Conservatism Is Dead… And So Is the Dollar
Call it TrumpCare. Call it RyanCare. Call it RINOcare. Call it ObamaCare 2.0.
Call it whatever you want.
The health care reform bill proffered up by House Republicans earlier this week is a disaster and everyone knows it.
Influential lobbying groups (even conservative ones) like the Club for Growth, FreedomWorks, the Heritage Foundation, and the AARP have all come out against the plan. Doctors associations and insurance groups have, too.
Even the fiscal conservatives in Congress that make up the House Freedom Caucus, and rank-and-file Republican voters are frothing with anger.
If you don’t know why everyone is so upset, it’s because the AHCA keeps all of ObamaCare’s biggest spending measures intact while also eliminating every single mechanism that would pay for them. It eliminates coverage for millions of Americans and increases costs for those able to maintain it. It’s a huge tax handout to the very wealthiest people in the country.
It’s everything that’s wrong with Washington D.C. rolled into one big, ugly, hastily thrown-together bill.
And yet, this is nothing new. This is the way the government operates. It has been for decades now.
First, they pass a bad bill, then they pass a worse one.
Each party accuses the other of frivolous spending, and then racks up piles of debt when in power.
There is no such thing as fiscal responsibility.
If you thought Donald Trump was going to change that, I’m sorry.
And I’m even sorrier to tell you he’s making it worse.
For starters, the president’s weekend trips to the “Winter White House,” Mar-a-Lago, have already cost U.S. taxpayers $10 million. On top of that, it costs $500,000 a day to protect Trump Tower when the president is there.
For the sake of comparison, Barack Obama’s personal trips cost about $96 million during his entire eight-year stay in office. Donald Trump is on track to blow through $60 million in his first year, alone. At this rate, he’ll hit Obama’s eight-year total by October 2018 and cost taxpayers something in the neighborhood of $240 million by the end of his four-year term.
And that’s just personal expenses. We haven’t even touched policy.
Debt, Deficits, and the Dollar
Trump is giving full-throated support to the Republican health care bill. The bill is projected to be so costly that Republicans are rushing it through Congress before the non-partisan Congressional Budget Office can even look at it. At the same time, Trump officials are already taking to TV to assail and discredit the CBO itself in an attempt to soften the blow.
Meanwhile, the House Ways and Means Committee rubber stamped the bill just 18 hours after it was revealed.
Because of the swift passage and lack of analysis, no one’s really sure what the total package will cost. But the taxes it seeks to repeal total $600 billion. It also offers tax credits for every level of income.
This dovetails nicely with Trump’s tax plan, which is also… let’s say, “generous.”
That plan on Trump’s web site suggests a unified business rate of 15%, which is an enormous cut from the current top tax rate of 39.6%. For individuals, we’d be looking at a reduction from seven brackets to three. Those three brackets would top out at 33% for high-income taxpayers. Right now, the effective top rate is 43.4%.
The bottom line: Trump’s tax plan will reduce federal tax revenue by more than $6 trillion over the next 10 years, adding more than $5 trillion to the national debt.
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Then there’s the spending.
Trump’s budget blueprint cuts spending on federal agencies by $54 billion, but it would increase defense spending by the same amount.
On top of that, Trump has made some big promises regarding border walls and infrastructure development.
Trump himself has said his Mexican border wall would cost $12 billion, and that’s a typical Trumpian understatement. In reality, the cost will likely be closer to $25 billion.
And who’s going to pay for the wall?!
Me… You. The taxpayer.
Speaker of the House Paul Ryan and Senate Majority Leader Mitch McConnell have already authorized $12 billion to $15 billion for a wall spanning the entire U.S.-Mexico border as soon as Sept. 30.
Earlier this week, McConnell was asked point blank if Mexico would be paying for anything at all. His response: "Uh, no."
In addition to the wall, Trump has pledged to deploy a trillion-dollar infrastructure program. It was a key note in his first address to Congress.
“America has always been a nation of great promise, because we dream big,” Trump said. “We’re going to really dream big now.”
Indeed we are. And those dreams will be funded with imaginary dollars.
That is, all of this spending is to be financed with debt that the new president doesn’t truly believe America has an obligation to pay.
Last June Trump said: “I would borrow, knowing that if the economy crashed, you could make a deal. And if the economy was good, it was good. So, therefore, you can’t lose.”
Furthermore, at an earlier rally in May he said: "First of all, you never have to default because you print the money, I hate to tell you, OK?"
If Trump’s march to victory proves anything, it’s that traditionally conservative values (i.e. reduced levels of government spending, deficit reduction, and free trade) no longer apply.
Conservatism is dead. And so is the dollar.
As things currently stand, the dollar is strengthening, but only because every other country in the world is somehow doing worse than we are. Great Britain has yet to digest the full economic impact of the Brexit. The EU is on the brink of disintegration. China has exhausted itself. And Japan is Japan — the same country that’s been stuck in an inflationary malaise for nearly three decades now.
So, yes, in a room full of losers the dollar looks like a stud. But only for now. Eventually the chickens will come home to roost. The greenback will be exposed just as the euro has been.
Donald Trump’s plan to cope with a $20 trillion debt burden by either printing enough money to pay it off, or convincing creditors to take less than what they’re owed is downright destructive — not just for the dollar, but the global financial system.
There is no way out of this mess.
Jason Simpkins is a seven-year veteran of the financial publishing industry, where he's served as a reporter, analyst, investment strategist and prognosticator. He's written more than 1,000 articles pertaining to personal finance and macroeconomics. Simpkins also served as the chief investment analyst for a trading service that focused exclusively on high-flying energy stocks. For more on Jason, check out his editor's page.