Well, that was unexpected.
Admittedly, our recollection only stretches so far. But we know of few US presidents who’d dare to demonise the poor as Trump did this week. When he talked about making America great again, we didn’t think it meant making the poor…well…poorer.
Was Trump’s budget the latest sign of American exceptionalism falling on its sword? Or was it his unique brand of reverse psychology working overtime? Whatever it was, it felt novel, if somewhat ill-advised. Punishing on the poor as Trump’s budget is, we’ll admit it was a unique way of tackling America’s deficit. (Of course, that assumes Congress approves it, which is no guarantee.)
As in all aspects of modern life, Trump’s budget took no middle ground. Defence spending and border security won big. Meanwhile, America’s underprivileged suffered a massive blow, with savage cuts across the board.
Having watched on as years of sensationalist promises went unfulfilled under previous administrations, Trump’s budget might seem fiscally prudent. If only for the fact that withholding money from the less-productive poor is a simple way to balance the books.
In any case, one thing became evident, if it wasn’t already. American exceptionalism can no longer be taken for granted. Cold pragmatism has replaced humility and compassion.
A century of prosperity has produced an underclass that numbers in the tens of millions. And now Trump seeks to cut them at the knees.
That’s worrying. Not only for the poor, but for the sanctity of America’s claim as a nation with liberty and justice for all.
Trump’s feting of the masses with short and vapid slogans seems a world away now. He littered the airwaves with meaningless phrases. Rallying cries that trivialised the extent of the public’s disillusionment with politics. Making America great again resonated with a yearning for hope. But, more theory than science, the individual was left to fill in the blanks.
We don’t assume Trump’s plan for restoring America’s greatness garners no support. We know that millions of Americans would love nothing more than to see the welfare state cut down in size. But if anyone was under the illusion that Trump’s patriotism would leave no man left behind, they won’t be anymore.
Those that saw it coming are left with a bittersweet taste in their mouth. On the upside, they were right all along. On the downside, they were right all along…
It’s for this reason that Trump’s budget leaves us cold.
We don’t disagree with trimming bloated welfare systems. But we find it hard to stomach when it’s paired with generous tax cuts for large corporations.
The losers and losers from Trump’s budget
The poor. The disabled. Farmers. Young workers. No one gets off lightly.
Trump wants to slash Medicaid and health insurance for millions of poor families by $616 billion over the next decade. The Food Stamp Program faces $191 billion of cuts. And there’s $22 billion worth of cuts reserved for the Temporary Assistance for Needy Families.
But Trump’s axe isn’t earmarked for the poor alone. Millions of disabled Americans face a $70 billion cut to Social Security benefits. Farmers, too, would see subsidies slashed by $38 billion over the next decade. And young workers would face benefit cuts or significant tax hikes. As PBS reports:
‘By not addressing Social Security or Medicare benefits for retirees, Trump’s budget increases the likelihood that young workers will eventually face either significant benefit cuts or big tax increases. Social Security’s trust funds are projected to run dry in 2034 and Medicare’s is projected to run out of money in 2028. If Congress allows either fund to run dry, millions of Americans living on fixed incomes would face steep cuts in benefits.’
Amid all this, Trump still plans on building that border wall. Though we think the one he’s erecting between the rich and poor might be his greatest legacy.
To think, most governments tow the populist line when it comes to budgets. They avoid upsetting large voting blocs for fear of reprisal at the ballot box. And if that means polishing a turd, they’ll put their best shiners on the job. But Trump isn’t your typical leader. And his government doesn’t deal in half-measures.
In the Kingdom of Trump, the meek most certainly won’t inherit the Earth.
This week in Markets & Money
On Monday, Vern had an answer to the Aussie government’s budgetary problems. To achieve a budget surplus by 2050, he proposed teaching schoolchildren that ‘government is the problem, not the solution’. The sooner we start weaning society off its dependency on government, he says, the better for everyone.
As Vern noted, the government doesn’t have a revenue problem. It has a spending problem. Budget forecasts show tax receipts for the next financial year at $440 billion. That’s a lot of money. And yet the government can’t find ways to save for a rainy day.
One way or another, Vern believes the market is going to provide the solution to the government’s problem. It’ll be brutal. It won’t be fair. And the lessons will be felt for a generation or longer. For the full story, go here.
On Tuesday, Jason explored the murky world of shadow banking in China. As non-traditional lending practices, shadow banks aren’t bound by tight regulations. Which is why they’re overleveraged.
As Jason noted, the world is inching closer to a Chinese shadow banking crisis. What does it mean for China’s banking sector? And why could it lead to massive bank runs? You’ll find all the details in Tuesday’s Markets & Money here.
On Wednesday, Jason turned his attention to crude oil. Despite the recent bounce, crude prices aren’t as strong as they appear. One reason is that US shale producers are dumping crude on the market by the bucket load. With the world awash in crude, Jason says sinking oil prices are a certainty in the months ahead. And that was before Trump announced plans to trim national debt by selling half the nation’s emergency oil stockpile. For Jason’s full analysis on the future of crude prices, click here.
On Thursday, Cycles, Trends and Forecasts’ Terence Duffy unveiled a new video tutorial his team is putting the finishing touches to. It’s called ‘18 = 14 + 4: Where We Are in the Cycle, and What Happens Next’.
This cycle is what creator Phil Anderson calls the Grand Cycle. It has both explanatory and predictive powers. And, once you understand how it works, you’ll know where we are, and where we’re going. Click here to discover the power of the Grand Cycle.
When you’re done with that, make sure to read Friday’s M&M. Terence explained why the Grand Cycle suggests the Aussie property market could go much higher. Click here to read it now.
Until next time,
For Markets & Money
PS: An important reminder that Phil Anderson’s Cycles, Trends and Forecasts team has a brand new video presentation coming out next Tuesday. It explains where Aussie property is in the 18-year cycle…why those predicting a crash this year will be proven wrong again…and why Phil Anderson will likely be proven right once more… It’s a fascinating watch. If you want to see how current events are playing into the real estate cycle…and what is likely to HAPPEN NEXT in the cycle…keep an eye on your inbox next Tuesday.