The Donald's twitter-finger wasted no time Monday morning slinging another verbal dart into the bull (market). Even though the talking heads will likely deny it until the cows come home, too, the stock market is hovering at its current insanely over-valued levels owing to the fantasy of a big corporate rate cut.

But it's not happening because the GOP can't agree on a way to pay for it. Moreover, the $1.5 trillion deficit allowance in the Senate budget resolution won't amount to a hill of beans when the tax writers get down to the lick log, as Senator Howard Baker used to say. More on that below.

But as an indicator of the level of desperation that exists backstage on Capitol Hill, consider the fact that Ways and Means Chairman Brady late last week was apparently even floating the idea of sharply paring 401(k) retirement plan deductions. The current annual maximums of $18,000 and $24,000 (for workers over 50) would be reduced to just $2,500.

While the so-called tax expenditure (revenue loss) for defined benefit retirement plans is estimated by the Treasury Department at $1.05 trillion over the next decade, this big number includes non-401(k) plans and the employer share of 401(k) plans that are not being targeted for reduction.

Accordingly, the employee share of the revenue loss attributable to 401( k) plans would amount to about $550 billion over the decade. But even that number vastly exaggerates the potential revenue pick-up that could be used as a "payfor" to fund the rate cuts and reforms.

That's because in the most recent year there were 62.7 million active participants in 401(k) plans, who matched employer contributions at an average rate of $3,350 per participant. This means, in turn, that when you remove the high contributors from the average---what is left is a huge pool of participants who already contribute less than the $2,500 cap proposed by Brady and therefore would not be impacted.

So we estimate that the revenue gain from drastically reducing the deduction cap for the limited universe of high income/high contribution participants might amount to just one-third of the total tax expenditure or about $180 billion of the next decade.

Needless to say, that's not very much when you are trying to finance a $6 trillion wish list. That is, the current best guess as to the gross revenue cost of the corporate rate reduction from 35% to 20%, the 25% pass-thru rate for sub-chapter S businesses and the individual income tax reforms including three brackets, doubling of the standard deduction and increased child care credits.

Besides that, the 401(k) deduction is not a true "loophole" but is actually just an interest-free loan from Uncle Sam. Eventually, workers must pay taxes when they drawdown these funds after retirement.

Yet even that deferment was too much for the Donald---to say nothing of the nation's vast army of tax planners and stockbrokers who feed off 401(k) accounts. Before the Wall Street lobby machine even got into high gear, Twitter carried the coup de grace:

There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!

The capitalized "no" part of it says all you need to know. The Brady plan was leaked to the New York Times and Wall Street Journal on Friday and pounced upon immediately thereafter by the Dems. It's an insidious scheme to screw the average workers in order to fund big reductions for the 1% was their full-throated battle cry.

So by the time of the Donald's 7:40 AM tweet, it was already DBA (dead before arrival).

We dwell on this episode because this was the last great white hope on the "payfor" front. That is, after the multi-trillion BAT (border adjustment tax) was deep-sixed months ago and the $1.3 trillion savings from eliminating SALT (state and local tax deduction) has gone into a near-terminal meltdown.

As to the latter, there have been literally millions of real estate agents, community bankers, commercial developers and state and local officials banging the drums loudly in every Republican office and email account on Capitol Hill. The considerable political effect is obvious in the backroom surrender---otherwise known as "compromise" negotiations---now underway.

So as we suggested above, whatever simulacrum of a tax bill that does emerge in the months ahead---if any at all--- will likely be shoe-horned into the $1.5 trillion deficit basket encompassed by the budget resolution.

Yet when you consider that the CBO baseline for the individual and corporate incomes tax amounts to $26 trillion over the next decade, the Donald's "biggest ever" tax cut comes a cropper. The Senate's$1.5 trillion allowance could end up reducing Uncle Sam's extractions by less than 6%!

We explained last week why we think the US is on the "zero bound" of the Laffer Curve in terms of supply side stimulus to growth and jobs. But no matter what theory you use, a 6% tax cut over a decade is not going to touch off an economic boom.

