Executive Program Offers Owners Perspective on Reform, the Markets and Washington Landscape – April 24, 2017 by Randy Myeroff

This year’s Executive Focal Point event offered a look inside the political and economic landscapes impacting business owners today. We were excited to be joined not only by a group of innovative and engaged business leaders, but also by presenters Russell Moenich, chief investment officer at Sequoia Investment Group, and Matt Kadish, a partner at Kadish, Hinkel & Weibel and CEO and VP-legislation of the Small Business Council of America.
 
On the economic outlook, Russell Moenich’s message was that while 2016 was an incredibly eventful year both domestically and around the globe, in 2017 we still find ourselves in a very long yet mild expansion cycle. In fact, the cycle is the third longest since 1900 and the weakest on record since 1948 with an average 2% of GDP growth. And while we’re in the late innings of the expansion, if we were to fall back into another recession, it could be mild to match the expansion cycle we’ve been experiencing. So what’s the biggest risk to the business cycle? The Federal Reserve Bank. Moenich pointed out that there have been recessions following aggressive interest rate hikes in 13 of 15 instances since the Fed came into existence. 

Moenich also discussed “Trumponomics” — what it is and what it may or may not do for, or to, our economy. If intentions become reality, comprehensive tax and serious regulatory reform initiatives could increase our economic efficiency and the overall potential of our economy. The President’s focus on these two areas has created a skyrocketing “optimism index,” resulting in a growing confidence among consumers and business leaders. However, Moenich points out there are a few key areas of which to be mindful: 

  1. True fiscal power lies in Congress, and particularly the Senate, to pass new laws — not with the President. The current environment in Congress and the recently failed healthcare reform efforts makes this fact evidently clear.

  2. Healthcare reform is not likely before the August Congressional break, which means new fiscal policies, e.g., tax reform, aren’t likely to occur soon enough to help us transition successfully out of the late innings of our business cycle expansion. New fiscal policies in place before that point could help our economy remain stable.

  3. The nationalist and protectionist stance of the President could be a concern, causing a potential decrease in economic efficiency from a financial perspective. 

Time will tell, and progress likely will be measured in terms of productivity and workforce growth, as well as overall economic potential.
 
Matt Kadish put on his Washington-insider’s hat and offered his nonpartisan view on hot topics in today’s political realm. On tax reform, he led with an important thought: even though no one knows when tax reform may happen or what it may look like, that shouldn’t stop business owners from trying to understand and have a sense of the “tea leaves” so they can plan for what might lie ahead. He went on to say that while the proposals from President Trump and the House (“A Better Way”) are the two leading contenders for what will be introduced when the time comes, one of the biggest issues Kadish foresees is whether or not Congress will find a way to pay for it all. The House proposal in particular suggests paying for most of reform using the Border Adjustment Tax, but that is already causing a stir among many big-box retailers. As these “minor” details are figured out, time could become an issue. While Congressional Republicans up for reelection in 2017 may get a pass, if tax and healthcare reform don’t happen before the 2018 elections there could be significant repercussions.
 
As to where, and when, both reform efforts may land, that really all depends. There are many items competing for bandwidth right now on the President’s agenda: immigration, investigations, travel ban, the wall on the Mexican border, infrastructure concerns, national defense, etc. However, Kadish pointed out that this fully stocked agenda shows, whether you agree with the initiatives or not, that President Trump is trying to make good on his campaign promises. That includes appointing individuals to cabinet positions who are in stark opposition to the departments they lead, a.k.a., implementing a strategy to ultimately reduce big Government.
 
Perhaps Kadish’s biggest point throughout the discussion was to become involved in the process, whether through an organization, such as the Small Business Council of America, or on an individual level by speaking to your local representative on issues that matter to your business — it can make a difference!
 
We would sincerely like to thank all of our speakers and attendees for engaging with us and adding all of their insights.
 
Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.