. What will you tell your constituents when it does?”

Money for nothing: What does £50bn buy you these days? Not a lot, argues Wolfgang Munchau. Both Brexiters and Remainers in the UK continue to labour under the illusion that there is a range of options between a Canada-style trade deal on goods and membership of the single market and customs union. They should think again.

The trials of the central banker: Central banking has never looked more daunting, writes former deputy governor of the Bank of England Charles Bean. Since the financial crisis, the line between monetary and fiscal policy has become increasingly blurred.

Robot wars: The last thing the world needs, says Kai-Fu Lee, is an arms race in artificial intelligence between China and the US. The challenges posed by AI are so vast that the two superpowers will have to work together to solve them.

Best of the rest

Donald Trump's “fake news” tactics — Steve Coll in the New Yorker

No matter what Macron says, French is not going to become the next global language — Ben Chu in the Independent

La trahison des clercs, economics edition — Paul Krugman in The New York Times

Donald Trump, a clown in Washington — Dominique Moisi in Les Echos

What you've been saying

This misuse of ‘surreal’ is positively unreal— letter from Andy Green, Vale of Glamorgan, UK

“Sir, Can the sub-editors at the FT please crack down on the misuse of the word “surreal”? Your report ( FT Weekend, November 25/26) on coalition talks among German parties featured Holger Schmieding, chief economist at Berenberg Bank, saying: “It’s been a surreal week.” Unless he was referring to dolphins, Fritz the Cat or giant cucumbers joining the negotiations, I presume he means “unreal”.”

Comment by EasyP on Henry Mance's ‘Person in the News,’ Meghan Markle: a breath of fresh air for the royal family

“A young man from a dysfunctional family does a few years in the army, grows up a bit and after several relationships finds happiness with a slightly older divorced woman. Could be a script from Coronation Street.”

Housing need is different to housing demand— letter from Martin Hewes, Managing Director, Hewes & Associates, Surrey, UK

“Sir, John Kay’s article, “Building blocks” ( House & Home, FT Weekend, November 11/12), covers some interesting points, and ends with what many view as a sensible solution: build more houses, and via local authorities. On one issue, however, he falls into the trap of confusing housing demand with housing need (“housing demand is driven by population”). Housing demand refers to the willingness and ability to purchase a house. Housing need refers to the number of houses required, given growth in households, itself derived from household size and population growth.”

Today's opinion

Gavyn Davies’ blog: The changing of the guard at the Fed

The Republicans’ faith-based tax plan This is Reaganomics with all the downside and none of the upside

China and America must shape the high-tech future together We need a global response to the huge job displacement AI is likely to cause

Central banking has never looked more daunting The line between fiscal and monetary policy is increasingly blurred

Even £50bn will not buy Britain very much The ratification of trade agreements cannot be contractually agreed, it is always political

The Big Read: Brexit: EU and UK battle over ‘an accession in reverse’ Britain imagines it is an equal partner in the exit talks. But negotiations over its 1973 entry illustrate who has the upper hand

A messy Brexit will lead to a radical Labour government Corbyn elected with a whopping majority would be bad for the City and for industry

FT View

FT View: The Republicans deliver, but not for everyone A huge, deficit-funded tax cut for corporations is not reform

FT View: Mexico faces a choice between fear and anger Trouble to the north, uncertainty in the south and invidious presidential elections

The Big Read

The Big Read: Brexit: EU and UK battle over ‘an accession in reverse’ Britain imagines it is an equal partner in the exit talks. But negotiations over its 1973 entry illustrate who has the upper hand

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