The stock market has been on fire lately. The S&P 500 rises almost every day. It has only fallen by 1 percent or more in a day four times this year. In fact, it has broken its record for the longest number of days without a 3 percent correction. America’s gross domestic product grew by 3 percent in the third quarter. Consumer spending and private investments are on the rise. A surge in the tech stocks brought the Nasdaq to a new high. According to Investor’s Business Daily, total employment has jumped by 2.2 million since Donald Trump became president.
The reason there has been so much growth in stocks is because of the anticipation of a tax cut and deregulatory policies that have already been initiated. There’s plenty of room for expansion in the economy. If President Trump and the Republican Congress pass a tax bill, then they could easily win in the upcoming elections.
Parties who implement tax cuts usually win re-election. When the tax reduction John F. Kennedy was pushing for was finally signed into law after his assassination, his successor Lyndon B. Johnson won the 1964 election by a landslide. Democrats increased their power in Congress.
Then there’s Ronald Reagan, who achieved two large tax cuts during his time as president. The first tax cut in 1981 handed him a second term in 1984. The other bill in 1986 helped Vice President George H.W. Bush become president. Republicans held the White House for twelve years. Bush wouldn’t repeat what Reagan did. Instead, he opted to raise taxes, which hurt him in 1992 when he took on Bill Clinton.
Bush’s son wouldn’t repeat his father’s mistake. His tax cuts were small and temporary, but he did win a second term — though this can also be heavily attributed to the foreign policy issues that dominated the 2004 election.
Taxes played a key role in the 2014 midterm elections. The Democrats lost gubernatorial races in Illinois, Maryland and Massachusetts partly due to policies that kept higher taxes.
There are still many challenges ahead in Congress. Overhauling the complex American tax code is no cakewalk. For example, Republicans want to slash the size of the mortgage interest rate deduction and eliminate the property tax deduction while paving the way for reductions in the marginal rates. This has faced strong opposition from the National Association of Home Builder, an interest group that would prefer those deductions be kept in place.
Simultaneously, U.S. Sen. Marco Rubio, R-Fl., and Sen. Mike Lee, R-Uta., want tax reform to include an expansion of the child tax credit from $1,000 to $1,800.
Spending also needs to be addressed. While tax cuts will vigorously fuel growth and can increase revenue over a long period of time by making the United States more attractive for businesses when compared to other nations, it is still worth slowing government spending while the dynamic changes in the economy take effect.
Nevertheless, if the GOP wants to maintain control of the government, they need something to run. Historically, enacting a tax cut is in their favor. While spending needs to be addressed to tackle the national debt, many Americans don’t like to see cuts into government programs. Even so, polling data indicates they want less taxes and a simplified tax code.
If an economic boom emerges quickly enough, then the president’s approval rating could be repaired at this exact time next year. Republicans in Congress will see their electoral fortunes rise, making it more likely they will maintain control of the legislature for at least another two years. There are some good signs for Republicans. Larry Schweikart, professor of history at the University of Dayton, has tracked the net increases in voter registration. It currently favors Republicans, even in some blue states — unfortunately, we don’t keep track of registration in Wisconsin, so we don’t know of any changes here.
This means there can not be a repeat of the Obamacare debacle, which has been damaging GOP support. They need achieve something. A tax cut would be a great Christmas gift for the American people. In exchange, the Republicans could receive the gift of re-election from the voters in 2018. It all depends on what they can do over the next few months.
John Graber ([email protected]) is a senior majoring in history and political science.