As we also have demonstrated, the huge Reagan tax cut of 1981 amounted to 6.1 percent of GDP--compared to the budget resolution allowance which would amount to less than o.5% of GDP. In round numbers at today's economic scale: The Gipper's cut was $1.5 trillion per year at its full impact compared to $150 billion per year under the Senate budget resolution.

But the Gipper's massive tax cut didn't stimulate much extraordinary expansion because 90% of it wasn't monetized by the Fed, thereby causing private sector activity to be "crowded out".

In a recent post, we explained this and the implications for a deficit-financed Trump tax cut today---even if far smaller. Namely, the impact of the coming far higher yields in the bond markets of the world will more than snuff out any favorable supply-side effects:

And that's not all. Neither the Laffer-style supply-side snake oil salesmen nor the standard Keynesian demand stimulus champions ever take into account the underlying balance sheet condition of the macroeconomy. The fact is, it's night and day different and for the worse.

In 1981 total public and private debt outstanding amounted to $5 trillion or just above 150% of GDP----a national leverage ratio that had prevailed for the entire previous century of dramatic economic growth. By contrast, the total debt burden on the US economy today is $66 trillion or 13X more; and it amounts to nearly 3.5Xgross national product.

Stated differently, there has been a massive, adverse step change in the US leverage ratio during the past 35 years. Essentially the American economy performed an LBO on itself.

In fact, those two extra turns of debt amount to a $35 trillion more debt than would be extant under the pre-1981 historic ratio; it amounts to a debt albatross.

And in a drastically altered monetary policy environment in which central bank balance sheets are shrinking and the public debt is being, in effect, demonetized, that debt albatross will be a giant headwind to growth as yields across the entire maturity spectrum normalize higher.

In short, we don't think there would be much extra growth from even a giant, Reaganesque style deficit-financed tax cut. Yet Trump is going to get a "stubby" one at best.

Even then, we have the distinct impression that the $1.5 trillion or 6% cut now provided for in the Senate budget resolution will have a hard row to hoe in the weeks ahead. That's because the Donald's skin is getting so thin and his tweets have become so unhinged that the frail GOP majorities are not going to hold together---especially if even a few fiscal hawks reach the breaking point.

Our candidate for that role is Senator Corker, who renewed his Trump attack on national TV this AM---only to receive an angry instant rejoinder from the Donald:

Bob Corker, who helped President O give us the bad Iran Deal & couldn't get elected dog catcher in Tennessee, is now fighting Tax Cuts....

While the retiring Tennessee Senator did embrace the $1.5 trillion deficit allowance for a tax cut, we anticipate that his faded plume of hawk feathers is likely to reemerge big and black during tax bill consideration. To wit, he will function as the fiscal enforcer who will demand "payfors" for any revenue losses above the $1.5 trillion allowance or even that.

Yet that gets us to the Trump Dump part. In its total suspension of disbelief, the casino believes the Trump Tax Stimulus will raise S&P earnings by $15 to $20 per share; and that this putative one-timeshift in after-tax earnings warrant a permanent increase in the market's capitalization rate at a time when PE multiples are already off the historic charts.

Really, its all too crazy to credit, but this is apparently what's "priced-in". However, with the death of the 401(k) cap comes a stark truth that has long obfuscated by the GOP's content-free anti-tax rhetoric and risible claim that the already "low" marginal rates (compared to most of the socialist developed world) can be slashed further by base broadening ala the 1986 tax reform.

They can't and won't. The notion of"tax loopholes" is essentially a myth. What we have in the IRS code is now simply settled social policy around a dozen or so big items that are implanted in political cement.

To wit, the Treasury Department's tax expenditure estimates for FY 2018 through FY 2027 total a staggering $19 trillion spread among 165 significant tax code provisions.

That humungous figure for the purported revenue loss from these 165 items is the basis for the erroneous belief that base broadening is there for the taking. In fact, fully $12 trillion or 63% of that total is represented by just ten giant exclusions or deductions that cannot be touched politically with a ten-foot pole.

The largest is the $3 trillion exclusion for employer health plan benefits. Speaker Ryan tried to nick that one in his original repeal and replace plan back in March, but it was dead within days.

