While merely a one-page synopsis of talking points, the Trump proposal revealed today may have relevance for DA readers. Initially, it proposes a massive reduction in Federal tax receipts, which would result (at least in the short-term) with equally massive borrowing. Should growth not materialize in the range hoped-for, then borrowing will accelerate and rates will climb.
Having been up-and-down the Laffer curve more than once, I am less than optimistic. Any time Art Laffer is giddy about macro-economic policy, I tend to hold onto my wallet.
The Trump proposal takes aim at deductions popular in "blue" states, which tend to have higher state, local, and property taxes. No surprise there; it's payback. Ironically enough, even in those "blue" states, retirees whose Social Security benefits are untaxed, or who benefit from caps on real estate taxes (think Prop 13 in California), will yawn.
Bottom line: I suspect the net effect of the Trump proposal, even if modified, will result in a drastic reduction in Federal tax receipts, a huge increase in borrowing, and a major increase in interest rates across the board. Keep those CD maturities nimble, folks. Without an "early out" for an EWP, I'd keep my maturities close to three years in CDs.
Just my $.02
