Tax reform continues its long and winding road through Washington. The full House is expected to complete a vote this week that paves the way for substantive tax work to begin in the House Ways and Means Committee. The major outstanding question facing lawmakers: how should our country pay for proposed tax cuts that are estimated to total $1.5 trillion over the next decade? Most House members favor “deficit-neutral” tax reform, i.e., paying for the tax cuts with reduced spending or with other tax increases, ultimately resulting in no impact to our country’s deficit. Some Senate members favor “deficit-financed” tax reform, i.e., passing tax cuts that mathematically would add as much as $1.5 trillion to our deficit, but instead believing that the tax cuts will pay for themselves through economic growth (source: BTN Research).
The budget deficit for the USA in fiscal year 2017 (i.e., the 12 months ending 9/30/17) was $666 billion. The USA has run a budget deficit in 52 of the last 57 fiscal years, i.e., 1961-2017. 60% of the $3.981 trillion of total outlays for the US government during fiscal year 2017 were in just 4 categories – Social Security, National Defense, Medicare and Net Interest Expense (source: Treasury Department).
The S&P 500, up +16.9% YTD, has been positive in each of the first 9 months of 2017, matching the 9-month start to a year last achieved in 1995. With just 7 trading days remaining in the tenth month of the year (October), the index is up +2.3% (total return) for the month-to-date (source: BTN Research).
Notable Numbers for the Week:
1. IF IT HAPPENED TODAY - When the S&P 500 fell 58 points on “Black Monday” (10/19/87), the tumble represented a fall of 20.5%. A 20.5% decline on last Friday’s (10/20/17) closing index value of 2575 would equate to a fall of 528 points (source: BTN Research).
2. LOOKING INTO THE FUTURE – Just 1 of 10 Wall Street equity strategists polled by Barron’s on 12/17/16 forecasted a year-end 2017 closing value for the S&P 500 above 2500. The S&P 500 index closed last Friday (10/20/17) at 2575 (source: Barron’s).
3. NOT ENOUGH PEOPLE - Japan, a country that has strict immigration policies and a low birth rate, had a population of 128 million in 2010. Japan’s population is projected to fall 34% to 85 million by the year 2100 (source: The Brookings Institute).
4. LESS OIL DEPENDENT – US imports of crude oil for the week ending 9/08/17 were 6.48 million barrels a day. In the last 20 years, there has been only 1 week when the USA imported less than 6.48 million barrels a day of crude oil (source: Department of Energy).
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