White House officials have begun preparing options to help bolster the American economy and prevent it from falling into a recession, including mulling a potential payroll tax cut and a possible reversal of some of President Donald Trump’s tariffs, according to people familiar with the discussions, The New York Times reports.
Trump continues to insist the economy is “doing tremendously well,” and he and his advisers publicly dismiss any notion of an impending recession. But behind the scenes, Trump’s economic team is pulling together contingency plans in the event the economy weakens further.
Officials inside the administration have drafted a white paper exploring a payroll tax reduction, which would seek to boost the economy by immediately injecting more money into workers’ paychecks. In 2011 and 2012, the Obama administration employed a two-year payroll tax cut in an effort to stimulate what was a sluggish recovery from the recession that ended in 2009. The payroll tax discussion was first reported Monday by The Washington Post.
Such a cut would require congressional approval. Administration officials said the idea had not been pushed with Trump and tried to tamp talk of it down, The New York Times adds.
A White House official said more tax cuts were on the table, “but cutting payroll taxes is not something that is under consideration at this time.” Another senior administration official cautioned that a payroll tax cut was not under serious consideration. And a third official said that discussions of what tools could be deployed to offset a recession, based on examining what had been done in previous slowdowns, were hypothetical and not being explored with urgency.
It is also unlikely that Trump would abruptly reverse course on the tariffs he has imposed on Chinese goods, which he has said repeatedly are hurting China but not affecting American consumers.
Still, the fact that the White House is even discussing ways to stimulate an economy that Trump on Monday called “very strong” underscores a growing concern in the administration about slowing economic growth. The United States is in its longest economic expansion on record, but economists are increasingly warning that a recession looms.
Stocks churned last week after the bond market flashed a warning signal that has historically presaged a recession. The manufacturing sector has fallen into a recession on its own amid a global growth slowdown that many economists attribute in part to Trump’s trade war with China.
Cutting payroll taxes would be an attempt to further strengthen consumer spending, which has been the driving engine of the American economy this year as businesses pulled back on investment.