Economic strength is driven by the frequency at which money changes hands. That's why economists hate fear and uncertainty so much.
To cite an old joke:
Two economists were walking down the road when they came across a pile of dog poop. Economist A said to Economist B, "I'll pay you $50 if you drop to your knees and eat it." Economist B agreed, ate the dog poop, and was handed $50.
Further down the road, they came across another pile of dog poop. Now Economist B said to Economist A, "I'll pay you $50 if you drop to your knees and eat it." Economist A agreed, ate the dog poop, and was given his $50 back.
At this point, Economist A stopped and asked: "Hold on, didn't we just eat dog poop and no one was better off for the experience?"
Economist B replied: "Nonsense, we just added $100 to the GDP!"
Again, this is a joke, but one that illustrates a point. Might've posted this joke here before, I don't remember one way or another.
This is why study after study shows that the most economically stimulative thing the government can spend money on is food stamps, because people who receive them will spend it quickly. The least stimulative? Tax cuts for the wealthy.
How is an economy that encourages consumption but not investment sustainable?
Imagine, if you will, that money is taken from a company that produces goods and given to a consumer for him/her to spend.
Many foreign goods are cheaper than their American counterparts, so much of what the consumer spends goes into foreign pockets; the only Americans who get a cut are shippers and retailers. Who contribute value to the economy, sure, but in another sense don't produce anything. And, I guess, a fraction of it goes to buying American produced stuff. But only a fraction.
Meanwhile, the aforementioned company is unable to spend that money on R&D or building/maintaining company infrastructure. Or, their employees lose out on a raise to break even, which depresses consumer spending.
"But most of the tax cuts would go to company bigwigs!" you might protest. Well, no. In 2024 the "median revenue" for a Fortune 500 company stood at $42 billion, whereas in 2023 (probably not that big a difference between 2023 and 2024) the average Fortune 500 CEO had a salary of $17.7 million. First, that's just barely not a drop in the bucket, and second, as the most powerful employee of the company the CEO is best insulated from cuts to his salary even if the company is forced to make cuts elsewhere, making this a moot point.
"Most of the tax cuts go to stock buybacks!" you might say next. Which seems to be correct based on evaluation of the 2017 Trump tax cuts, but also kind of misleading. In the absence of tax cuts, stock buybacks would still be happening, since they represent an outstanding liability a company will want to take care of at some point. But now, the stock buybacks will be paid for by making cuts elsewhere in the company's budget, such as to R&D, infrastructure investments, or employee salaries. Tax cuts let the stock buybacks happen without necessitating said cuts, or at least said cuts are rendered less severe than they otherwise would be. In other words, regardless of the saved money is directly spent on, tax cuts ultimately enable companies to spend more money on useful things than they otherwise would.
This is just hand waiving. Trump has gutted the agencies who's job it is to go after institutions who engage in fraudulent activities. There is no reasonable argument that that will not result in more fraudulent activities.
The CFPB only dates back to 2011. There were (and still are) redundant bodies predating CFPB. Biden's initiatives, of course, date back to 2021 at the earliest. We've had a functional banking system for centuries beforehand. The Cato Institute has argued that the CFPB ought to be dismantled.
(Though, to date, the Trump Admin. hasn't tried to completely abolish the agency and it might continue in a downsized form with a narrower set of responsibilities.)
But if, in fact, the small sliver of fraudulent or genuinely predatory transactions within this sector increases somewhat, this isn't the only relevant factor. In 2023 the CFPB reported that platforms like PayPal and Venmo are unsafe because they lack FDIC insurance. Had Biden won a second term, this might've eventually culminated in CFPB shutting down Paypal/Venmo or requiring them to pay for expensive (and thus far unnecessary) coverage that would heavily discourage competition and useful alternative banking services from emerging. Ultimately, it is poor, underbanked demographics that would pay the price for this development if it happened.
