High-end real estate will be the first to fall.
Why corporate America loves Donald Trump
American executives are betting that the president is good for business. Not in the long run
MOST American elites believe that the Trump presidency is hurting their country. Foreign-policy mandarins are terrified that security alliances are being wrecked. Fiscal experts warn that borrowing is spiralling out of control. Scientists deplore the rejection of climate change. And some legal experts warn of a looming constitutional crisis.
.. Bosses reckon that the value of tax cuts, deregulation and potential trade concessions from China outweighs the hazy costs of weaker institutions and trade wars.
.. the investment surge is unlike any before—it is skewed towards tech giants, not firms with factories. When it comes to gauging the full costs of Mr Trump, America Inc is being short-sighted and sloppy.
.. The benefits for business of Mr Trump are clear, then: less tax and red tape, potential trade gains and a 6-8% uplift in earnings.
.. During the Obama years corporate America was convinced it was under siege when in fact, judged by the numbers, it was in a golden era, with average profits 31% above long-term levels.
Now bosses think they have entered a nirvana, when the reality is that the country’s system of commerce is lurching away from rules, openness and multilateral treaties towards arbitrariness, insularity and transient deals.
.. so far this month 200-odd listed American firms have discussed the financial impact of tariffs on their calls with investors. Over time, a mesh of distortions will build up.
.. American firms have $8trn of capital sunk abroad; foreign firms have $7trn in America; and there have been 15,000 inbound deals since 2008. The cost involved in monitoring all this activity could ultimately be vast. As America eschews global co-operation, its firms will also face more duplicative regulation abroad. Europe has already introduced new regimes this year for financial instruments and data.
.. The expense of re-regulating trade could even exceed the benefits of deregulation at home. That might be tolerable, were it not for the other big cost of the Trump era: unpredictability. At home the corporate-tax cuts will partly expire after 2022.
.. Bosses hope that the belligerence on trade is a ploy borrowed from “The Apprentice”, and that stable agreements will emerge. But imagine that America stitches up a deal with China and the bilateral trade deficit then fails to shrink, or Chinese firms cease buying American high-tech components as they become self-sufficient
.. Another reason for the growing unpredictability is Mr Trump’s urge to show off his power with acts of pure political discretion.
- He has just asked the postal service to raise delivery prices for Amazon, his bête noire and the world’s second-most valuable listed firm.
- He could easily strike out in anger at other Silicon Valley firms—after all, they increasingly control the flow of political information.
- He wants the fate of ZTE, a Chinese telecoms firm banned in America for sanctions violations, to turn on his personal whim.
.. When policy becomes a rolling negotiation, lobbying explodes. The less predictable business environment that results will raise the cost of capital.
.. Mr Trump expects wages to rise, but 85% of firms in the S&P 500 are forecast to expand margins by 2019
.. Either shareholders, or workers and Mr Trump, are going to be disappointed.
.. In a downturn, American business may find that its fabled flexibility has been compromised because the politics of firing workers and slashing costs has become toxic.
.. American business may one day conclude that this was the moment when it booked all the benefits of the Trump era, while failing to account properly for the costs.
McCain could save the country from this terrible tax bill
In 2010, he told Fortune magazine that the nation was “sleep-walking toward a debt crisis,” and he foresaw calamity on a grand scale. “Within a few years a sale of government bonds will fail,” he said. “The capital markets will go crazy, and the Fed and Treasury will run to Capitol Hill demanding a giant bailout.” Wow.
He offered much the same view in 2011. “We face a crushing burden of debt, which will take down our economy,” Ryan predicted. “It will lower our living standards.”
.. When it comes to the middle class, by the way, this proposal doesn’t even deserve to be called a tax cut. According to the Tax Policy Center, it would leave about half of taxpayers paying more by 2027.
Republicans are lying coming and going. They hold down the sticker price of the bill and minimize its impact on the deficit by having the middle-class tax cuts (but not the corporate reductions) expire. But they insist that future Congresses would keep the middle-class tax cuts in place.
So they are either lying about the deficit or misleading the middle class.
.. As soon as Republicans shovel every dollar they can to the people who pay their party’s bills, he’ll dust off those old the-sky-is-falling quotes and warn about the deficits he helped to bloat. He’ll tell us how urgent it is to slash Medicare, Medicaid, Social Security and programs for the needy (although he’ll try to bamboozle us again by claiming to be only “reforming” them)... What can stop this duplicitous raid on the federal treasury? A mobilization at the grass roots
Q&A: Economist Tyler Cowen Thinks Americans Are Too Complacent
The George Mason University author says Americans have lost the pioneer spirit that created a more dynamic country
.. I think this has always been a country that gets things done by plunging in first and figuring out later how to pay for it.
.. we move across state lines at much lower rates. We take fewer risks in many forms. We hold a higher percentage of government-insured safe assets. We are far, far more risk-averse with how we bring up our children—often we don’t even let them play outside anymore. There is a lot of data about how we innovate less.
.. Mobility used to be much higher in our history and in many regards measured segregation is going up.
.. if you look at lower earners–how many years people stay at home, that a lot of them are less likely to get married, or aspire to own their own home or cars, how many extra hours they spend playing video games or watching pornography or smoking marijuana. To me those are signs of a kind of complacency... There’s a new paper by Erik Hurst and he measures a lot of the less-skilled, out-of-work males and he thinks they are actually very happy or they at least think their situation is OK... everyone thought the internet would help make a more dynamic world. Instead, you suggest it allows people to stay within their comfort zone—they order up the music or food or news they know they like rather than exploring, trying something new... I don’t think of Trump himself as a change agent. I view him as someone who talked a good game on change but in fact has been doing nothing, doesn’t know how to get things done, was mostly about rhetoric. In a way, his biggest promise was to bring back the past and along the way not to cut entitlements. So he’s actually the ultimate complacent president... Q: What will it take to make the U.S. a more dynamic nation again?
A: There’s what we could do and won’t do: Take more chances, start new businesses, deregulate a lot, expose ourselves to a lot more risks, segregate less.
.. I think the actual reality is we will have some kind of crack-up in terms of governance and institutional quality and we’ll be forced to become dynamic again just because we won’t be able to escape risk by burrowing in more deeply... I discuss three scenarios.
- One would be a debt crisis, which I don’t think is the most likely.
- Another would be a foreign-policy crisis where we just don’t have the wherewithal to respond to it.
- And the the third would be this ongoing collapse in the quality of governance, and I think that’s what we have been seeing so far–when nothing the president says seems to matter, no deal can be cut.
The Republican Party has no coherence, the Democratic Party doesn’t either. I don’t think you call it gridlock anymore. Gridlock is very 2011. This is some new phenomenon of chaos and lack of coherence.