D.C. News Overshadows Economic Data
It was an interesting session on Tuesday that reacted more to non-economic news and scuttlebutt from Washington, D.C. than economic data, which continues to bolster my observation that the wheels of commerce are moving and building the kind of momentum without that doesn’t expire overnight.
The fact is that it took more than half a dozen years to grind down the innate instincts of growth and success of the American economy, which began to awaken in late summer 2016.
The reason why the economy began to turn is unclear other than there must have been a sense that the end of the Obama era would see a more business-friendly environment even if the Democrats won, but especially if the businessman Republican nominee was victorious.
This brings us to the revelation yesterday that wasn’t leaked by the New York Times, CNN, or Politico. In an interview with Bloomberg News, Senate Majority Leader Mitch McConnell said efforts by the GOP on tax reform “will have to be revenue-neutral." The Trump administration has worked hard to promote the idea of dynamically-scoring healthcare and tax bills, but they’re also saying these plans must “prime the pump.”
In other words, they ideally would not be revenue –neutral; instead, they should fire up the economy and get things flowing to prevent deficits and lower debt levels. No one will say if this is Keynesian, but there are enough members of the GOP that still hold tight to a conservative orthodoxy of lowering debt now rather than later.
In 2017 thus far, the market has been able to shut out noise from Washington, D.C., and even events such as the massive ransomware shakedown; the idea of a major legislation slipping into 2018 or maybe simply slipping is a reality few want to admit or embrace.
Layer on scandals (real and manufactured) means, even more, hurdles for the economic agenda; it would not only free the DNA for success, but it also would live up to its ultimate potential.
The good news is the economic needle is moving; underscored yesterday, the Industrial Production and Capacity Utilization report beat Wall Street consensus. I combed through the data last night, and two items leaped out. The capacity in iron & steel and oil & gas noticeably improved with areas of very high-paying jobs that require big capital investments to expand.
It should be noted these industries were in free fall as they headed into the November election.
There is no doubt that a part of the needle moving here is a direct and immediate reaction to lower regulations via executive orders and Trump administration actions. A lot more can be done to remove speed bumps and brick walls for these industries and others as investors and taxpayers wait for some kind of tax reform.
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