RANDY FREDERICK: With a new budget deal and an outline for tax reform, Mike Townsend, Schwab’s vice president of legislative and regulatory affairs, joins me for the May 2 Schwab Market Snapshot to discuss some of the many things going on in Washington D.C. right now and how investors might be impacted. Welcome back, Mike.
MIKE TOWNSEND: Great to be with you, Randy.
RANDY: So, Mike, let’s start with the budget deal that was announced on Sunday evening. This removes the threat of a government shutdown here in the very near term. Can you give us your thoughts on some of the highlights of that deal?
MIKE: Sure. Well, you’re right, it takes the threat of a government shutdown off the table until the end of this fiscal year—which is September 30. Essentially, it funds government operations at the same rate at which things had been going. The President did get a slight increase in military spending, but he didn’t get much else of what he wanted. For instance, he didn’t get any funding for a border wall.
Essentially, what happened here is I think Congressional Republicans in the White House realized that having a big fight over a government shutdown over what amounts to five months of government spending just wasn’t worth it. And they needed to get this off the table and move on to some of the bigger issues on their agenda, like healthcare reform and taxes.
RANDY: Now, since you mentioned taxes, President Trump also unveiled his ideas on how to reform the tax code. What stood out to you on that particular proposal?
MIKE: Well, first of all, it’s not a plan. It’s more of a wish list. It was literally one piece of paper. On that piece of paper were big ideas for individual cuts, lower rates, get rid of the estate tax, get rid of the Alternative Minimum Tax, or the AMT. And the President’s proposal also gets rid of most deductions, except for the deduction for charitable contributions and for mortgage interest.
It also includes a big corporate rate cut from the top rate of 35% down to 15%. But what I think is important for investors to understand is that at the end of the day it’s Congress who is going to write a tax reform legislative proposal. It’s Congress who is going to have to pass it through the House and Senate, and eventually get something that can go to the President for signature. And while the President can use his bully pulpit to push for his priorities, it’s Congress that is at the very beginning of a long, slow process of developing tax reform.
RANDY: Now, another interesting development that happened this past week was the 100th day of Trump’s presidency. Now, we know this is just kind of this arbitrary, meaningless checkpoint, but it’s gotten a lot of press coverage. What are your thoughts on that particular topic?
MIKE: Well, Randy, you and I have a new article out that provides some of our collective thinking on this question, but let me highlight three things. First of all, I think it’s notable that most of the President’s accomplishments so far have come via the Executive order, which you don’t need Congress to do. That means that the President has been able to push forward with executive orders his deregulation agenda.
Second, I think the President’s agenda has been hampered a little bit by the incredibly slow pace of nominations and confirmations to key administration positions. The President’s Secretary of Labor was confirmed on April 27, and that gives President Trump the full complement of cabinet officials. But it’s the next level down, those assistant secretaries and deputy secretaries that just haven’t been named yet. In fact, there are almost 500 positions for whom no one has yet been named. So that is really slowing down the agenda, I think.
Finally, I think we’re also seeing early evidence of the President’s frustration with Congress and his fragile relationship with Capitol Hill. He’s a guy who wants to get things done and he wants to get things done quickly, and I think he’s frustrated with how slow the congressional decision-making process is. But he’s going to have to find some patience, and he’s going to have to find a way to work together with Congress if he wants to see some of these big goals, like healthcare reform and tax reform, seen through to the end game.
RANDY: Yeah, I think those are some very important points, Mike.
Listen, if you want to hear more, you can read more of Mike’s Washington Insights on Schwab.com. And don’t forget, you can follow me on Twitter @RandyAFrederick. We’ll be back again. Until next time, invest wisely. Own your tomorrow.