Q&A: How President Trump Could Affect Your Personal and Business Finances
Regardless of your political leanings, we all need to be prepared for what the new president and his congressional supporters will mean for our bottom lines over the next four years. For supporters of Donald Trump, the future looks bright with long-awaited changes in the business world. But for the Hillary Clinton faithful, optimism may be low with an uncertain future for the liberal policies of the last eight years.
However, business owners and those who are quick on their financial feet have reason to be optimistic about a Trump presidency. We asked Pinnacle’s Chief Investment Officer Mac Johnston what he expects from the next four years. No matter who you voted for, you may find something to be hopeful about in the possibilities below.
Q: What steps do you expect President Trump to take in the early days?
A: Given the contentious election and toxic political climate, he will have a hard time getting any major legislative changes through Congress in the first half of his term. So expect smaller steps early on – like corporate tax reform.
The U.S. has the highest corporate tax of any G8 nation at 40 percent. If President Trump can get that down to 20 or 25 percent, you can expect more investment in U.S.-based companies and a recommitment to keeping their business here rather than combining with overseas companies to avoid the higher tax rate.
If you are a small business owner, your take-home income will go up, and you will have more money to invest in your business. In addition, the stock market would likely surge under any serious corporate tax cut, and the U.S. economy would continue to grow, possibly as much as 3 to 3.5 percent.
Q: What’s the one thing he’s almost certain to do?
A: The easiest thing for President Trump to do will be to roll back and reverse President Obama’s executive orders. All it requires is his signature.
The executive orders most likely to see quick reversal include environmental regulations on drilling and greenhouse gas emissions, issues related to labor and wages and possibly some on immigration. That may look like bad news if you lean left of center, but ultimately they may prove beneficial for small businesses.
Q: Given that Washington is so divided right now, will he be able to push through any of the major changes he spoke about on the campaign trail?
A: If President Trump is able to grow the economy and boost the stock market in the first half of his term, he will have more political and popular support to push through some of the bigger legislative pieces.
That could mean an individual tax cut for many Americans, which – obviously – would mean more money in your pocket and investment accounts.
Q: Will he ease up regulation of American businesses?
A: When he was campaigning, Trump promised to “drain the swamp” in D.C. by bringing in outsiders and clearing federal agencies of Washington lifers. He hasn’t fully lived up to that promise, bringing in lobbyists and CEOs to lead his administration. But his cabinet picks show that he does have an eye on changing the way many federal agencies operate.
In the second half of his term, with more political capital to spend, President Trump is likely to shift groups like the Environmental Protection Agency, the Department of Labor and the Commerce Department from regulatory bodies into “business assistance” bodies. Rather than keeping tight control and letting the federal government dictate how they do business, these agencies could move to a model of letting the market decide the when, where and how of American business operations.
Q: How will he pay for these changes and tax cuts without running up the deficit?
A: If everything goes his way and the changes listed above go off without a hitch, President Trump is likely to tackle the big brass ring of any conservative administration: entitlements – Medicare and Social Security in particular. The goal would be to reduce the costs of these services, which would free up America’s tax dollars to pay for things like his tax cuts without running higher deficits.
For Social Security, that could mean pushing the retirement age up or perhaps even private investment. For Medicare, it could mean co-payments for certain medical services or for patients with higher incomes. If he is even more ambitious, he could try for a means test, meaning only those of certain income levels would even qualify for benefits at all.
It’s much more likely that the first steps into this arena will be small with bigger steps to follow if they are successful.
Come January 20, America will have a new president. Whether you voted for him or not, President Trump will hold the reins of the American economy. From one standpoint, his policies could end up benefitting small business owners and anyone with a substantial stake in the market. How big the benefits will be and how long they will last is up for debate, but there is good reason to be optimistic.
