‘This Is Just More QE’: The Tax Bill Explained In One Sentence

All eyes are on the tax bill this week and as we detailed on Sunday evening, the verdict is already in on who the plan benefits.

This is no “middle class miracle.” This is not “for working families.” Independent analysis has shown over and over who wins from this bill: corporations and the wealthy. Apparently, America knows this – or at least according to the NBC poll cited in the post linked above.

In many ways, this plan is the antithesis of Trump’s promise to fight for working class, everyday Americans. Indeed, the President himself stands to benefit to the tune of some $1 billion and the hilarious thing about that figure is that it’s impossible to nail down with any degree of precision because he won’t release his tax returns.

“Rarely has a piece of major legislation, that wasn’t social policy oriented, been so laser-focused on a sub-set of the populace, nor has it been so clear as to the winners and losers,” former trader Richard Breslow writes, in the Monday installment of his daily missive for Bloomberg.

This is trickle-down economics in the extreme, and what’s particularly amusing about that as it relates to markets is that the presumed “wealth effect” of QE was trickle-down in nature as well. Unfortunately, policymakers grossly overestimated the efficiency of the transmission channel from monetary policy to the real economy while grossly underestimating the efficiency of the transmission channel from monetary policy to financial assets. The result: bubbles aplenty, rising inequality, and a “recovery” that, while prolonged, has been anything but robust.

Remember, your portfolio of ETFs may have tripled since 2009, but thanks to the fact that financial assets are disproportionately concentrated in the hands of people who were already rich, you and all of your E*Trading friends are paradoxically getting collectively poorer relative to the Hamptons dwellers:

In that context, consider the following excerpt from the above-mentioned Breslow (the bolded bit is the “one sentence” referenced here in the title):

After all, this is additional QE — super-charged for share prices and the benefit of trickle-downers. We often ask monetary policy forecasters if they’ve factored in the tax cuts. A more interesting question is whether those that set compensation levels based on share price targets have done the same.

The question is who pays for this? Because that absurd one-pager the Treasury released a week ago certainly didn’t convince anyone.

And remember, when you call Steve Mnuchin a “James Bond villain,” he takes that as a compliment…