- Reuters/Mike Segar
- Polling shows that most Americans don’t think the US needs tax cuts. Too bad most Americans don’t work on Wall Street, because that’s who has won the battle for control of Trumponomics.
It’s time to call a winner in the battle for control of President Donald Trump’s economic agenda. When it comes to Trumponomics – an amalgamation of supply-side budgeting and anti-globalization – the populists have lost, and Wall Street has won.
What’s more, it wasn’t even close. The populists were totally lapped.
Here’s how we know. While perhaps Trump’s base is cheered by his verbal attacks on 20-something athletes at political rallies, they are not cheered by what has now become the most important part of his agenda – tax cuts. They don’t care about them. The White House cares, the Republican apparatchiks in Washington care. But that’s it.
According to an NBC-Wall Street Journal poll, 42% of Americans don’t want a tax cut. Only 24% want a tax cut for individuals, and 37% want them cut for businesses. Most Americans polled think the wealthy could use a tax increase (62%) as could corporations (55%). In fact, it almost looks like the only person who thinks corporate America needs a tax cut is JP Morgan CEO Jamie Dimon.
But Commerce Secretary Wilbur Ross, charged with much of Trump’s trade agenda, said that everything takes a backseat until tax reform resolved. And that means everyone and everything is taking a backseat to Wall Street.
“I want tariffs”
Now, to all of you thinking to yourself well of course Wall Street won this one – let me remind you that this could’ve gone another way. A few months ago, I warned that someone was going to have to lose in Trump’s economy. It was either going to be the Goldman guys in the White House calling for tax cuts, or Steve Bannon’s brand of populism that would upend globalization and potentially spark a market-crashing trade war.
For a second there, it looked like the populist trade warmongers might actually have a shot.
Months ago, Treasury Secretary Steve “I’ll -say-anything-you-want-me-to-say” Mnuchin even said in Congressional testimony that there would be no tax cuts for the rich. It was called the Mnuchin Rule, and it lasted about as long as Anthony Scaramucci’s tenure as White House Communications director. Axios reported that top earners will likely see their rate cut from 39.5% to 35%.
Trump himself has reportedly said “I want tariffs.” Before that, the White House was taking action, putting tariffs on Canadian lumber and announcing its preparation to do something about steel. Now, the latter, according to Ross, is going to have to wait until after tax reform.
Still it gave people pause – a really, really, really brief pause.
- Getty Images/Steve Pope
Paul Ryan is also a big loser
I say Wall Street won here because this is not a victory for the Republican establishment per se. More and more it looks like this will be a temporary, deficit-increasing tax cut, not the tax reform overhaul House Speaker Paul Ryan dreamed he could turn into reality with the GOP controlling Congress and the White House.
Part of that is because it’s really hard to find ways to increase revenue, and the way Ryan envisioned got knocked out of discussions. Ryan wanted to institute border adjustment, basically a tax for companies that export goods to the US. Of course, that would hit some American companies really hard, and Wall Street hated that.
We know Wall Street hated that because bank after bank was sounding the alarm in their daily reports. The Trump administration knew it too, and that was making the Bannon camp really happy. In fact, the White House’s populist trade adviser, Peter Navarro, said bank research that suggested a border adjustment would hurt retail hard enough to spark mass layoffs was “fake news.”
Wall Street can breath easy on that one now, it seems. Reports from Washington indicate that Navarro has been sidelined. The GOP budget nerds who would normally scream about deficits are nowhere to be found.
There’s almost nothing more Wall Street than this. The Street wants tax cuts and deregulation no matter who is in power, and they don’t care what has to be done to get them. When Democrats, who might spend tax money on social programs are in office, Wall Street cries about the deficit. When Republicans have power, it begs for tax cuts.
This is to say the politics on Wall Street are not “conservative” in the traditional fiscal sense. They are self serving in the traditional logic sense.
Perhaps you read Bloomberg reporter Max Abelson’s charming profile of his time spent with politically active Wall Streeter’s whose most passionate desire is tax relief.
“Beyond the top executive suites of the biggest banks, support for cuts can be even more full-throated. Inside the 21 Club, one of Wall Street’s favorite hangouts, a few dozen executives, money managers, and other businesspeople gathered in August at a reception thrown by two groups that despise high tax rates: the Committee to Unleash Prosperity and FreedomWorks, co-founded by the billionaire Koch brothers.
“Standing in a brown Brioni pinstripe suit with a martini in his hand, Alfred Angelo, an investor based in New Jersey, gestured to the other guests. ‘We’re those villainous people,’ he said. ‘Nobody put me on this Earth to pay for everybody’s health plan. I know that sounds like Scrooge or somebody. But this is the real world.'”
Tell that to Trump’s base, without whom the Republicans might not have the control they have now. Research shows that wealth concentration in big cities and on the coasts of this country is getting more dramatic. Eventually Trump’s base may realize that they’re not getting much out of this administration except a few fun rallies.
When that happens both Wall Street and the GOP will have a problem much more urgent than their obsession with tax cuts.