President Donald Trump began his Tuesday morning by sharing social media praise for his administration’s efforts on the economy. But behind closed doors, White House officials have been considering a potential release valve to discourage recession fears: implementing a payroll tax cut.Trump shared more than a dozen tweets from allies and supporters over the course of Tuesday morning admiring economic strength. “#Trump has this Economy humming like a fine tuned engine,” one tweet said. In another, Trump disputed media and market suggestions indicating a recession may be looming, chocking up news coverage of economic anxieties to low ratings.
But despite Trump’s public-facing strident about the strength of the economy on his watch and aides stating they have no concerns about a recession, officials have discussed the possibility of a potential payroll tax cut to stave off anxiety over an economic slowdown in recent days.Five of the world’s biggest economies are at risk. Here’s where the US stands.
The President’s vigorous take on the economy has been somewhat undercut in recent weeks. One idicator, an economic yield curve inversion, suggested last week that a recession may be looming. And US Steel, part of the American steel industry the Trump administration has been trying to save through tariffs, has announced it would temporarily be laying off about 200 workers.
Multiple senior officials told CNN they weren’t aware of the payroll tax break discussions — revealing what an early stage the talks have been in.The Washington Post first reported the talks Monday.A White House official denied to CNN on Monday that the move was under consideration “at this time.””As Larry Kudlow said yesterday, more tax cuts for the American people are certainly on the table, but cutting payroll taxes is not something under consideration at this time,” the official said in a statement.
Millions of American employees pay 6.2% of their salary in “payroll taxes,” which are usually used to fund social safety net programs — such as Social Security and Medicare. It would not be the first time a sitting president has used it as a political exercise. Former President Barack Obama, seeking reelection, signed a law in 2012 extending a payroll tax cut for workers and unemployment benefits as part of the administration’s economic recovery plan following the financial crisis. Rather than paying a 6.2% payroll tax, they paid 4.2%, putting an extra $83 a month in the pockets of American workers making $50,000, for example
Payroll tax cuts, like all tax cuts, grow the deficit in the short term. But they are appealing to aides worried about a potential recession because they are widely popular and are designed to boost American spending, which accounts for about two-thirds of the economy. “A payroll tax would definitely reduce federal revenue and add to the federal deficit,” Kyle Pomerleau, chief economist at the Tax Foundation, told CNN.
The country’s debt has been mounting under the Trump administration in part due to a $1.5 trillion tax cut signed into law in 2017 along with a massive spending package passed by Congress. Trump promised during the 2016 election to eliminate the federal debt. The White House’s Office of Management Budget has forecasted that the deficit will exceed $1 trillion for the entire fiscal year, which ends on September 30. The nonpartisan Congressional Budget Office in May had predicted a slightly smaller shortfall of $896 billion for the year, with deficits rising above $1 trillion starting in 2022.