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Ron Insana: Trump Tax Cuts Good for Wall Street, Not Main Street

By    |   Friday, 22 December 2017 05:55 PM

What's good for Wall Street in the Trump tax cuts may not be equally good for Main Street, economic guru Ron Insana predicts.

The stock market, up sharply in 2017; the bond market, where rates are rising, and the commodity markets all suggest that economic growth may accelerate sharply from here, the author of four books on Wall Street wrote for CNBC.

However, he warns that it isn’t automatic that labor will benefit to any great extent from the Republican tax reform. Nor is it a given that the small tax savings for households will encourage people to aggressively ramp up their spending, the CNBC and MSNBC contributor wrote.

Insana made his comments as Republicans in the U.S. Congress this week approved a broad package of tax cuts in what was the largest overhaul of the tax code in 30 years, handing President Donald Trump a major legislative victory with the legislation, which has $1.5 trillion in tax cuts, Reuters explained.

Economists are forecasting a modest economic boost from the tax cuts, which includes slashing the corporate income tax rate to 21 percent from 35 percent. The fiscal stimulus will come while the economy is at full employment, which raises the risk of it overheating.

“I still have doubts that the good fortune among large companies will be broadly shared with their workers, or will result in a rapid acceleration in economic growth,” Insana said.

“Companies may buy more equipment and increase the efficiency of their operations, getting a huge tax benefit in the process. But they may also use their excess cash to buy back stock, raise dividends and buy other companies before they pay out higher wages. That is borne out by examples in recent economic history,” he said.

“Those activities benefit the shareholder class, investment bankers and select industries that supply labor-saving, productivity-enhancing systems.”

“I hope that any additional prosperity that comes from tax reform will be broad-based, but I fear that, this time, Wall Street is only forecasting the future of Wall Street, not the future of the street where you live.”

However, other respected economic voices are much more optimistic about how the tax cuts will sway the economy.

Investment guru Steve Forbes predicted to Newsmax TV that the GOP tax-reform legislation will spark investment that ultimately lead to “a higher standard of living” for all Americans.

“We've had, as you know, subpar investment for a decade,” the chairman and editor-in-chief of Forbes Media told Sunday’s “The Income Generation Show.”

“And so, in order to get a higher standard of living, we need more investment. And that leads to enabling people to keep more of what they earn via higher earnings, higher salaries, higher pay in the future and you have to have investment,” said Forbes.

(Newsmax wire services contributed to this report).

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What's good for Wall Street in the Trump tax cuts may not be equally good for Main Street, economic guru Ron Insana predicts.
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Friday, 22 December 2017 05:55 PM
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