Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Trump’s Private Sector Appointments Signal A Rollback Of The Regulatory State

Economics / Market Regulation Dec 13, 2016 - 07:04 PM GMT

By: John_Mauldin

Economics

BY JARED DILLIAN : I feel good about the nomination of Steven Mnuchin for Treasury Secretary. A banker (a not a political hack) in that seat is all right by me. Seriously. And Wilbur Ross as Commerce Secretary? Terrific.

I can’t tell you how happy I am to have private sector guys in these positions of power.

I’ll be candid—for eight years, under Obama, business was the enemy. That mindset is changing. It seems foreign because it’s been so long.


I was never a Trump supporter. But this is the reality of it: we have just elected a businessman (however flawed) to the highest public office. Trump is motivated by very different things than Obama was.

If you're wondering about the newfound ebullience in the stock market, this is it. The last eight years saw an unprecedented expansion of the regulatory state. It will be rolled back.

Trump’s bullish tax plan

The most bullish thing of all about Trump is his tax plan. It establishes three brackets of 12%, 25%, and 33%, and the top rate kicks in at an income of $225,000.

So right off the top, about a 7% reduction in the top marginal rate.

Also: the standard deduction will be $30,000 for married filing jointly, instead of $12,600. That has massive implications.

Who pays more than $30,000 of mortgage interest every year? Why itemize deductions? All this running around we do at tax time, collecting receipts and such, could go away… for all except the wealthiest.

But here is the biggest proposal of all—make sure you’re sitting down.

Trump wants to lower the corporate tax rate to 15%. A laudable goal: lower the rate, broaden the base, collect more revenue, and maybe repatriate some of that overseas income.

But he wants to apply it to not just C corporations but to pass-through entities such as LLCs and S corps and partnerships. I’m sure some people get most or all of their income from pass-through entities. Think about how big this is.

Likelihood of passing? No idea. It’s hard not to imagine distortions arising from a 15% federal LLC tax (everyone opening up LLCs, for example), but even a partial reduction in taxes on small business… yuge, as they say.

A return to Reaganomics?

A lot of people are comparing this (favorably) to the early days of the Reagan administration, and the parallels are a bit eerie, actually.

In both cases, you had a Democratic Fed and Fed chairman who were more than willing to rip rates and plunge the economy into recession under a Republican president. (This is not a widely held view.)

But go back and look at the charts in 1980, in the days and weeks after Reagan was elected. The Dow looked like a rocketship, and stocks went up with few interruptions for 20 years.

But the big difference between Trump and Reagan (and there are many) are their attitudes toward trade. The modern Republican Party has always been in favor of free trade... but not Trump.

Is Trump right? Neither here nor there.

I think the economic impact will be negative, and the question is how negative.

Stories are starting to trickle in about how intertwined US-Mexico auto manufacturing is, and that there would be a massive unwind if NAFTA were to be renegotiated. (I blocked a guy on Twitter last week for calling me a filthy globalist or something like that, so take the free-trade views with a grain of salt.)

The benefits of free trade are not intuitively easy to understand. I’m surprised it’s lasted as long as it has. I think we have entered a period of de-globalization.

So if you think about who has benefited from globalization over the last 15 years and who has lost—imagine what the world will look like when the roles are reversed. That means bad news for the Chinese underclass and the 1%, and great news for America's middle class.

Maybe.

Running the US like a business

So I suspect I am like many people… watching the Trump transition with a mixture of optimism and horror. The surprises do not end here. The policy 180 might go down in history as the biggest of all time. And we haven’t even talked about healthcare yet.

I’ve noticed that some journalists are a bit scornful of all these private sector guys in the cabinet. Don’t be. I worked in government once, remember. The main reason I left was because it was laughably inefficient. If the government starts running like a business, it wouldn’t be the worst thing in the world.

You can go back in time and think up presidents who once worked in the private sector (both Bushes, Truman, Carter, others), but not one of them had devoted an entire lifetime to business. Trump thinks more like an investor than a beaurocrat. So there’s a good reason for optimism.

Get Thought-Provoking Contrarian Insights from Jared Dillian

Meet Jared Dillian, former Wall Street trader, fearless contrarian, and maybe the most original investment analyst and writer today. His weekly newsletter, The 10th Man, will not just make you a better investor—it’s also truly addictive. Get it free in your inbox every Thursday.

John Mauldin Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in