Post election fatigue?
What a week. It was election week with a decisive electoral college and popular vote victory for Donald Trump. The country remains deeply divided despite this victory. Many of the campaign promises made by Trump have serious implications for the US economy as well and household economics. The Senate has also turned Republican but as of now the House is still undecided. If Republicans have the House, the Senate and the Presidency, it will make it easier for Trump to implement his agenda. Often campaign promises are just that and when the reality of governing sets in the agenda changes. We will have to wait and see. However, there are some assumptions we need to take on faith. Trump’s emphasis in the campaign was immigration, tariffs and taxes. Here are some different articles outlining the possibilities:
Inflation Infused the Vote. But Could Trump Reignite It?
We can only wait and see what moves forward through executive order and legislation. The tax cuts that are due to end in 2025 are likely to be extended. The main benefits of those tax cuts were for higher wage earners. The reason these tax cuts had a sunset clause was because of arcane legislative requirements passed to limit deficit spending. Well, deficit spending for both parties were and are not much of a concern. Continuing the tax reductions over the next 10 years would add $4Trillion to the federal deficit. When will deficits begin to matter? This does not include eliminating taxes on social security, tips, and deducting interest on automobile loans. Congress is likely to pour cold water on some of these proposals. For instance, taxes on social security income go back into the social security bucket. If those earnings were not taxed, social security would run out of money sooner. There are many unknowns at this point so caution and patience are important.
Deportations and tariffs, according to a consensus among economists, point to higher prices and wages that in turn cause inflation and interest rates to increase. The bond market is already concerned about the impact of implementing these proposals. Again, proposals don’t necessarily mean they are enacted. We know how the stock market feels about Trump’s election with market averages soaring this week to new highs. The stock market was already historically expensive and now even more so.
In the News
Older Workers to Get ‘Super’ 401(k) Catch-Up Contributions in 2025 - The New York Times
IRS announces new federal income tax brackets for 2025
2025 Tax Policy Crossroads: What Will Happen When the TCJA Expires? - Bloomberg Government
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