US: Trump’s speech to Congress was long on vision, short on details – HSBC

Kevin Logan, Chief US Economist at HSBC, suggests that big set-piece speeches by the President to the Congress are often long on vision and short on details and if the financial markets were looking for new, detailed, information about tax reform or infrastructure spending in the President’s speech last night, they were probably disappointed.

Key Quotes

“On tax reform, President Trump said that his “economic team is developing historic tax reform that will reduce the tax rate on our companies so that they can compete and thrive …”, but there were no details about tax changes that have been recently discussed in Congress such as the disallowance of net interest deductibility, expensing of capital outlays, territorial versus a worldwide tax system, border tax adjustments, et cetera.”

“On infrastructure spending, Mr. Trump said only that he would ask Congress to approve legislation that produces USD1.0trn in infrastructure investment – financed through both public and private capital. This is not necessarily a request for USD1.0trn in federal spending. Nor was any timetable mentioned on when the infrastructure spending would take place.”

“President Trump’s suggestions for the reform of “Obamacare” generally conformed to many of the proposals in the “Better Way” blueprint put forward by the House Republican leadership. The blueprint leans heavily on tax credits and Health Care Savings Accounts rather than direct subsidies to purchase health insurance. Trump also hinted that he would support Better Way proposals to shift the Medicaid program to a per capita cap or to a block grant system.”

“One new twist was a suggestion that he would work “to bring down the artificially high prices of drugs.” This is a proposal that is usually associated with Democratic Party officials and is not something that one often hears from Republicans.”

“As expected, President Trump endorsed higher levels of military spending, but he did not propose any specific increase in the defense budget. We will have to wait for the release of the Administration’s proposed budget sometime in the next few weeks to learn the extent of potential fiscal policy changes.”