June 12, 2017


Trump's Economic Agenda Is Almost Dead : A once-in-a-generation opportunity is slipping away. (Barry Ritholtz, 6/12/17, Bloomberg)

Let's begin with the observation that the long-awaited "pivot towards being presidential" hasn't arrived, and by all indications never will. Those of us who harbored hopes for a comprehensive corporate tax reform, for repatriation of trillions of overseas dollars, for an infrastructure plan, and perhaps even for a lowered personal income tax rate, are coming to recognize the folly of our wishful thinking. That window of opportunity now looks like casements in South Florida during hurricane season.

The good news is that the global economy keeps expanding as corporate profits rise and the post-credit-crisis recovery continues apace. Left to its own devices, even as the Federal Reserve normalizes rates, the economy has the potential to grow for several more years before its next cyclical stumble.

The bad news is that the self-inflicted wounds of the most undisciplined presidency in history are increasingly likely to blow its chances of passing any of the aforementioned economic stimulus measures.  The trifecta of tax reform, repatriation and infrastructure investment could put the U.S. on very strong footing for the next several decades. Such was the legacy of Ronald Reagan, who oversaw a similar "once in a generation" economic boost that resonated for the next 30 years. 

Trump is no Reagan. The current president started with a generational opportunity, in the form of a GOP sweep of the White House and Congress. On November 9, I placed the odds of passing a robust economic legislative agenda at 96 percent. The day Trump took office, cracks in my optimism appeared.   By March, I had lowered the odds to a still healthy 75 percent. Now I'm thinking 25 percent, and even that might be optimistic.

Let the weight of that missed opportunity sink in for a minute.

To be fair, Reagan (and Thatcher and Volcker) broke inflation and then Reagan and Thatcher won the Cold War to boot, giving us the boom.  Taxes had little to do with anything (taxes as a percentage of GDP were little changed in his last year from his first).

What the GOP is blowing is a chance to reform what we tax--consumption instead of income, savings and profits.

Posted by at June 12, 2017 7:19 AM