President Trump and the Republican congressional majority have promised to roll back legislation passed over the last eight years that they say impedes economic growth and job creation. But will the proposed changes truly boost the economic wellbeing of the nation’s citizens? How might it go wrong?
For a look on the not-so-bright side, here are a quartet of possible issues with the administration’s approach:
Stripping consumer protections
During the 2007 financial crisis, people lost their homes, their retirement savings, their jobs, and their businesses. In response, the federal government created the Consumer Financial Protection Bureau (CFPB) under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Its mission: “To make sure banks, lenders, and other financial companies treat consumers fairly.”
Congress is now considering the Financial Choice Act, which ostensibly “will empower Americans, not Washington bureaucrats” to create “strong economic growth and more freedom.” In practice, the bill rolls back protections of the CFPB by legally prohibiting the publication of data the government collects on consumer complaints on financial services. As a result, consumers and businesses will have less information when making financial decisions.
Many see potential disaster in weakening the provisions of the CFPB. Sean Coffey of the California Reinvestment Coalition says the GOP’s plan to dismantle consumer protections will be “incredibly costly” for consumers in the long run.
“If the Financial Choice Act were to become law, the Consumer Financial Protection Bureau would be dramatically weaker and have less power to stop banks like Wells Fargo from engaging in abusive practices,” he says. “It also includes a specific ‘carve out’ for predatory payday and high-cost installment lenders, banning the CFPB from regulating them.”
Reducing housing assistance
“Buried in the budget is a fundamental change in the way housing assistance is calculated for lower-income Americans,” says Dave Layfield, founder and CEO of Affordable Housing Online. For Section 8, senior/disabled housing, and public housing, the administration’s budget proposes to:
- Increase tenant’s contribution from 30 percent of their income to 35 percent
- Raise the minimum rent payment from $25 to $50
- Prohibit utility reimbursements
Other services are already looking at deep cuts, particularly those for the elderly, as President Trump’s budget proposal included cuts and changes to the Obama-era Older Americans Act. For those seeking information on exactly how the changes might affect them, Affordable Housing Online’s HUD budget cut calculator enables citizens to estimate how much the cuts in funding for affordable housing will cost their local communities.
Morgan Stanley financial advisor Michael Fleischer believes that, in general, Trump’s proposals on infrastructure and defense spending are pro-business. “However,” he cautions, “an area of concern for both the economy and financial markets is that these proposals could result in a lot of money entering our financial system and trigger inflation, which would be a negative for both the stock and bond markets.”
Fears of what may come, however, probably won’t stop investors from keeping their eyes on the prize. Fleischer reminds his clients, “No matter who is in Washington and how you feel about them, it’s important to continue to invest and make decisions based on personal, long-term goals.”
Fewer entrepreneurial opportunities
Some fears are less about the actual policies under consideration, and more about how the political turmoil and controversy within the Trump administration might upend the GOP’s ability to effectively pursue their agenda.
Stephen Kent represents Young Voices Advocates, a nonprofit that connects media outlets with millennial-age policy experts and commentators from around the world. Kent says that the Trump administration and Republican congress are not on track to put Americans back in the business of opening businesses.
“They have an opportunity to enact tax reform that simplifies the tax code and incentivizes investment,” he explains. “But scandal and confusion is marring this administration, and it will cost the American people a great deal.”
Why? “Because the key to understanding the cost of an ineffective government is looking at opportunity cost,” says Kent. The 2013 government shutdown cost the American taxpayers $24 billion, according to estimates by S&P Global Ratings.
Consider the impact the 2013 shutdown had on Alaskan fisheries, for example. “When an Alaskan Department of Fish & Game closes its doors for an extended period of time, that is time that fishermen aren’t getting licenses renewed and new fishermen aren’t entering the market,” explains Kent.
Bottom line: “The administration’s lack of direction, leadership, and clear sense of priorities will muddle the process of the GOP fulfilling its promises on tax reform,” says Kent. “With a debt ceiling debate looming in the months ahead, the chaos surrounding Trump will cost the taxpayer billions in squandered opportunity alone.”
Not everyone is convinced that the current administration and its congressional allies will have an immediate impact on the economy. “Contrary to popular belief, presidents, congress, and political parties have little control over the immediate economy,” says Timothy Baker, founder and principal of Wealth Shape. “Long-term implications are judged by history, and even then there are usually a number of variables that contribute to any boom or bust.”