University of California, Berkeley
The Supplemental Nutrition Assistance Program (SNAP), also known as "food stamps", is one of the largest anti-poverty programs in the United States. Policy changes up for consideration could lead to dramatic funding cuts to SNAP. However, the program has measurable short- and long-term benefits, especially for children.
- SNAP provides low-income individuals and families monthly additional food resources, reaching over 44 million Americans in 2016, at a cost of $73 billion to the Federal Government. About two-thirds of SNAP benefits go to families with children.
- In the short-term, those receiving food stamps experience greater food security and are better able to weather tough economic times.
- When an expecting mother has access to SNAP during her pregnancy, it decreases the likelihood that her baby will be born with low birth weight.
- The benefits of nutrition support can persist well into adulthood. We find a significant reduction in the incidence of obesity, high blood pressure, heart disease and diabetes in adulthood among people who had access to the program before birth and during early childhood (see chart).
Beyond improving food security in the short-run, access to SNAP helps prevent the negative, long-term effects of deprivation during childhood. Health improvements due to the program imply a decrease in future taxpayer costs for health care. Children who had access to the program at early ages received the most significant long-term health benefits, highlighting the importance of intervening in early childhood. A full accounting of the benefits of the program, not just the costs, should be taken into consideration when evaluating potential cuts to SNAP.
McCourt School of Public Policy, Georgetown University
Current tax reform plans by both House and Senate Republicans propose to eliminate or limit federal tax deductions for state and local taxes. If passed, state and local authorities would likely find greater resistance to raising taxes — or face greater pressure to lower them — making it more difficult to raise funds for public schools.
- Public K-12 education is largely funded through state and local revenues. Federal funds accounted for only 8.7 percent of revenues for public elementary and secondary schools during the 2013-14 academic year.
- The existence of the federal deductions for state and local taxes make it easier for state and local authorities to raise revenues. About 30 percent of taxpayers nationally take advantage of these deductions, with significant variation across states.
- Tax reform plans in both the House and the Senate rely on eliminating or restricting deductions for state and local taxes as a way to make up for lost tax revenue from proposed tax cuts.
- Higher-income individuals in higher-tax states currently benefit the most from these deductions. Eliminating the deductions could make the tax system more progressive. However, state and local tax revenues fund many services and public goods that serve residents of all incomes. Progressivity would also be diminished if lower-income residents receive fewer services as a result of eliminating these deductions.
Eliminating and reducing the value of federal deductions for state and local property taxes would not have any instantaneous mechanical effect on today's education budgets. But it would make taxpayers who currently make use of the deductions less likely to vote for policies that could raise their state and local tax bills in the future, when they would face the full price of state and local taxes, without the federal discount to which they are accustomed. Many high-income taxpayers who currently itemize state and local tax payments would feel the impact of eliminating these deductions. But so would the beneficiaries of the state and local spending — especially public school students — throughout the entire income distribution in their states.
The Fletcher School of Law and Diplomacy, Tufts University
President Trump has threatened to withdraw the United States from the North American Free Trade Agreement (NAFTA) as well as from the Korea-U.S. Free Trade Agreement (KORUS). Does a U.S. President have the Constitutional or statutory power to withdraw the United States from these agreements?
- Under the Commerce Clause of the U.S. Constitution, the President has no power to regulate international trade, except as may be statutorily delegated to him by Congress. The Supreme Court has said, in the 1994 case of Barclays v. California that “the Constitution expressly grants Congress, not the president, the power to “regulate commerce with foreign nations.”
- Historically, the President negotiates free trade agreements with foreign countries and submits to Congress legislation that would implement the agreements. U.S. free trade agreements must be approved by a majority of each house of Congress.
- All U.S. free trade agreements that have entered into force, including NAFTA, contain provisions allowing for a party's withdrawal from, or termination of the agreement. Because of this, under international law, if the President of the United States gives notice that he intends to exit NAFTA, this move would be likely to carry consequences in international law, starting the 6 month period of notice before the U.S. may withdraw from the agreement.
- But, the agreements do not specify who in the U.S. may make the decision to withdraw — that issue is left to domestic constitutional and statutory law. Therefore, members of Congress or affected citizens or companies could sue to seek an injunction ordering the President not to send the actual notice of withdrawal, arguing that the President is powerless under domestic law to make this decision by himself.
