US budget to spur jobs?

Analysts at Brown Brothers Harriman explained that judging from the budget proposal, the US administration seems to be banking on boosting the labor force by making draconian cuts in the social safety net.

Key Quotes:

"As if fewer life choices, greater susceptibility to illnesses, experience greater hardships, and reduced longevity is not a sufficient disincentive of poverty, the budget proposals won't raise the cost of being poor.

Mnuchin previously said that high income earners would not be beneficiaries of tax reform. This has become known as the "Mnuchin Rule," which appears to have been repealed. The Treasury Secretary softened his commitment by saying that the necessary compromises with Congress may violate his rule. This seems disingenuous, as the budget proposals, first for the remainder of this year, and then for next year that came from the White House, before Congress even touched it, seemed to contradict the rule.

El-Erian has argued that the problem is the sequencing of the President's economic agenda. He says the health care out not to have been the starting point. Yet that seems to be politically naive. Given the desire to exploit the Republican majority in both houses of Congress, then getting rid of the Affordable Care Act, which the GOP had harangued against for years, must be the centerpiece. This has to do with repealing the tax cuts associated with the ACA that would free up funds to pay for broader tax reform, in a way that can be achieved through the reconciliation process of the legislative branch.

Moreover, when Trump was elected, the US was near full employment, the Fed's inflation target and trend growth. Many economists argued that economic stimulus risks accelerating inflation and forcing the Fed to move faster. Simply put, health care reform was needed to tax reform."

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