While some investors are freaking out about investigations, tweets, or the personality of President Trump, we are still watching policy. So far, some regulation has been rolled back and more is on tap, the Supreme Court has a more market friendly make-up, and there is a hiring freeze on many government agencies. These policies will help economic growth, but they are not enough to get it above 2.5% annually.

The latest political news is that the Justice Department appointed a former FBI Director, Robert Mueller, to look into the supposed ties between Russia and the Trump campaign. Some may fret that this is a negative for the market, but we believe it will reduce, to some extent, the bickering in Washington and allow more focus on major policy questions.



Mueller has already had a long career (apparently has very little craving for the limelight) and will conduct a thorough and clean investigation. Leaks will be few and the investigation will drag on for a long time.

This will allow the GOP to focus their efforts on health care and tax cuts. They believe the more legislative accomplishments they have to show their voters, the better off they'll be in 2018.

The politics of these policy changes is complicated. Republican leaders in the House of Representatives have proposed a "border-adjusted tax" which we think is a bad policy move (see our piece from February 13). One reason they did this is because they are trying to make the tax cut "revenue neutral" so that it fits in budget rules and might possibly get some Democrats on board.

The Trump Administration said no to the border adjustment and proposed sweeping tax cuts that Congressional budget experts say aren't revenue neutral. They "score" it as losing tax receipts because they use a "static scoring model" which does not account for revenue from more economic growth. For example, the Congressional Budget Office estimates that 1% more GDP growth over the next 10 years will bring in $3.0 trillion in additional revenue. If you don't score that revenue bump, tax cuts are almost impossible to accomplish.