How Trump's 'nickel plan' could boost the economy

By White HouseFOXBusiness

Economist on Trump's spending cut proposal: Markets would love this

Moody's Managing Director John Lonski on President Trump's plan to take on government spending and its potential impact on the U.S. markets and economy.

President Trump’s initiative to cut spending by 5 percent across his Cabinet’s departments would likely provide a solid boost to the economy and Wall Street, according to Moody’s Managing Director John Lonski.

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“The markets would love this, my goodness,” he said on Thursday during an interview with FOX Business’ Stuart Varney. “Treasury bond yields would drop. Equity prices would soar if we had these type of spending cuts.”

Part of Trump’s solution -- dubbed the “nickel plan” -- requires each Cabinet department to slash the “fat and waste” in the government by cutting 5 percent from the budget by fiscal-year 2020. Congress already approved a defense spending bill in September, so the cuts won’t apply to the military.

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“We’re going to cut spending, absolutely. It’s not as tough as you think. And frankly there’s a lot of fat in there. But we had to get the military done last time,” Trump told FOX Business’ Stuart Varney in an interview Wednesday.

Lonski applauded Trump’s spending plan, which he said had come at an “opportune time.”

The national debt has skyrocketed to more than $21 trillion, and the federal budget deficit has ballooned to $779 billion, its highest level in six years.

“I think we would be very lucky to limit government spending growth to 1 percent, never mind a 5 percent cut,” he said. “That’s going to be very politically unpopular among those who have some linkage to government spending.”