So about half of the country is happy to see Donald Trump as the President Elect, while the other half is freaking out. At least Donald Trump hasn’t made up a little sign that says “The Office of the President Elect” for the podium when he speaks like Obama did in 2008. I’m sure that there will be things that President Trump will do that will be disappointing. From a purely economic standpoint, however, there are reasons to be happy to see a President Trump, beyond just the huge rally that the stock market has made since the results of the election were announced. Here are a few:
- Full-Time Work. You may have noticed that there have been a lot of people in part-time work since about 2011. A big reason for this is that part of the Affordable Care Act, aka “Obamacare,” requires that employers who have 50 or more full-time employees to provide extensive, expensive health insurance for their employees. And full-time employee was defined as working more than 30 hours per week. For an employer, following the law might mean that adding just one more employee to your small business would mean a new bill for $500,000 or more added to your expenses. This has resulted in a lot of businesses keeping most workers at 29 hours per week. This meant that not only did people still not have health insurance, but they got less pay as well. If Trump repeals Obamacare as promised, this restriction should go away and employers should start offering full-time work again.
- Lower Corporate Taxes. Trump has promised to lower corporate taxes to 15% from their current levels in the 30’s. While you may be upset that these “evil corporations” will now be paying less in taxes than they have been, realize that the corporations don’t really pay the taxes – you do. Taxes are just a cost of doing business, so if the government charges a corporation more in taxes, they just raise their prices (and/or lower their wages). Taxes also have no effect on the salaries of the chief executives. If anything, if a company makes higher revenues because their prices are higher, the CEO may make a higher salary since it is a smaller fraction of the size of the business. If corporate taxes are cut, expect for prices to fall, and maybe for worker salaries to rise ( a small amount).
- Less Regulation. Trump has also promised to cut regulations on businesses. And these aren’t regulations like “don’t make products that kill people.” These are regulations like “fill out all of this paperwork that no one reads.” This is just a cost which once again results in prices of goods and services being higher, because, once again, the costs just get passed on to the consumer. Cutting regulations will also mean that fewer people will be generating paperwork that no one reads, which means maybe they’ll be making something useful. The more people there are making useful things, the richer our society is and the more there is to go around.
- Actually Affordable Health Insurance. A prime issue with the affordable care act is that it requires everyone to pay for insurance that covers everything (after you pay a huge amount in premiums and a super-high deductible). You can’t choose to go with a cheaper policy that you can afford that will cover big things, but not the smaller things. Think of it as being forced to buy auto insurance that covers new tires and oil changes when all you really want is collision. Repealing Obamacare will allow insurers to sell major medical plans again. These will allow people to buy coverage for when they’re in the hospital, but not include all of the little things that drive the premiums up. Combine this with more transparency in health care prices (like requiring hospitals and doctors to post the prices they actually charge like other businesses do) and you’ll see healthcare costs fall to the point where they are affordable.
- A Faster-Moving Economy. After the market crash of 1929, the US stayed in recession until about the time we entered WWII. A big reason was that the Roosevelt Administration was passing all sorts of worker regulations like minimum wages and restrictions of lay-offs and firings. This was great if you had a job, but it made a lot of companies leery to hire anyone. The Affordable Care Act and Dodd-Frank have caused a slow economy as well ever since the 2008 crash, although not as bad as the 1930’s (because the crash wasn’t as bad as the 1930’s). More recent Executive Orders and regulations requiring employers to treat salary workers at relatively high pay levels like wage employees, including paying overtime, has resulted in employers restricting the hours of those employees, making it tough for them to advance. Look for a President Trump to cut these regulations and rescind these Executive Orders, which will result in a hotter economy and more jobs.
So there you have it: Full-time work, lower prices, less wasted time at work, affordable health insurance, and more jobs with higher salaries if President-Elect Trump actually carries through with his promises. No wonder the markets are shooting up..
Have a burning investing question you’d like answered? Please send to email@example.com or leave in a comment.
Follow on Twitter to get news about new articles. @SmallIvy_SI
Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.