What Comes First

By Isaac Cohen*

President-elect Donald Trump’s economic policy contains two pairs of measures, one belongs to fiscal policy, in the form of tax cuts and increased infrastructure expenditure, the other pair is from international economic relations, such as trade and immigration. All of these measures are controversial, but the fiscal stimulus is more positive, while the international economic measures are basically negative.
The crucial question is what will come first, because it will set the tone at the start of the new administration. If the fiscal measures come first, Congress will be asked to approve a tax reduction, aimed at enticing US companies to repatriate the estimated $2 trillion in profits they hold abroad. The Republican dominated Congress will easily approve this measure, because tax cuts are one of the main components of the Party’s platform.

The other fiscal measure is more complex, because depending on how it is financed, a package of $1 trillion in infrastructure spending, together with the tax cuts, will push the public debt beyond the 76 percent of the economy where it is today. There seems to be bipartisan consensus on infrastructure spending, but it collides with the more conservative segments of the Republican Party and it also concerns the Democrats, because it may be an incentive to cut spending in social programs, such as Medicaid, Medicare and Social Security. Although it should be said that during the campaign the President-elect promised those social programs would not be touched.

The stock market, through a climb of almost 3 percent since the election, has signaled it prefers the positive package of corporate tax cuts and infrastructure spending.

*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media. Former Director, UNECLAC.

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