No. 5 – Europe’s Unity In Doubt
Over a year since the Brexit referendum surprised most analysts and onlookers, Europe remains strained by the forces of nationalism, notes Hooper. In recent elections, German voters dealt Chancellor Angel Merkel a setback when they forced her to form a coalition government with Germany’s liberal Green Party and pro-business Free Democratic Party.
Simultaneously, the government headed by British Prime Minister May prepares to navigate a March 2019 exit from the European Union. While May has previously been on record of supporting a “hard Brexit” in which much of the EU’s policies liberalizing trade and immigration are undone, in recent speeches she’s taken a softer tone. In addition, a recent referendum in Spain has touched off a political crisis as the Catalonia region chose succession in a vote deemed by the Spanish government to be illegitimate and unconstitutional
“We’ve noticed an inverse relationship between uncertainty and capital expenditure,” says Hooper. “So many companies don’t know what is happening, so they freeze. That kind of uncertainty can be really damaging to an economy.”
No. 6 – Tax Reform’s Lukewarm Prospects
While the Trump administration appears to have drawn a red line concerning, at a minimum, the reduction of the corporate tax rate to 20 percent, what a tax reform bill looks like is anyone’s guess, says Hooper.
“There are certainly some positive potentials for the tax bill in front of Congress right now, but the ultimate legislation, if passed, may look very different from the administration’s comprehensive wish list,” she says. “We have to look at the failure of three attempts to repeal and replace the healthcare reform as a reminder that it’s not so simple to form a coalition in Congress, even within a single party.”
While the current plan is broad, says Hooper, calling for lower corporate and household taxation and provisions to tax assets repatriated from overseas, it’s unclear if any Congressional Democrats will support the measure, especially if it includes the elimination of the estate tax and of state-and-local tax deductions. Hooper says that deficit-hawk Republicans, like Kentucky’s Rand Paul, might also balk at potentially increasing the deficit by reducing revenue absent any significant spending cuts.