US fiscal policy may not be what the investors expected - BBH

Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, says that the draft budget proposed by President Trump expressed little of the populist sentiment seen on the campaign trail and subsequent rhetoric.  In many ways, the budget was an expression of longstanding Republican aspirations.  Rather than boost infrastructure spending, numerous domestic social programs and foreign aid were cut to make room for increased defense and security spending, including a down payment for the wall that is to be erected on the border with Mexico.  

Key quotes

"Funds to the Department of Transportation, which would seem to play an important role in the revitalization of America’s infrastructure, would see a 13% (nearly $2.5 bln) cut under the president’s plan.  The Federal Aviation Administration (FAA) would be privatized.  Amtrak funding would also be cut, and several new transit projects would have to be canceled."

"Meanwhile, the Republican health care plan as an alternative to the current Affordable Health Care Act (a.k.a. Obamacare) may be voted on before the end of the week ahead.  At stake is not only health care, but it is a keystone to the Republican’s larger tax reform efforts.  Specifically, the repealing of the taxes that financed the current scheme would free up around $1 trillion over the next decade."  

"Of course, as most observers recognize, the Senate has other ideas and will likely pass a different bill.  The differences will be hammered out in the reconciliation process, which requires a simple majority that the Republicans possess.  It is integral to the GOP strategy to use the reconciliation process to overcome the limitations posed by its slim majority in the Senate."

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