Ever since Donald Trump’s astonishing victory, the stock market has been on a tear. The general assumption is that he will create a paradise for business. After eight years of a president that hated business, the optimism certainly seems justified. However, the actual results may fall short of expectations.
The centerpiece of his economic plan is the corporate tax cut. Conventional Republican wisdom holds that this will cause the economy to take off. There are several problems with this line of reasoning. It’s assumes that the bill will sail through Congress. Remember that Senate Democrats still has the filibuster. This is being sold as a godsend to small business. A business with $1 million in sales will get $20,000 or less, hardly enough to add to staff or expand. Many large businesses have plenty of cash (Google has over $80 billion). Since the government doesn’t have the money, it will have to increase borrowing and pay interest in perpetuity. Since Trump wants to drastically increase spending on defense and infrastructure, the deficit will balloon totally out of control.
Cutting regulations would certainly be beneficial. However, there seems to be no organized approach on how to achieve it. Businesses can cope with red tape easier than uncertainly.
They also need to be concerned about incurring his wrath if they do something he doesn’t like (such as not doing business with his daughter).
The biggest concern is what might happen with trade. If he does mess up our relationship with countries like China and Mexico, those jobs aren’t coming home. They will go to third world countries like Brazil and Vietnam. Meanwhile our companies are shut out of valuable markets.
There certainly is reason for optimism but people shouldn’t get carried away. As we have seen, Trump can be a loose cannon.