Round I (2017): Always unfolds this
way — check history
(Trickle Down — still a
farce)
Round II (2017): Tax cut winners (the top) then the rest
Post for today deals with GOP tax policy, the national
debt, overall deficit spending, jobs, and “the Market” all rolled up into short
summary especially now as we look forward after the midterm results which certainly
will give us more, not less, divided and rabid raw government in the new
Congress.
One analysis is here from Market Watch.
Basically, Trump wants another big GOP tax cut, as
some are calling: “Tax cut 2.0” – but as for me, I say “It ain’t gonna happen.”
Partly because markets normally like tax cuts because they give businesses and
consumers more disposable income and typically boost spending and corporate
profits.
More here on
the topic today published from Yahoo financial: Right now most markets
seem a bit relieved there won’t be any further GOP tax cuts, e.g., Goldman
Sachs said the possibility of further tax cuts was an “expansionary tail risk” and adding that the elimination of this
risk “should be positive for markets.”
Here’s some of why another round of
big GOP tax cuts won’t happen:
· Tax cuts reduce federal revenue,
forcing the Treasury to borrow more to maintain Congressionally-authorized
spending levels.
· The additional borrowing tends to
push up interest rates, since a growing supply of Treasury debt forces the
issuer — Uncle Sam — to pay more via higher rates to attract buyers.
· Higher rates are generally a negative
for corporate earnings since they equate to higher borrowing costs.
· Tax cuts also would amount to an
economic stimulus that might trigger more aggressive monetary tightening by the
Fed, also a possible negative for stocks.
· So taking tax cuts off the table
might be a good thing.
· Plus, this post-election market relief
rally could turn out to be short-lived.
Stocks
drifted back down after the one-day rally, as investors went back to assessing
earnings and economic data. Earnings still look good, but there are mounting
warnings of a global economic slowdown underway.
Moody’s Analytics declared: “The
global expansion has passed its peak for this cycle. A recession isn’t
imminent, but heightened downside risks threaten to deliver a
faster-than-forecast downturn in global activity.”
One of those risks: Trump’s sustained trade war with
China. Markets have more or less digested Trump’s trade actions so far,
including tariffs on half of all Chinese imports to the United States, and
retaliatory measures by China. But the stakes are set to go higher, with the
tariff rate set to rise from 10% to 25% on January 1.
Plus, Trump may soon
impose tariffs on the other 50% of Chinese imports, which would include
thousands of consumer goods.
My 2 cents: With this trade “war” Trump is
waging and consumers worried, I see no happy, savvy shoppers out spending
freely. Goods and products will cost a bundle more and when that happens any
good wise savvy shopper (probably your wife just like mine) will slow down
shopping and start saving more.
Another example from the Tax Policy Center, a think-tank, found that more than 60
per cent of the benefits of tax reform would accrue to the top 1 per cent of
earners in 2027.
By that year, taxes would rise modestly for the lowest-income
group, change little for middle-income groups, and decrease for higher-income
groups. This is partly driven by the decision to make proposed individual tax
cuts expire over a decade to comply with deficit-limiting rules in the Senate —
even as the corporate tax cuts stay in place.
The fact that companies are
getting a permanent cut while households’ reductions are temporary has led to
inevitable protests by Democrats. The White House insists the cuts will be
extended by a future Congress. But this idea worries some fiscally conservative
Republicans.
So, Trump is not apt to win this trade war on his
terms – we have trading partners and friends and allies and yes, some who are
not but love American products… we should not suffer due to his narrow and
false peddling how great a businessman he claims to be: his record speaks
otherwise.
Stay tuned as we ready for
the new Congress and surely a more-aggressive Donald J. Trump.
Thanks for
stopping by.
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