US equities are at an all-time high. Investors are bullish about the future. A lot of people are excited about the potential for economic growth with the passage of GOP tax cuts. There’s a lot of optimism.
In a recent interview on The Street, Peter Schiff said he thinks 2018 may start out the same, but he sees clouds on the horizon, especially when it comes to the dollar.
The House and Senate both passed the GOP tax bill yesterday. As of Wednesday morning, it needed just one more vote in the House on some technical changes made in the Senate before it heads to Pres. Trump’s desk.
The media keeps calling the Republican bill “tax reform.” Peter Schiff called that, “fake news.”
We’ve done extensive reporting on the GOP tax reform bill as it’s moved through Congress. We’ve highlighted a number of concerns about the plan, specifically the significant expansion of the national debt it will cause. Yesterday, we explained how the impact on the deficit will likely be even bigger than expected because of the incentives found in the latest incarnation of the plan. Most significantly, we’ve echoed Peter Schiff’s view that the plan isn’t really tax reform. It’s tax cuts masquerading as reform.
But all of this leaves an important question unanswered. What would actual reform look like?
Mises Institute senior fellow Mark Thonrton offers some ideas in his latest piece at the Mises Wire. In a nutshell, shrinking the size of government is a key ingredient necessary for real reform.
It appears increasingly likely the Republican Congress will pass tax reform this week.
As we analyze the plan, it’s important to remember – incentives matter.
Details of the House/Senate compromise bill came out Friday. It features a top rate of 37% and a bottom rate of 10%. The corporate rate would drop to 21%. The standard deductions would nearly double. Individuals with existing mortgages would still be able to deduct their interest, and the compromise restored the deductibility of state income taxes up to $10,000. The plan would also eliminate the Obamacare penalty for not buying insurance. There are certainly things to like.
But as Peter Schiff pointed out in his podcast, there are also significant problems with the plan. It is riddled with loopholes and incentives that will substantially raise the debt – even more than projected.
There is one thing Republicans and Democrats should agree about – buy gold.
But like everything else, the yellow metal has become politicized. If you believe the stereotype, only people on the right buy gold. A recent article by Martin Tiller at Nasdaq.com highlighted the phenomenon.
In all of the talk about tax reform, nobody is considering the more fundamental problem facing America – the size and scope of the federal government.
Peter Schiff has described the Republican tax plan as “tax cuts masquerading as reform.” When it’s all said and done, Americans aren’t going to get tax relief. They are going to get big government on a credit card. The balance will come due down the road.
The real issue is the total cost of government. In an article originally published on the Mises Wire, Ryan McMaken argues that if Republicans really want to ease the burden of government, they need to cut spending.