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b'Congress May Not Deliver Promised Economic Growth
\\nI think part of the renewed weakness in the dollar may be due to the feeling that all the tax cuts are not going to pass.\\xa0 The Trump/Republican plan outlined some days ago will be difficult to to get through Congress. Even if it does get through Congress it is not going to deliver the economic growth that is being advertised.
\\nTax Cuts Masquerading as Reform
\\nGo back to the origins to the Republican dialogue about tax reform.\\xa0 They actually wanted to do reform. All the reform is out the window now. All we have is tax cuts masquerading as reform.\\xa0 But the initial concept that the Republicans had was to try to move toward a consumption-based tax system. They tried to do that through the back door with the BAT (Border Adjusted Tax), which is the opposite of what the Republicans are now promising, which was tax relief for the middle class. That\'s not what they are delivering.
\\nGetting Around Elimination of State & Local Tax Deductions
\\nA lot of people are going to get tax increases.\\xa0 Part of the problem, though is the elimination of the deductibility of state and local taxes. I mentioned on an earlier podcast that the states can get around this by shifting the tax to a payroll tax that will be fully deductible for the employers.\\xa0 Any resulting reduction in salary would be offset by the elimination of state and local taxes.\\xa0 If the states react the way I think they will to the loss of the deduction, the governments will not reap the tax windfall that they expect, causing much bigger deficits.
\\nBig Deficits Ahead
\\nAt the end of the day the bill may not pass because Congress may not be willing to sign on to anything that raises taxes.\\xa0 They want everybody to get at tax cut.\\xa0 How are you going to do that? How are you going to cut income taxes and not cut spending on anything without having a huge increase in the deficit - which of course is what is going to happen.
\\nRecession Ahead
\\nYou can try to assume that some of that increase is not there because of dynamic scoring, you can assume that tax cuts are going to lead to economic growth.\\xa0 Maybe they will, but I think regardless we\'re going to have a recession.\\xa0 There is no recession in any of the forecasts. Nobody thinks a recession is coming at any point during the next 10 years, whether we cut taxes or not. I think, whether we cut taxes or not we\'re going to have a recession, and if there is a recession, you can throw all this dynamic scoring out the window!
\\nProduction Equals Stimulus
\\nEven if the recession is not as severe as a result of the tax cuts, the results will still be huge increases\\xa0 in the budget deficit. They are losing some Republican support and they are going to have to reach across the aisle, and there is no way the Democrats will sign on to any tax cuts for the "rich".\\xa0 If they take away tax cuts on corporations, they take away the reduction in the marginal tax rate, then you lose any hope of economic stimulus. That is where the stimulus comes from.\\xa0 Real economic stimulus comes from more capital investment, more job creation, less consumption. That is what you get when you reduce marginal taxes on people with the highest propensity to save and invest.
\\nInflation Ahead
\\nThe Keynesians have it backwards.\\xa0 They think stimulus comes from consumption - it doesn\'t.\\xa0 Consumption doesn\'t stimulate anything.\\xa0 Consumption without production just leads to higher prices which is what is going to happen.\\xa0 We are going to get more inflation.\\n\\nOur Sponsors:\\n* Check out Rosetta Stone and use my code TODAY for a great deal: https://www.rosettastone.com/ \\n\\nPrivacy & Opt-Out: https://redcircle.com/privacy'