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US: After Trump’s First 100 Days, More of the Same?
While we have apparently avoided a government shutdown in early May, Trump’s ambitious legislative calendar means that investors have to ready for a number of potential showdowns later this year.
The first may come as early as July, when the tax and spending plans yet to crafted by the administration and Congress run into the debt ceiling clock. The risks is that that the tax cut and budget plans get tied up with keeping the government operating after September 30, when the new fiscal year begins, leading to one big mess. Sadly, we have been here before. A frustrated Trump has indicated that we may need a “good shutdown” next September to clean up the mess and help him get his way.
In any event, the Trump tax plan outlined in late April is more an opening bid than a real plan, leaving the details to be fleshed out in the formal budget submission, which may come in late May, or for Congress to deal with it this summer. We continue to think that the corporate tax reform (which has bipartisan support) will not lead to a rate cut below 25%, if the overall tax bill is to be revenue neutral. On the personal tax side, doubling the standard deduction makes sense and would appeal to Democrats but is costly. The reduction in personal tax rates at the top end will gather little bipartisan support.
A major infrastructure plan, which was one of the hallmarks of Trump’s campaign seems to have been forgotten and may not even be part of the formal budget submission. Trump has unable to gather support for funding the wall with Mexico last month but will try again in the next fiscal year.