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
THEY DON'T RING THE BELL AT THE CRPTO MARKET TOP! - 20th Dec 24
CEREBUS IPO NVIDIA KILLER? - 18th Dec 24
Nvidia Stock 5X to 30X - 18th Dec 24
LRCX Stock Split - 18th Dec 24
Stock Market Expected Trend Forecast - 18th Dec 24
Silver’s Evolving Market: Bright Prospects and Lingering Challenges - 18th Dec 24
Extreme Levels of Work-for-Gold Ratio - 18th Dec 24
Tesla $460, Bitcoin $107k, S&P 6080 - The Pump Continues! - 16th Dec 24
Stock Market Risk to the Upside! S&P 7000 Forecast 2025 - 15th Dec 24
Stock Market 2025 Mid Decade Year - 15th Dec 24
Sheffield Christmas Market 2024 Is a Building Site - 15th Dec 24
Got Copper or Gold Miners? Watch Out - 15th Dec 24
Republican vs Democrat Presidents and the Stock Market - 13th Dec 24
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 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