There is no doubt that Congress has control over the making of trade agreements. The question of presidential authority unilaterally to terminate these trade agreements should be seen within the broader context of the Constitution, and also within the context of globalization. As globalization has proceeded, more and more aspects of U.S. economic policy are addressed in and through trade agreements. It would be inconsistent with the Constitution’s clear assignment of power to regulate commerce to Congress to accord the President broad power to regulate, or re-regulate, commerce through a unilateral termination power.
University of California, Davis
President Donald J. Trump has said he is considering withdrawing from the Korea-U.S. Free Trade Agreement due to an increasing trade deficit with this nation. In October, the countries announced they had agreed on a path to renegotiate aspects of the trade deal, though uncertainty remains regarding how this process will take shape. Key members of Congress, the business community, and the national security community have argued that strong ties with South Korea are not only good for the U.S. economy, but are also important for stability in the region.
- The U.S.-Korea Free Trade Agreement (KORUS) was initially negotiated by President George W. Bush and came into force in 2012. The deal slashed tariffs on many goods, increased U.S. access to South Korea’s services market, and strengthened South Korea’s intellectual property protections.
- Critics say the bilateral trade deficit in goods with South Korea more than doubled in the five years following the treaty's implementation, going from $13.2 billion in 2011, to $27.6 billion in 2016. This excludes trade in services, which increased by 26 percent during that period leading to a trade surplus in services of $10.1 billion in 2016.
- It is likely that the bilateral trade deficit would have been even larger in the absence of the deal. Korean economic growth slowed after 2010, just as U.S. growth began to pick up after the Great Recession. The U.S. goods trade balance with South Korea has roughly tracked how fast South Korea’s economy is growing relative to the United States (see chart). In addition, new trade deals between South Korea and other partners made for tougher competition for U.S. exports, which would have been even less competitive absent KORUS.
- We calculate that the U.S. bilateral trade balance with South Korea performed better than the (deteriorating) U.S. trade balance with the rest of the world for fully half of all goods categories traded between the U.S. and South Korea in 2011. In addition, for some goods in which the balance with South Korea worsened, this had little net effect on the overall U.S. trade deficit -- suggesting that KORUS may have caused U.S. importers to buy more from South Korea and less from other foreign suppliers.
Even though the overall U.S. trade deficit in goods with South Korea has grown since the implementation of the U.S.-Korea Free Trade Agreement, this does not mean it represents unfair trade. The U.S. bilateral balance improved for many traded goods categories and, in some cases, led to the replacement of imports from other sources for cheaper Korean imports. Given the challenging macro environment for U.S. exports in South Korea since KORUS went into effect, this is a clear win for the hundreds of thousands of workers involved in producing U.S. exports to South Korea.
A recent report by the Trump administration's Council of Economic Advisers claims that lowering the corporate income tax rate from 35 percent to 20 percent would "increase household income in the United States by, very conservatively, $4,000 annually."
- For a corporate tax cut to result in higher wages in the way the CEA report hypothesizes three things must happen: the lower tax rate has to boost investment; the increased investment has to raise the productivity of labor; and, finally, workers have to get higher wages as they become more productive.
- There are reasons to doubt that U.S. investment is substantially lower due to our tax system. For instance, the current corporate tax system actually subsidizes debt-financed investment. And, while U.S. multinationals may have stockpiled $2.6 trillion dollars abroad to avoid taxes, they can still borrow against these offshore profits, generating the equivalent of a tax-free repatriation. Moreover, the funds from foreign profits are frequently invested in U.S. assets, increasing the supply of financial capital in U.S. markets.
- Even if the corporate rate cut increases investment, and this investment makes workers who continue to be employed more productive, new machinery, computers, and robots are as likely to displace workers, by lowering labor demand, as they are to increase employment.
There are good reasons to reform the United States corporate tax system, but economists disagree on the relationship between lower corporate taxes and higher wages. The CEA's claim that workers’ income would rise by $4,000 to $9,000 is well above the top of the range of consensus estimates. If one goal of tax reform is to raise worker incomes, there are much more direct ways to go about doing so. We know that workers pay all of the payroll tax and that they receive most of the benefit from the Earned Income Tax Credit, so focusing on those areas provides a more direct benefit to workers.