The U.S. Presidential Inauguration for Donald Trump will take place on January 20, 2017, in Washington, D.C.
BOSTON — The stock market soared the day after Donald J. Trump was elected as the 45th president of the United States. While Trump and his supporters saw this as a positive sign, it remains to be seen how his policies will impact the economy.
For a brief period after it was announced that Trump had attained 276 electoral college votes, the U.S. stock markets mirrored confusion some Americans felt on the morning after the election. Shortly after midnight Tuesday as the election results rolled in,, the Dow Jones industrial average fell 506 points as investors braced themselves for Trump’s policies. However, following Trump’s acceptance speech Wednesday morning, the financial markets steadied. By noon Wednesday stocks rallied and have been climbing overall since then.
“We have a great economic plan,” Trump said in his victory speech. “We will double our growth and have the strongest economy anywhere in the world.”
Throughout the election, Trump has said he would lower taxes for all Americans in order to boost the economy. In the economic plan he released before the election, Trump focused on tax restructuring. His plan would reduce the number of tax brackets from seven to three. This means the highest income earners will be paying less in taxes and the middle class will be paying more.
Trump’s plan would raise the lowest income tax rate from 10% to 12%, eliminate the head of household option and repeal personal exemptions.
Trump also has pledged to slash corporate taxes, which he said will bring companies and jobs back to the United States.
"We're going to rebuild our infrastructure,” Trump said in his acceptance speech Nov. 9. “We will put millions of our people to work as we rebuild it.”
Abhijit Banerjee, who teaches economics at Massachusetts Institute of Technology, said cutting taxes would increase spending in the short run. However, in the long run, he said, it would depend on the impacts of loss in tax revenue.
“If it reduces government spending on welfare or investment in infrastructure, people may end up poorer.” Banerjee said.
According to CNN, investors felt calmer and less uncertain after hearing Trump’s acceptance speech, in which he showed a calmer and more conciliatory side. Trump’s comments about increasing both tax cuts and infrastructure spending encouraged investors.
Reuters reported Nov. 11 that Warren Buffett, an American business investor and billionaire, predicts that a Donald Trump presidency would be good for the stock market.
"The stock market will be higher 10, 20, 30 years from now," Buffett said to Reuters.
In an interview with Bloomberg LP, Mark Gallongly, a member of President Barack Obama’s Economic Recovery Advisory Board, said Trump’s acceptance speech was more reassuring than his campaign but encouraged investors to be cautious.
“This has been an election driven by personality and a few big themes, and very little on specifics of his policy,” he said to Bloomberg. “So what he’s going to do will reveal itself over the next number of months.”
To be sure, the impact of Trump’s economic plans are unknown.
Dr. Manove, a professor of microeconomics at Boston University, said that the success of Trump’s tax policy depends on how individual consumers act. While cutting taxes could increase spending and thereby boost the economy, it also creates a problem. People might not be as motivated to work.
“If someone gives you 1 million dollars, would you spend it or would you work harder?”
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