Trump’s grade on the economy ticks back up to A-

Rick Newman

In the year since Donald Trump won the U.S. presidency, earnings have crept upward, employers have added 1.8 million jobs, and the stock market has soared by 22%. That’s enough to boost Trump’s grade on the economy to A- in the latest installment of the Yahoo Finance Trumponomics Report Card.

Trump’s initial grade was a B when we launched the report card in May. Strong job growth — including the manufacturing sector — and the seemingly unstoppable stock market pushed his grade to B+ over the summer, then to A- in September. The grade fell by one notch after a weak employment report for September, which was largely due to hurricanes that slammed Texas and Florida. But hiring came back strong in October, pushing the grade back to A-.

Our Trumponomics Report Card measures six key economic indicators under Trump compared with six prior presidents at the same point in their presidency, going back to Jimmy Carter in the 1970s. Moody’s Analytics provides the data, which we convert into letter grades. (Here’s our complete methodology.) Job growth was stronger at the same point in the first terms of Jimmy Carter in 1977 and Bill Clinton in 1993. The stock market did better in the early days of Barack Obama and George H.W. Bush. But Trump is presiding over a kind of Goldilocks economy that isn’t exactly roaring, but its doing reasonably well all around. Here’s how he measures up on our six indicators:

Source: Moody’s Analytics, Yahoo Finance

With every update to the report card, we point out that Trump inherited an economy that had been steadily improving for years. The pace of job growth today is roughly the same as it was during the last two years of the Obama presidency. The stock market began to recover from post-recession lows all the way back in 2009, and has mostly gone upward since. It won’t truly be the Trump economy until he’s been in office for at least a year, maybe more.

Trump’s tax plan will impact the economy

Yet Trump is also pushing for policy changes that could have a powerful impact on the economy —both positive and negative. The Republican tax-cut plan he backs would boost corporate profits and stock values, if it passes. Trump has been rolling back regulations, another move that’s good for businesses. Some analysts think such moves have already goosed stock prices, partly because of real changes and party because of expected ones.

Source: Moody’s Analytics, Yahoo Finance

Trump is also pushing some changes that might spook markets and depress hiring – most notably, revisions to the North American Free Trade Agreements. Trump has threatened to withdraw completely from NAFTA if Canada and Mexico don’t offer major concessions. So far, his bark has been worse than his bite, but corporate executives familiar with ongoing negotiations say they’re worried.

By the middle of 2018, Trump policies should have a more direct impact on the economy. By then, we’ll know whether Republicans who control Congress are able to pass tax cuts. The fate of NAFTA will be clearer, as well. Then will come the 2018 midterm elections, which will be a referendum of sorts on how Americans feel about the Trump economy. For the time being, it is one thing Trump has going for him.

Yahoo news

Republicans push ahead with U.S. tax bill as Democrats sharpen attacks

The U.S. Capitol dome is pictured in the pre-dawn darkness in this general view taken in Washington, October 18, 2013. U.S. lawmakers launched an effort to resolve budget differences in a less confrontational fashion on Thursday as Washington picked up the pieces from a political crisis and 16-day government shutdown that has slowed the economy and undermined the country's international standing. REUTERS/Jonathan Ernst (UNITED STATES - Tags: POLITICS BUSINESS)

By Amanda Becker

WASHINGTON (Reuters) - Republican lawmakers on Monday began revising their proposed overhaul of the U.S. tax code, as Democrats pointed to the loss of popular deductions as proof the legislation was an assault on the middle class.

A draft bill unveiled last week by Republicans in the House of Representatives, if enacted, would be the biggest restructuring of the tax system since the 1980s and the first major legislative victory of the Trump presidency.

One of the first changes agreed to on Monday, related to carried interest, would go towards fulfilling one of President Donald Trump's campaign promises.

Republican Representative Kevin Brady, chairman of the House tax-writing panel, offered to make smaller portions of Wall Street financiers' income eligible for a lower capital gains tax rate.

It was one of many revisions that are expected as the House Ways and Means Committee amends the tax bill. Brady pledged to lawmakers that they would have a chance to propose their own changes. "Let me assure you this is the beginning of the tax reform process," he told the committee.

Although Republicans generally support the bill's broader themes, including a sharp cut in the corporate income tax, there are rumblings of dissent over other elements, including repeal of the deduction for state and local income tax (SALT) payments.

New York, California and other high-tax states would be hard hit by the removal of that deduction, a fact seized upon by Democrats to bolster their argument that Trump's plan is a gift to the wealthiest Americans and the corporate sector.

"There are a lot of people expecting a tax cut who will be big losers under this bill," Representative Bill Pascrell of New Jersey, a Democrat on the House Ways and Means Committee, said as the tax-writing panel convened to consider the bill.

An analysis of how taxpayers would be impacted by the bill from the nonpartisan Tax Policy Center issued on Monday was later withdrawn due to an error. TPC said that its analysis contained an error related to a proposed child tax credit and that it would release a revised version as soon as possible.

The White House argues that tax cuts are needed to boost economic growth and create jobs.

The linchpin of the plan is the reduction of the corporate tax rate to 20 percent from 35 percent and establishment of a 25 percent tax rate for "pass through" businesses, which currently pay income tax rates as high as 39.6 percent.

With Democrats united in opposition to the plan, Republican defections from a few traditionally Democratic-leaning states could be enough to torpedo it in the House.

Brady has already agreed to retain the deduction for property tax payments up to a cap of $10,000 as part of a SALT compromise and has said he would be open to raising it.

Brady's carried interest provision would lengthen to more than three years from one the amount of time Wall Street financiers must hold assets in order to be eligible for a lower tax rate.

Carried interest is a share of an investment fund's profits – typically about 20 percent beyond the return guaranteed to investors – that goes to the general partners of private equity, venture capital and hedge funds.

Under current law, high-income fund partners pay the long-term capital gains rate of 20 percent on their carried interest income, instead of the 39.6 percent individual tax rate that applies to the ordinary wage income of high earners.

MARKET RALLY ON EXPECTATIONS

Securing congressional passage of the tax plan is critically important to Trump, who has yet to get major legislation through Congress since taking office in January, including a healthcare overhaul he promised as a candidate last year.

Investors are adding to the pressure. The expectation of deep tax cuts has helped fuel a stock market rally during Trump's time as president, with the broad S&P 500 index up about 14 percent.

The Senate, where Republicans have a 52-48 majority, is developing its own version of the tax legislation, which would have to eventually be reconciled with the House version before it is sent to Trump for signing.

Several Republican senators have said they would have a problem voting for any tax bill that significantly increased the deficit. The House bill is projected to add $1.5 trillion over 10 years to the $20 trillion national debt.

Reuters in Yahoo news