WASHINGTON - Making political predictions about the New Year is a risky business, but some things are certain to happen in the nation’s capital that will be fully controlled by the Republicans. So here goes.
A sweeping pro-growth, pro-investment and pro-jobs bill will be swiftly passed and signed by President Trump. He ran on it, embraced it, and made it the central part of his agenda.It will significantly lower income tax rates for businesses and individual taxpayers, and trigger a major expansion in an economy that has been sorely in need of job-creating capital investment throughout the eight years of Barack Obama’s persistently, slow-growth presidency
And here’s the bonus in the Republican’s tax cuts: it will boost tax revenues (since more people will be working), as a result of cleansing the tax code of dysfunctional, special interest tax breaks and other loopholes
We’ve had three major tax overhauls since the 1960s: the across-the-board Kennedy tax cuts (which Democrats never talk about), and the Reagan tax cuts enacted in the early 1980s, and in the aftermath of Reagan’s landslide, 49-state re-election in 1984.
In both cases the economy took off, with the Kennedy tax cuts producing a budget surplus by the end of that decade.
We are already seeing the economic dividends in anticipation of the Trump/GOP tax cuts, with the stock market soaring to record levels in just the past month.
The Dow Jones industrial average, a major index of 30 blue chip stocks, has soared 10 percent since Trump’s election, inching towards the 20,000 mark in recent weeks.
“I’m bullish,” said David Kass, a University of Maryland finance professor.
“Gross domestic product should grow fast, corporate profits should be higher, and therefore I would expect equities to do well during 2017,” Kass said.
The Wall Street Journal’s Money Beat column is forecasting “mid- to high single-digit earnings growth,” as a result of a faster growing economy and stronger profit margins.
One of the first items on the GOP’s agenda will likely be repealing and replacing Obamacare, but if you are looking for a quick ending to President Obama’s signature reform, you can forget it.
The legislative likelihood will be a gradual, two to three year transition away from the original medical insurance program, while keeping some of its more popular features, such as insurance coverage for pre-existing conditions, and possibly an expansion of Medicaid among the states.
The budget will be cut, too, tightening appropriations for long forgotten, waste-ridden bureaucracies, and further shrinking the deficit. Some of the spending cuts may be phased in over several years.
The big exception will be in defense which will see big increases at the Pentagon, such as missile modernization, and cyber warfare preparedness.
But some of Trump’s big spending proposals could face rough opposition from Republicans, particularly his plan for rebuilding the nation’s infrastructure. Despite promises of long term job-creation, Obama’s program was a costly, short-term failure.
As for those predictions that Trump will have a nasty, turbulent relationship with Republican leaders on Capital Hill, he has in fact reached out to lawmakers on several fronts to improve his relationship with Congress.
He has forged a closer working relationship with House Speaker Paul Ryan, filled his new administration with five sitting lawmakers, and picked the wife of Senate Majority Leader Mitch McConnell to be his secretary of Transportation.
Unable to get many of his proposals through Congress, Obama has signed a long list of Constitutionally-dubious, executive orders in an end run around the legislature. Trump will rescind those orders on his first day in office.
But there were many other promises that Trump made in his presidential campaign that are going nowhere during his presidency.
First and foremost, the 20-foot wall along our border with Mexico is one of them, and, needless to say, Mexico is not going to pay for it. Nor is Congress going to approve it.
Neither is Congress going to appropriate the billions of dollars to build a nationwide police force to arrest, detain and deport 11 to 12 million illegal migrants. It’s not going to happen.
As for the nutty idea to impose or raise trade tariffs on imported goods, as Trump has repeatedly proposed, there isn’t a ghost of a chance that the GOP Congress will raise taxes — which is what a tariff is — on what millions of hard-pressed American consumers buy.