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Thursday, April 27, 2017

Daily update 4/27 Do tax cuts pay for themselves?

Pause day.

Mot much to say about today.  Breadth was slightly negative.  New highs were strong again at 262.

The futures dipped slightly intraday, but found support at the upper channel line.  If the market is in runaway mode the futures should stay outside the channel.  Closing back inside the channel usually means a pause or pullback to contact the 20 SMA.

The green count picked up a bit, but remains below overbought levels.

Will resistance hold or will the bulls power through?  The intraday action seems to indicate considerable resistance in this area.  It may take a positive news event to break out.  I think it is wait and see time.

Sometimes I wonder what happens to people's brains when they become part of the government.  The current administration is talking major tax cuts saying they will pay for themselves.  Over the years I have heard many economists claim tax cuts pay for themselves.  I have yet to see anybody provide data that actually proves it.  Just because people repeatedly say something that does not make it true.  Look at this chart and see what you think.

Does this chart even need any commentary?  The last two major tax cuts put this country on the path to insolvency.  What are the odds it will work better this time?  The U.S. recovered from a high debt to GDP ratio after world war II because that surge in the ratio was caused by war expenses.  Once the war ended the increased costs went totally away.  We currently do not have any costs that will be going away.  On the contrary, the aging boomers will be increasing costs.  The only thing tax cuts will do today is hasten the day when the U.S. defaults on its debt.  Revenue neutral tax reform would be a different kettle of fish.  Currently that is not what I am hearing though.  Politicians and economists drive me absolutely crazy. 


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