Recession On The Way? Trump Will Make It Worse With Another Massive Tax Cut For The Rich

Trump has an even worse one in mind now

Trump wants to put through another big tax cut for the wealthy before the election and Bloomberg News is reporting that the regime thinks it can be done without approval from Congress— which certainly wouldn’t be coming. The plan is “to cut taxes by indexing capital gains to inflation. Vanity Fair’s Bess Levin explained how the plan is designed to give 86% of its benefits to the one percent, by significantly reducing taxes on long-held investments. “Currently,” she wrote, “when an asset like real estate or a stock is sold, tax is paid on the appreciation tied to inflation. So while corporate stock with dividends held for 10 years would be hit with an effective tax rate of 24.3% at present, the White House plan— which may be advanced “soon”— would mean the same holding would be subject to a tax rate of 21.4%, according to the nonpartisan Congressional Research Service. The move would reduce tax revenue by an estimated $102 billion over a decade and the benefits would almost exclusively go to the wealthiest people in the country.”

Trump thinks he can do it by executive order, which would probably not even pass muster in this Supreme Court. But Trump knows he has to do something since it’s no secret that the Trump Recession is in it’s early stages now. Axios’ charts show a normal yield curve which is a result of confident investor betting on longer term (higher yielding) Treasury bonds. If investors fear a recession, they'll settle for lower yields on long-term debt. The curve "inverts" when short-term yields are higher— i.e., an inverted yield curve. And, alas, the difference between short- and long-term yields has inverted this year, almost a guaranteed bet on a recession around the corner (between 6 months and two years).

The U.S. Treasury yield curve has now been inverted for more than a month— meaning the 3-month bill is paying a higher interest rate than the 10-year note.

Why it matters: An inversion of Treasury bond yields is a near-perfect recession indicator that economists at the Federal Reserve recently called "the best summary measure" for an economic downturn.

How it works: Investors demand higher payment for loaning out money for longer periods of time. Bonds are essentially loans, so it follows that a bond that does not return a lender's cash for 10 years would pay more than one that returns the cash in 3 months.

• An inversion of the Treasury curve means the exact opposite is happening. Either investors see a higher chance they'll get paid back in 10 years than in 3 months by the U.S. government (the world's most secure borrower), or they see inflation being so flat that money invested today will be worth a little less in 10 years than it is worth in 3 months.
• Neither says positive things about the market's view of the economy.
• The yield curve inverted in March and in May, but for very short periods of time, and other parts of the curve inverted as far back as December.