The new president has trumpeted the promise to “Make America Great Again,” or simply known as the shorthand #MAGA, a central and consistent refrain of his agenda. It seems that one of Donald Trump’s first orders of business is making the U.S. dollar great again.
From tax reform to loosening financial regulations and even talking about gold, President Trump may be capable of transforming the world’s most important monetary regime.
Regulatory Red Tape
After a flurry of executive orders in the first two weeks of Trump’s presidency, the White House targeted the country’s regulatory regime in its most recent executive actions on Friday. The administration is seeking to fulfill another of its campaign promises by overhauling the vast web of financial regulations that were implemented after the financial crisis.
At the forefront of this effort is dismantling aspects of the Dodd-Frank legislation that expanded the oversight and regulation of the financial industry. This includes the so-called Volker Rule (named for the former Fed chairman) that bars banks from trading on their own investment accounts. Trump and the GOP are also seeking to scrap the Consumer Financial Protection Bureau (CFPB), a relatively new government agency whose enumerated powers likely violate the Constitution.
Tax reform is another key area of President Trump’s agenda. However, change has been hard to come by. According to Joseph Thorndike, a Forbes contributor, “Washington is full of good tax ideas that went nowhere, thanks to policy inertia and active resistance from potential ‘losers’ in the reform process.”
The last time that Congress undertook a substantive tax reform was in 1986 under the Reagan administration. More so than implementing tax cuts, this is similarly an effort to comprehensively change in the way the government operates. Such tax reform, as was the case under President Reagan, will require executive leadership from Mr. Trump.
Yet the president will also need his party’s legislative majority to follow him if anything is going to get done. Speaker of the House Paul Ryan and his congressional colleague in the Republican Party have their own ideas about how to fix the tax system that have been cultivated for years. These are not always in agreement with the president’s preferences—namely the idea of a “border adjustment tax,” which Trump and his surrogates have expressed reservations over.
In addition to lowering the corporate tax rate to make America a more competitive place for businesses to locate, Trump’s statements have largely focused on a simpler “border tax”—essentially, tariffs.
What About Gold?
There has been some speculation about where the president stands on gold, given these proposed changes to the financial system. Although he has stopped short of endorsing a true gold standard, the president’s comments have been revealing.
Last year, while still campaigning, Trump said that backing our money with gold again would be “wonderful,” but he conceded that it would be “very hard” to implement. Though a return to the gold standard is unlikely, Trump has positioned himself as the president most sympathetic to gold since Reagan, who appointed the Gold Commission to study the issue in 1982.
On top of all this, Trump will also be able to replace outgoing members of the Federal Reserve during the middle of his term.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.