Are You Scared? You Should Be!
It’s been two weeks since Donald Trump won the US election. To be perfectly honest, I’m terrified.
From my standpoint, the best possible outcome would have been for the continuation of a paralyzed government, with a Democratic president and a Republican-controlled Congress. Hillary Clinton would have spent the next four years trying to fend off impeachment, and Congress wouldn’t have had time to meddle in the economy, trade, taxes, or anything else.
As the late comedian Will Rogers once remarked, “[When] Congress is deadlocked and can’t act, I think that is the greatest blessing that could befall this country.”
A deadlocked Congress, of course, isn’t a complete blessing, because there are urgent matters that our nation must deal with, starting with our national debt. In fiscal year 2016, which ended September 30, federal debt increased by a staggering $1.4 trillion – more than $3.8 billion per day. That’s a far cry from the “official” 2016 deficit of $590 billion.
And the pace of deficit growth is accelerating. According to Treasury Department data, the national debt grew another $294 billion in the 46 days after the end of September through November 15. If we keep spending at this pace, the national debt will increase by $2.3 trillion in the 2017 fiscal year.
But of course we don’t have a divided government. We have a Republican president with both houses of Congress also controlled by the GOP. Donald Trump promises to go on a spending and tax cut spree that will make these deficit numbers look tame.
Here’s what we can expect, assuming Trump is able to keep his word.
Trump is proposing legislation he calls the “Middle Class Tax Relief and Simplification Act.” This is an economic plan that would supposedly grow the economy 4% per year and create 25 million new jobs through massive tax reductions, trade reform, and regulatory relief. With a Republican-controlled Congress, I think this proposal has a good chance of being enacted. And I think it will give a boost to the economy, but at the price of much higher deficits.
And there’s no way Trump is bringing back some of the types of jobs he claims he could. For instance, my home state of West Virginia once had 100,000 miners working in coal mines. Today, there are only about 20,000. On a campaign stop there earlier this year, he promised to bring back many of those jobs.
But it’s just not going to happen. The decline in coal mining jobs in West Virginia is partially due to environmental laws, which Trump plans to loosen, but mainly is a consequence of the fact that coal can be mined so much less expensively in other states. For instance, in Wyoming, coal extraction costs are about half what they are in West Virginia.
Next, we have the End Illegal Immigration Act. This law would fund the construction of a wall between the US and Mexico, and will somehow get Mexico to reimburse the US for its cost. It also criminalizes any attempt to enter the US illegally.
Trump also wants to suspend immigration from regions where terrorism is common. Essentially, this would shut down immigration to the US from countries like Syria and Iraq. Trump also promised to deport millions of “criminal aliens” from the US, beginning on the day of his inauguration. Given the makeup of Congress, I suspect this law will pass easily.
Like so many others of Trump’s promises, the idea is ridiculous that the US economy will be revitalized or that the US will be safer from terrorism with these measures. Quite the opposite. If Trump really does shut down immigration from other countries, those countries are likely to retaliate by restricting visitors from the US.
And if he deports millions of workers from the US, our economy will suffer – badly. For instance, a 2014 study suggested undocumented immigrants contribute $130 billion annually to California’s economy.
Then there’s Trump’s Restoring Community Safety Act. This is proposed legislation that fulfills Trump’s campaign promise to reduce supposedly surging crime in America’s cities. The proposed law would increase funding for programs that train and assist local police and begin a massive campaign to put criminals behind bars. Again, I think it will pass.
However, this law is completely unnecessary – violent crime in the US is at the lowest level in more than two decades. What I’m afraid might happen is that police will use their new authority to step up civil forfeiture – the ability of police to confiscate your property without bothering to accuse you of a crime. The Supreme Court has ruled repeatedly that it’s perfectly okay to seize property from an innocent owner. So when it comes to civil forfeiture, don’t look to Trump, the police, or anyone else to be “fair.”
Trump also has a substantial degree of executive authority that he can invoke without congressional approval. In his campaign, he promised to junk or renegotiate bilateral and multilateral trade agreements that don’t favor the US. Trump could mostly do this on his own. For instance, he could withdraw from the North American Free Trade Agreement (NAFTA) without going to Congress. He could also scrap the Trans-Pacific Partnership (TPP) agreement that America’s largest trading partners have signed on to.
If Trump trashes trade agreements, the loss of access to US markets will seriously harm many countries’ economies. Those countries are likely to seek reprisals against the US, potentially leading to a trade war. Demand for US exports will fall, and the global economy will slow down even more. Similar protectionist legislation in the US triggered the trade war of the 1930s, which in turn made the Great Depression even worse.
Trump’s protectionist policies could also undermine the US dollar, because there will be less investment into the US by foreign countries and individual foreigners, as well as fewer tourists visiting the US.
There’s much more in store, but I’m sure you get the idea.
Two weeks ago, on Election Day, I wrote that no matter who won, we’re all screwed. The one good thing I can say about Donald Trump is that he’s not Hillary Clinton. But we’re still screwed.
You should get your Plan B in place – or even a Plan C – if you haven’t done so already. And even if you have backup plans in place, you need to keep fine tuning them, as the threats to your wealth will continue throughout a Trump presidency.
So fasten your seat belt… the next four years are going to be a bumpy ride.
Protecting your assets (and yourself) against any threat - from the government, the IRS or a frivolous lawsuit - is something The Nestmann Group has helped more than 15,000 Americans do over the last 30 years.
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