Markets have broken numerous records during this first year of Donald Trump’s presidency. However, one of Trump’s top advisers is warning Congress that unless they get their act together, the economic situation could turn around very quickly.
Treasury Secretary Steven Mnuchin warned Congress that if they fail to cut taxes and pass the proposed tax bill, they could blow up the stock markets, which have been so favorable until now. “But there’s no question in my mind that if we don’t get it done you’re going to see a reversal of a significant amount of these gains,” Mnuchin said, according to Politico.
The Treasury Secretary warned that Wall Street’s big gains following the election of Donald Trump had been primarily a sign of confidence that he will pass crucial legislation, which will improve conditions for economic growth. In addition to bringing back US manufacturing, one of the most anticipated bills they are expecting is the major tax-relief bill. Mnuchin has warned that if Congress fails to deliver here, the markets could tumble just as quickly as they rose.
“There is no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done,” Mnuchin said in the interview. “To the extent we get the tax deal done, the stock market will go up higher. But there’s no question in my mind that if we don’t get it done you’re going to see a reversal of a significant amount of these gains.”
Many financial experts on Wall Street are concurring with Mnuchin’s assessment. “If it suddenly looked like a tax bill was dead, stocks could sell off sharply. Then the blame game would begin,” said Greg Valliere of Horizon Investments.
“I think Trump would hammer hard at Democrats, blaming their intransigence for a stock market sell-off. A half-dozen Democrats in the Senate, fearing a defeat next year, would waver,” he added.
He continued to say he was confident that President Trump would manage to sign a significant tax bill by the end of the year, despite Trump’s statements saying it might take a little bit longer. “I would like to see it done this year,” said the President to reporters. “But don’t forget it took years for the Reagan administration to get taxes done — I’ve been here for nine months,” he added. “We could have a long way to go, but that’s OK.”
Mnuchin has been working stridently with lawmakers to eliminate state and local tax problems, as well as other concerns, in order to press onward with these economic changes. Originally, he was planning to see the tax bill passed in August, but wasn’t expecting Congress to be as inefficient as it was when it came to repealing the Affordable Care Act.
Ever since Trump came into office, stock markets have grown at an accelerating rate. The S&P 500 just marked the longest streak of record closes in two decades. Bloomberg also reported that consumer sentiment in the US is the highest it has been in 13 years, with Main Street feeling more confident about the economy since last November.
The prospect of a rapidly reversing stock market is a possibility that both sides of the political aisle would fear. Should such an event take place, many Democrats could be pressured into supporting President Trump’s tax proposal.
Congress just received a stern warning. Should they act?
Despite being appreciated by the financial markets, many on the Left side of the aisle in Congress are opposed to Trump’s plan. Sen. Bernie Sanders (I-VT), for one, called it, “Morally repugnant and bad economic policy,” as reported by Breitbart. Senate Minority Leader Chuck Schumer (D-NY) said that the report read as if it was meant for corporate boardrooms and country clubs as opposed to everyday, hard-working Americans.
Congress needs to come together on this issue. The consequences of not passing this piece of legislation could be far worse than imaginable, and those consequences could possibly deliver anti-Capitalists back into power.