Is it possible that another wave of payroll tax cuts is coming for U.S. citizens? According to some reports on Monday such as those from Fox News and the Washington Post, the White House is weighing this possibility as a way to ease economic concerns. Other news outlets, including Bloomberg, have negated this claiming, reporting that the White House has denied reports claiming that a new tax plan is not on the table. The last payroll tax cut was a temporary measure implemented by during President Barack Obama’s administration as an effort to increase consumer spending. These cuts expired in 2013.
Though news reports are notorious for mistaken facts, the sheer number of conflicting stories about this potential tax cut is rather unusual and has understandably left traders confused. The reports come as President Trump has been aggressively trying to calm public fears that a recession is brewing. Trump’s strategy has included both public statements, tweets, outright criticism of the Federal Reserve, and even an extension for Huawei to continue purchasing American products for another 90 days.
Even if a tax cut were on the table, it is questionable whether the House of Representatives, currently controlled by the Democratic Party, would even pass this legislation. As it is, the Democrats have previously warned against additional tax cuts, citing the dangers to social welfare programs Medicare and Social Security if funding is decreased. In fact, some members of the House have proposed to raise the payroll tax in order to support the Social Security program.
Traders Opt for Optimism
All three benchmark indexes closed higher on Wall Street on Monday as traders opted for optimism rather than recession fears. Perhaps President Trump’s messages were getting heard. Or perhaps the global picture, one which is expecting global economic stimulus, is boosting trader morale. Traders are specifically looking at Germany and China where stimulus plans are expected to boost the local economies and to have a global impact. Germany is expected to overrule its balanced budget rule to increase spending while China is expected to reduce corporate borrowing costs with its new interest rate reform plan. And, of course, traders are waiting to hear from Federal Reserve Chairman Jerom Powell on Friday, where he will be speaking from Jackson Hole about the Fed’s economic plans.