President Donald Trump delivered his first speech to a joint-session of Congress, covering a range of policy plans including corporate tax reform, repealing Obamacare, creating jobs, and dialing back red tape regulation. U.S. stock futures were higher during his speech, which lasted for more than an hour. While that signals optimism among investors, Congressional representatives would have preferred more detail.
Continue Reading Below
"Members of Congress listening for the fine print on top priorities like individual and coprorate tax reform didn't hear it in this speech...for the financial markets, investors and ultimately all Americans, the challenge remains with respect to delivering on the president's ambitious agenda which includes boosting growth through incentivizing business to make a piroity of hiring closer to home," Bankrate senior economic analyst Mark hamrick. Below are some highlights from the President's speech.
President Trump renewed his vow to make America great again on Tuesday night and his message was one of unity and optimism. He outlined the need for reviving “dying industries” like mining and manufacturing, ramping up the nation’s military, removing burdensome regulations on business, and rebuilding America’s infrastructure.
U.S. Stock Market Has Gained Nearly $3T Since the Election
The speech was closely eyed on Wall Street where investors have sent stocks to record highs on hopes of lower taxes, less regulation, and more fiscal spending aimed at continuing to bolster U.S. economic growth. U.S. stock futures are seeing modest gains.
Tax Reform and International Trade
The president first took on the issue of tax reform, acknowledging the federal corporate income tax, at 35%, is the highest in the world. Proponents of lower tax rates argue companies will be more willing to make investments not only in their work forces, but in their corporations if they have more money in their pockets to spend.
Trump said his economic team has been tasked with developing “historic tax reform” to level the playing field, but didn’t elaborate on the details of what that overhaul might look like.
Continue Reading Below
“That will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone,” he said. “At the same time, we will provide massive tax relief for the middle class.”
The Business Roundtable, a group of CEOs whose companies employ 15 million and generate $6 trillion in revenues, had this response:
"President Trump is right to emphasize the importance of competitive tax rates on business so U.S. companies can win in the global marketplace. Reform must also include a modern international tax system that doesnt' penalize businesses for bringing their foreign earnings back to the United States to invest, expand, and hire."
The president also renewed his call for fair trade policies, citing high tariffs and taxes on American goods exported to other countries. He pointed to a recent meeting with Harley Davidson (HOG) executives who reported one case in which their goods were taxed 100% by another nation.
“I believe strongly in free trade, but it has to be fair trade,” he said.
Trump’s point is a good one, Wells Fargo Investment Institute Head Global Market Strategist Paul Christopher tells FOX Business, who said other countries discriminate against U.S. exports via their tax systems and there are concrete steps Trump can take to improve overseas treatment.
“The Commerce Department could undertake trade complaints on behalf of U.S. companies before the World Trade Organization. Also, NAFTA could use a review of its conditions, given that the goods in trade have changed much -- and the country sources of goods have changed much -- since NAFTA was passed in 1994,” Christopher said.
The president called on Congress to approve legislation for a $1 trillion investment in U.S. infrastructure, financed through public and private capital.
“America has spent approximately $6 trillion in the Middle East. All this while our infrastructure at home is crumbling,” Trump said. “With this $6 trillion, we could have rebuilt our country twice.”
Trump said the efforts will not only improve tunnels, roads, and bridges throughout the nation, but also help create “million” of new jobs with the core principal of the effort being “buy American, hire American.”
But Christopher cautioned that this kind of program isn’t necessarily what the economy needs since it’s difficult for the government to know which infrastructure projects will have returns worthy of the investment.
“In many cases, efficiencies are not the result of large new construction projects, but the result of new ways to manage infrastructure [like] electronic systems to manage traffic on highways,” he said, adding that if the government is less likely to sustain $1 trillion in new debt, can Congress find funding for $100 billion per year in spending for this new program?
Trump Touts Corporations Creating Jobs
Obamacare Repeal: Action Not a Choice - Necessary
Trump called on members of Congress to work in a bipartisan manner to “create a better health care system for all Americans,” outlining five essential elements to do so.
- Ensure Americans with pre-existing conditions retain access to coverage
- Through tax credits or expanded Health Savings Accounts, help Americans purchase the right coverage for their needs
- Give state governors flexibility with Medicaid
- Bring down artificially high drug prices and pass legal reforms to prevent unnecessary costs on patients and doctors
- Enact the ability to purchase insurance across state lines to create more competition in the marketplace
Budget Details: Veterans a Priority
With Carryn Owens, a widow of William “Ryan” Owens -- a U.S. Navy Special Operator who died in the line of duty -- in attendance Tuesday night, the president vowed to send a budget to Congress that will increase military funding.
“I am sending the Congress a budget that rebuilds the military, eliminates the defense sequester, and calls for one of the largest increases in national defense spending in American history,” he said.
He added the administration expects its partners -- NATO or otherwise -- to share in the costs of strategic and military operations.
Other nations of the world rely on U.S. defense spending, and there is room for a more shared responsibility, said Christopher.
“However as with immigration, there is a balance to be struck,” he said. “Relying too much on equitable contributions could redirect foreign policy priorities in ways that are not optimal for coming years.”
Regulation Overhaul Coming
Regulations were one of the biggest priorities of the new president during his first two months in office. In his speech Tuesday night, Trump pointed to the creation of task forces inside each government agency to overturn needless regulations, an executive order mandating for every new regulation, two existing ones must be struck, and the withdrawal of the U.S. from the Trans Pacific Partnership agreement struck under former President Obama’s administration.
Of all the president’s early initiatives, de-regulation is the one Wall Street has eyed the most, and the one that has the highest market-positive potential, Christopher said, calling the efforts “good steps” in the right direction.
Ahead of the speech, JPMorgan CEO Jamie Dimon (JPM) gave an upbeat assessment of his business and the overall economy at the company's annual investor day saying, "regulatory reform is flashing red to green."