Q. Is it wrong to think we should also expect huge budget problems and less aid to the states from decreased revenue? Given Trump’s penchant for borrowing and record of bankruptcies, “volatility in the markets” may be an understatement.
— Looking ahead
A. We’re still waiting to see the depth of the new president’s plans, and exactly what he’ll pursue in terms of policy.
President Trump’s inaugural address can be summed up in two words: “America First.”
He vowed that every decision on taxes, trade, immigration and foreign policy would be made with U.S. interests first, Altair Gobo, a certified financial planner with U.S. Financial Services in Fairfield, New Jersey, said.
“It will be interesting to see if his campaign rhetoric will mirror his actions as our 45th president,” Gobo said. “In other words, he has talked the talk, but will he be able to walk the walk?”
Gobo said most of the policies and plans Trump has spoken of have not yet been presented, and even the ideas presented could change drastically before they are finalized.
He said the United States is much larger and more complex than one or a few of Trump’s business entities, with more checks and balances preventing Trump from running the country as he would one of his businesses.
Also, Gobo said, even with the Senate, House and presidency held by a Republican majority, it doesn’t mean they’re all in agreement when creating policy.
“One major positive component is that Trump has worked with governments and businesses around the world so he may have rare, practical insights into international economics and trade above and beyond the typical politician,” Gobo said.
The Economic Pros & Cons of a Trump Presidency
Gobo offered a list of pros and cons.
- The Senate, House, and president should all agree on pro-business policies which can lead to growth in the economy and more jobs, Gobo said.
- New infrastructure investments could be additional fuel for this growth.
- Trump didn’t get to his current state by making uneducated decisions “and he certainly will not do anything to sabotage growth now,” Gobo said.
- Wishes to open up state lines and promote competition among healthcare companies could lower costs for the average American, Gobo said.
- Gobo said there are concerns over immediately and fully enforcing immigration laws as Trump has said he will do. This could cost the federal government revenue, shrink the labor force, and possibly reduce the real GDP by $1.6 trillion, Gobo said, sourcing the American Action Forum, a right-leaning policy institute in Washington, D.C.
- Trump’s healthcare idea may not garner the savings he intends, Gobo said, because policy in states may not translate to the same access to networks that local providers can contribute in-state.
- Trump made many promises to the American people that may be a challenge to deliver, Gobo said.
- And then there’s Twitter. “Combine Twitter with an impulsive personality and he has the ability to effect reputation or policy perception very quickly,” Gobo said.
Then there are taxes to consider.
Gobo said among the pros: Lowering taxes should create incentives to work and spend, many believe lower taxes are also a catalyst for growth, many believe the current tax policy is archaic and too complex, and lower corporate tax rates may bring corporate tax money back to the US.
But on the con side, Gobo said, what if growth does not occur after tax cuts are made? And the Trump plan, according to the Tax Police Center, would require spending cuts to avoid adding about $1.1 trillion to the federal debt by 2025, Gobo said.
Policy takes time to implement and the effects of new policies take time to present themselves, Gobo said.
“The true effects will be unknown for some time and we should not be eager to adjust strategies based on the multitude of `what if’ scenarios being presented at this time,” he said. “What we should do right now is follow the plans we have made for ourselves for the next 10, 20, or 30 years and not get caught up in the unproductive nature of short-term ideas that we can’t control.”
Your financial plan should allow enough flexibility to make any necessary adjustments based on any new tax or policy changes that may be enacted, Gobo said.
Editor’s note: Staying on top of the aspects of your finances that you can control can help you feel more certain in uncertain times. Managing your credit well is one of those things. You can get your two free credit scores, plus a snapshot of your credit report details, updated every 14 days, absolutely free on Credit.com.