Tags: Trump Administration | Hope | Pay | Trump | Plans | President | Wall

Hope Alone Won't Be Enough to Pay for Trump's Grandiose Plans

Hope Alone Won't Be Enough to Pay for Trump's Grandiose Plans
(Getty/Don Emmert)

By    |   Tuesday, 25 April 2017 12:55 PM

Ahead of Friday night’s deadline, or more precisely said on Saturday morning at 12:01 a.m. for a U.S. government shutdown, President Donald Trump apparently said that he was not too bothered about paying for the wall along the border with Mexico right now and that he is open to wait until later this year to secure funding.

By the way, Saturday is also the president’s 100th day in office.

Paying for that wall along the border with Mexico has been a very significant obstacle to allowing the government to carry on. The Democrats and Republicans could remove that obstacle by coming up with a five-month bill, but that they must pass this week, to avoid a partial government shutdown.

That whole situation was very well put into context in “Fox News Sunday” during an interview between Fox News Anchor Chris Wallace and Mick Mulvaney, the actual director of the Office of Management and Budget.

That said, markets will now have to wait for Trump’s tax proposals whereby the rate of corporation tax is said could be reduced to 15 percent from the current 35 percent, which should demonstrate clearly that the Trump administration puts higher priority on easing taxes than on curbing the U.S. budget deficit.

The big question will be: “How are they going to pay for all this?”

No doubt that the fiscal conservatives in Congress won’t be happy with it, which means that the tax cut proposal could meet a rocky reception while nobody still knows what the final outcome could be.

I’m afraid that hope alone won’t do the trick.

Last week, Treasury Secretary Steve Mnuchin gave the Financial Times an exclusive interview  wherein he made an interesting remark, saying: “Economic growth is our number one priority … There could be as much as close to $2 trillion difference in revenues under different growth scenarios … We believe in dynamic scoring (Ref. http://www.investopedia.com/terms/d/dynamic-scoring.asp) … What’s clear is that we will support something that doesn’t increase the deficit, with growth. That doesn’t mean, obviously in the case of static scoring, that it’s going to be deficit neutral.”

Now, a White House spokeswoman said that while the Treasury may be relying on “dynamic” economic models to suggest that deep tax cuts do not add to the deficit, Congress will have to use more conservative assumptions used by the Joint Committee on Taxation. If these show the tax reductions adding to the deficit, it could create procedural headaches within Congress.

In simple words, as an investor it might be wiser to wait and see what the final tax cut deal will be before taking long-term investment decisions.

Never forget, the administration’s tax package, for getting it through the Senate without the support of the Democrats, that package cannot add to the deficit over a 10-year time frame, which in turn also means that the measures may have expired by then.

Yes, it’s all much more complicated than thought…

For comparison, the House speaker Paul Ryan’s tax reform blueprint was constructed for being revenue-neutral over 10 years, which should logically provide greater certainty to business. That plan included a reduction in business tax to 20 percent as well as that controversial border-adjusted tax that was intended to add $1 trillion of revenues.

As things stand today, the plan has lost support in the White House.

Trump is also pushing House Republicans to re-start work on a replacement for Obamacare after the last attempt imploded in March when conservatives walked away. Uncertainty remains over whether the Trumpcare healthcare plan will take precedents over these tax proposals or not.

Finally, and as markets seem to remain in their risk-on mode thanks to the win of the centrist pro-European candidate Emmanuel Macron in the first round of the French Presidential elections on Sunday, and now seem to be convinced that Mr. Macron will win the second round against the far right Marine Le Pen, I would prefer to wait and see what comes out.

Never forget what Yogi Berra always said: “The game isn’t over until it’s over.”

And then, suppose that Macron is elected President of France, I’m afraid he won’t be able to deliver what he promised to the French voters in his manifesto, because he doesn’t have any party machinery or political support in the French parliament, and probably won’t get it either in the final round of the French Parliamentary elections on June 18

No, for all that seems easy at first sight, there is a good chance it isn’t…

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments.

© 2021 Newsmax Finance. All rights reserved.

In simple words, as an investor it might be wiser to wait and see what the final tax cut deal will be before taking long-term investment decisions.
Hope, Pay, Trump, Plans, President, Wall
Tuesday, 25 April 2017 12:55 PM
Newsmax Media, Inc.
Newsmax TV Live

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved