Tim Hoyle, Chief Investment Officer
thoyle@haverfordquality.com

One hundred days into the Trump administration many investors are feeling bruised and battered. Those hoping for a focus on regulatory rollback and tax reforms have instead endured the upending of trade policy and verbal barbs aimed at the Federal Reserve Chair.

The administration’s disruptive and aggressive tactics have obscured any substantive progress made on the tax and regulatory policy front. Some recent actions we detail here aim to deliver on campaign promises around tax and spending cuts and strike a more pro-business chord.

On April 5^th the Senate passed a budget resolution that uses a current policy rather than law as the baseline. The 2017 Tax Cuts and Jobs Act (TCJA) was passed through budget reconciliation and in accordance with the Byrd Rule[1]. This allowed the TJCA to avoid the need to garner 60 Senate votes and required the legislation to be revenue neutral beyond the 10-year budget window, thus many provisions of the Act sunset at the end of 2025. Utilizing policy baseline paves the way for Congress to make good on the President’s campaign promise to make tax cuts permanent.

According to the Tax Foundation, this novel approach will “allow $5.3 trillion in deficit-financed tax cuts” over the next ten years. This is the result of combining $3.8 trillion of TCJA tax cuts now assumed to be “costless” plus $1.5 trillion in additional deficit spending. President Trump has called for the TCJA to be made permanent, and Wall Street is counting on the continued stimulus of deficit spending, but the costs to the federal debt will be extreme.[2]

On April 9^th the President signed a memorandum directing Federal agencies to rescind regulations deemed unlawful in light of ten watershed Supreme Court cases. According to the White House factsheet, “agencies must move quickly to delete illegal regulations from imposing further burdens on the American people.” In one specific example, the order calls on agencies to repeal any regulation where the costs imposed are not justified by the public benefits, or where such an analysis was never conducted to begin with.[3]

It typically takes years to delete federal regulations through the Administration Procedure Act, which outside interest will use to litigate any regulatory changes. However, the President has instructed agencies use the “good cause” exception where appropriate. This exception applies when an agency finds a regulation “unnecessary” or “contrary to the public interest,” since “retaining and enforcing facially unlawful regulations is clearly contrary to the public interest.”[4]

The order also cites the repeal of the Under the Major Questions Doctrine, agencies must have explicit congressional authorization to regulate on issues of vast economic and political significance. This means that agencies cannot rely on broad or ambiguous statutory language to justify their actions. The repeal of the Chevron Doctrine significantly curtails the power of federal agencies to issue regulations based on their interpretations of statutory mandates. Agencies must now have explicit congressional authorization for their actions.

When discussing the transition from the Biden to the Trump administration, philanthropist and former hedge fund manager Stanley Druckenmiller said, “I’ve been doing this for 49 years, and we’re probably going from the most anti-business administration to the opposite.” Investors were very optimistic for pro-business policies just a few months ago when this administration took office. If the administration can show progress on deals to bring down the recently imposed global tariffs and trade barriers while also executing on regulatory and tax reforms, we could yet see the markets find their groove in 2025. 

[1] The Byrd Rule is designed to limit the scope of budget reconciliation bills, ensuring that they primarily address budgetary issues rather than unrelated policy changes.

[2] Trump Tax Cuts 2025: Budget Reconciliation | Tax Foundation

[3] Fact Sheet: President Donald J. Trump Directs Repeal of Regulations That Are Unlawful Under 10 Recent Supreme Court Decisions – The White House

[4] Trump’s Triple-Dog Supreme Court Dare – WSJ