Likewise, the $1.5 trillion attributable to the exclusion of imputed rental income on the 75 million castles owned by Americans is not even worth mentioning. Similarly, the $1.0 trillion cost of homeowners mortgage interest and $700 billion for charitable contributions has already been taken off the table by the Trump White House----along with practically everyone else in the Great Washington Swamp.

Then we have $1.2 trillion for preferential treatment of capital gains, which Wall Street guards like a junkyard dog---along with the aforementioned $1.05 trillion cost of defined contribution retirement plans.

Beyond that, the unions employ their own junkyard dogs when it comes to the $725 billion ten-year cost of the exclusion for defined benefit plans. The balance is comprised of SALT ($1.3 trillion) and $1.4 trillion for the deferral of US tax on corporate profits held abroad.

Needless to say, the latter $1.4 trillion is already gone. If the GOP is agreed upon anything, it is that the tax bill will switch to a territorial system after a one-time repatriation of approximately $2.5 trillion of foreign earnings. That is, on a permanent basis there won't be any $1.4 trillion tax expenditure because they won't be any US tax on foreign earnings at all.

The advertised tax rate for the above "mandatory" remittance is about 10%, but we also think it will be well into the single digits for what will be defined as "illiquid" foreign assets as opposed to cash. And by the time the detailed mark-up bill makes its way down K-Street and then through Gucci Gulch on the corridors to the tax committee rooms, the "illiquid" definition will encompass most of the $2.5 trillion.

So perhaps a few hundred billion will come in during the early 2020s, but it won't matter at all in terms of meeting the budget reconciliation requirement that the deficit not be increased after the 10th year. We are quite certain that Senator Corker and the Freedom Caucus folks will see to that----to say nothing of the Democrats with their faces pressed-up against the glass shouting out their newfound commitment to fiscal responsibility.

Nor are the political barricades exclusively limited to the defense of these top ten giant tax expenditures. The next 21 items on the Treasury Department's tax expenditure list would account for an additional $5 trillion of revenue loss---or most of the balance of the $19 trillion.

But these items are not going to be harvested by the tax writers for the "payfor" account, either. The next eight include capital gains on the sale of personal residences ($475 billion); the exclusion of social security benefits ($456 billion); the deductibility of retirement plans for self-employed and professionals ($431 billion); step-up of basis on capital gains at death ($416 billion); preferential treatment of qualified corporate dividends ($386 billion); exclusion of interest on state and local bonds ($360 billion); deductions for individual retirement accounts or IRAs ($256 billion); and child credits ($225 billion).

In a word, there is no there, there.

After you get through the largest 30 tax expenditures which are estimated to total $17 trillion over the coming decade, there are 135 items left----and most are just as invulnerable as the big items above.

To wit, no one is going to be eliminating tax preference for school construction bonds, tribal economic development bonds, the exclusion for the monetary value of GI benefits, additional deductions for the blind, the exclusion from taxation of food stamps, the credit for orphan drug research, etc.

So whether it's publicly acknowledged or not, the tax writers have already drifted into a box canyon when it comes to "payfors". Accordingly, we believe that of the $1.5 trillion they will have available to "spend" on a net basis--- fully half will go to individual income tax payers. The latter will be allocated to funding the doubling of the standard deduction, an increased child care credit, and slightly lower rates for the three new brackets compared to existing law---even as taxpayers with more than $1 million of AGI remain in the 4th bracket at today's 39.6% rate.

Moreover, if at least one-third of the $750 billion available for business cuts is reserved for unincorporated pass-thru payers, the corporate tax cut over the 10-year period will be lucky to total $500 billion.

That would amount to a 12% cut at best, and that's definitely far below what is now priced-in.

So it may be true, as was reported this morning, that the S&P 500 has gone 242 days without a 3% or more decline---something that has never before happened in recorded history.

Then again, honest price discovery has never been so completely destroyed, either. Nor has the nation ever sent to the Oval Office an incorrigible disrupter and impetuous megalomaniac capable of insuring that our already rickety Madison contraption of government grinds to an absolute halt.

So the Trump Dump is coming. When it does, the boys and girls on Wall Street will be begging for even a 30% drop, not the 3% buy-the-dips kind of blessed memory.