E John Mauldin Discusses What Could Go Wrong

John Mauldin published an article regarding the economics of Donald Trump. I share many of his views. I think the article deserves to be discussed further.

It isn't as if John Mauldin is happy with the continual drive toward negative yields and the new normal. I believe he is like many, willing to fight for higher interest rates within reason and within the economic boundaries that exist. He is on board with the Fed, unlike other central banks, and is willing to risk recession to avoid negative rates:

Meanwhile, the Fed is in the middle of a long-overdue policy turn. There’s still a risk that they will find they started tightening just in time for a recession, which is also long overdue. I was convinced last summer that they would push rates negative in that scenario. Negative rates could yet happen, but I think they will be less likely if the FOMC abides by their dot plots and raises rates three times this year. And I find it difficult to believe that a Trump-appointed Fed would take us into negative rates. We are going to have to find more creative ways to do things.   

Mauldin speaks about tax reform. He believes taxes should be simplified. But he also believes that taxes should be lowered for the poor and middle classes. It appears that this aspect of tax reform will not occur. Trump has similar views to Mitt Romney. He believes people should pay taxes and he believes poor and middle classes must have tax burdens decreased or his plan for stimulating the economy will not work. Mauldin spoke of a possible VAT tax eliminating the social security tax, and goes into some detail. But regarding the total tax burden on those lower and middle classes, Mauldin said:

While the tax outcome could be nice for some of us, I’m afraid of the political perception problem if the first tax cuts go mainly to high-income taxpayers. Democrats will cry foul and try to force a split between the GOP’s business wing and its new populist elements. More to the point, a tax cut for the wealthy won’t stimulate the economy enough.
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Disclosure: I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice.

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