Trump Administration Considering Payroll Tax Cut As More Economists Express Recession Concern

President Donald Trump

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The National Association for Business Economics survey said 38 percent of those surveyed believe a recession will begin in 2020 during the middle of the US presidential campaign, while 34 percent believe the economy will hit a recession in 2021.

The survey also asked about fiscal policy, and a majority of economists said Trump's tax cuts "had an overall negative impact on housing activity over the past 18 months", due to changes in deductions allowed for mortgage interest.

"We're very far from a recession", Trump told reporters today during a White House visit by Romanian President Klaus Iohannis.

A few seconds later in the interview, Smith pressed Gidley again, noting that "if there were to be a temporary payroll tax being considered, one might draw the conclusion that there is a need to stimulate the economy, an economy that obviously the White House and the president tout is still on very strong ground".

Millions of USA workers pay payroll taxes on their earnings to finance the Medicare health insurance program for the elderly and Social Security, which provides income payments for retirees. "Whether or not we do it now or not ... it's not being done because of recession", he said.

Mr Trump has been talking up the U.S. economy in recent days amid growing unease about a potential recession.

During the 2018 fiscal year, the federal payroll tax generated $1.17 trillion, or around 6 percent of the nation's gross domestic product, according to the Center on Budget and Policy Priorities.

Some administration officials have felt that planning for an economic downturn would send a negative perception to the public and make things worse, but Trump has spent much of the past week conferring with business executives and other confidants seeking input on what they are seeing in the economy. Americans also pay a Medicare payroll tax of 1.45 for employees and 1.45 for employers. Trump has repeatedly criticized Federal Reserve Chairman Jerome Powell and called on the central bank to cut interest rates. "If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone", Trump wrote.

Traders are now pricing in a 100 percent chance of a second reduction, with most expecting another modest 25 basis point cut.

Economists polled by NABE have previously expressed concern that Trump's tariffs and higher budget deficits could eventually dampen the economy.

The 226 economists responding work mainly for corporations and trade associations.

Trade between the US and China, the two biggest global economies, has plunged.

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