Audio Version: Let Me Hear It!
It’s official, the United States has defined its relationship with Donald Trump, agreeing to see him exclusively for at least four years. Although the nation has been courting Trump for over a year now, just like with any new relationship, only time will tell how it will all play out. After all, it’s not uncommon for a partner to change after a commitment, and it’s also not uncommon for a president to run one way and govern in another. All we can do is go off of what we know so far. So, what expectations has President-elect Trump set for our future together? Good, bad or indifferent, here are a few major policy initiatives that we know thus far.
In short, Trump’s main trade-related goal is to bring jobs back to the US. Proposed actions include a review and potential renegotiations of all existing trade agreements, as well as possible tariffs to make exports from foreign countries to the US more expensive, aka, less competitive. This could be good news for the US but not-so-good for countries like China, Mexico and Thailand that rely heavily on exports to the US. The question remains whether or not US workers are willing to accept the jobs at wage levels paid elsewhere. If not, prices could go up.
Think of fiscal policy as the government’s inflows and outflows. Inflows come in the form of taxes and outflows are pretty much everything it spends money on (think healthcare, education, pensions, defense). Trump has proposed a number of tax cuts including:
Revise the seven tax bracket system to three brackets (12%, 25%, 33%)
Reduce corporate tax rates from 35% to 15%
Increase the standard deduction amount and eliminate personal exemptions
Make child care expenses deductible for more taxpayers
Repeal the estate tax, personal and business AMT and the 3.8% healthcare tax on investment income
Alongside these tax proposals, Trump has proposed an increase in certain government spending like infrastructure and defense. Yes, the takeaway here is less income (near $6 trillion over the next decade) and more spending. This will work no differently than your own budget. If you take a pay cut but want to spend more on certain expenditures, you will either have to reduce spending elsewhere or take on more debt. One big way Trump has proposed to cut spending elsewhere is to repeal the Affordable Care Act, Obama’s landmark health care plan affectionately (or unaffectionately) referred to as Obamacare.
With the Republicans holding both the Senate and the House, there is now a greater chance for Trump’s plans to be enacted, but again, only time will tell.
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