Trump: Address to Congress reveals many proposals, but no new details - Nomura

Research Team at Nomura explains that the US President Trump addressed a joint session of Congress last night, in which he repeated many of his previous themes, but in a more measured, less combative tone than in previous speeches but he did not offer many new details on economic policy.

Key Quotes

“Much like his campaign, address largely offered broad themes for economic policy rather than detailed policy proposals. Near the beginning of his speech he listed his accomplishments, which included: businesses that have announced expanding or retaining employment in the US; various ways to reduce regulation; withdrawal from the Trans-Pacific Partnership (TPP); actions to reduce crime; reducing illegal immigration and removing illegal immigrants who have broken the law; improved vetting of refugees; and his nomination of Neil Gorsuch to the Supreme Court.”

“Regarding policies that could materially affect the economic outlook, President Trump touched on several areas. On fiscal policy, he repeated his desire to increase defense spending and lifting the sequester ($54bn). He also mentioned that he would increase spending for veterans, which was one of his campaign promises, but has not been discussed much since his inauguration. He did not specify how much he would increase VA spending, or which programs would be cut to pay for the increased spending.”

“The other side of fiscal policy is taxes. Consistent with other statements he has made on the issue, he reiterated tonight that companies would get a “big, big cut” and that there will be “massive tax relief for the middle class”. He did not endorse the idea of a border tax, but did talk about how US exports do suffer because of import taxes abroad.”

“The current replacement conundrum should serve as an important message to markets: getting President Trump’s major spending and tax initiatives through Congress may be more challenging than expected. Senior members in Congress have already pushed back on the bare-bones outline on the budget proposals outlined by OMB Director Mulvaney. Getting increased spending for defense, something many Republicans want, will involve some legislative gymnastics to bypass budget controls.”

“Broadly speaking, President Trump did not materially resolve key uncertainties regarding the outlook for economic policy – such as the outlook for taxes and spending, infrastructure, trade, and exchange rate policy – in his speech tonight; we believe it will take many months before we have clear answers to all of these issues.”