Here's What Ray Dalio Said About Trump's New Tax Plan | Exploring Markets

Here's What Ray Dalio Said About Trump's New Tax Plan

Ray Dalio just wrote a blog post about Trump's new tax plan and it is summarized entirely here below. And while he believes it does some stimulus, it does not help some of the core problems happening in this country. Dalio says we are not looking at infrastructure enough:
"The reforms to the structure of corporate taxes at the core of the bill will certainly make the US a more attractive environment to do business, but the impact of those changes is likely to be small relative to the improvement that could be achieved by investing more in things like infrastructure and education, which more directly boost productivity. To help convey the issue about infrastructure spending, the table below shows how US infrastructure compares to other developed countries (from the World Economic Forum)—i.e., it shows how the US lags significantly in rail and internet speeds, and is more middling in road infrastructure. Our infrastructure is in desperate need of improvement."


But there's more.

Dalio also believes that these types of policies are a defining moment for any generation. One example he looks at is the differences between China and Russia over the last several decades. Both of those countries took different paths and both of those countries are now going different directions (one is thriving, the other is not):
"So, the real question is whether one would rather a) have significant investment development, risking it not fully paying for itself (in which case some of it, such as 20% or 30%, might have to be written off over time), or b) not have significant investment development and avoid that risk. If one looks at the mechanics and consequences of these two choices, Path A is a better choice than Path B if the debt is denominated in one’s own currency. For example, if one does the calculations in order to look at the consequences of a) building something like a subway system and having to write off 20-30% over 15 to 20 years or b) not having the subway system, most people would choose Path A. And, if you look at the consequences for countries that chose Path A versus Path B, most people would prefer the conditions of countries that chose Path A.
For example, China chose Path A, so it has more debt and more and better infrastructure than Russia, which chose Path B. While there were of course other factors at play that affected some of the differences in how they evolved over the last 20 years (since the old-style communist systems ended), the choice between Path A and Path B was the most important."

And what's Dalio's final point? What worries him most about the decisions happening in politics right now? Dalio thinks it has to do with one group feeling superior or more correct than the other. Not enough people are focusing on the whole. Instead, they only care about the right now and themselves:
"I’d like to digress a moment to talk about the politics surrounding this situation because it’s a big deal in leading to this outcome and the future of our country. There’s a war going on, and biases are entering into the choices being made so there is not decision-making based on what is good for the whole so much as decision-making based on what one group that has more power wants relative to what the group that has less power wants. That’s the case, whether it’s the left/Democrats or the right/Republicans that has more power. So, right now what we are seeing is policies resulting from those who genuinely believe Path B is better than Path A and who are in the group that has the power to carry its vested interests forward rather than in support of the well-being of the whole."

If you enjoyed this post and the thoughts from Dalio, you can read his entire piece right here. It's a great read and it will make you think more deeply about taxes, Government, and world history. Where do you stand on the tax debate?