Trump Tax Bill Was Overhyped; Stimulus Is Coming: Valliere

Valliere, who zeroes in on the nexus of Washington politics and his analysis of global markets, declares that the One Big Beautiful Bill Act was “overrated” and evaluates Trump’s presidency thus far.

Offering an upbeat forecast for the economy, he stresses: “The White House wants the economy to be red-hot when we get into November.”

Here are excerpts from our interview:

THINKADVISOR: What are the tax implications if the Democrats take the House of Representatives in the 2026 midterm elections?

GREG VALLIERE:  First of all, the Democrats look a little stronger, finally, after a year in the wilderness.  Even though [Democrat Aftyn Behn] lost the Dec. 2 Kentucky special election, the Democrats did pretty well.  

If the [midterm] elections were held today, I think the Democrats would take the House. Speaker Johnson, Trump and others are going to go after stimulating the economy. 

THINKADVISOR:  What’s your general outlook for the economy for 2026?

VALLIERE:  The basic economy will stay surprisingly solid.  I’ve thought, for the last two or three years, that the economy is astonishingly resilient. And with a new, accommodative Fed chairman, I think we’ll see interest rates [decrease]. To me, that’s a very constructive scenario.  

THINKADVISOR: Any other thoughts about a new Fed chair?  Trump reportedly has decided on [National Economic Council director] Kevin Hassett.

VALLIERE:  I think it’s Hassett.  He’s very easy to get along with. He’ll get along with the press and with people at the Fed. Trump may wait another week or two or three [to announce his pick].

It’s going to be a very accommodative Fed.  So you’ve got strong stimulus on monetary policy and strong stimulus on fiscal policy.  On both fronts, there will be no restraint. 

In Washington, the budget deficit is viewed as irrelevant, and I think that will persist.

The Fed has medicines to put to work if they need them. It has medicine right now with interest rates.  It is prepared to cut rates at least twice in the next two or three months.  It’s determined to stimulate more and more.  Whoever is picked as chair is going to be very accommodative because Trump will insist on it. 
 
THINKADVISOR:  In June, you opined that the U.S. deficit might exceed $40 trillion by the end of this decade.  Do you still stand by that?

VALLIERE:  It wouldn’t surprise me. The number I’ve seen most recently is about $38 trillion.  It’s moving very quickly. Of course, we see a potential new war in the Caribbean.  

 THINKADVISOR:  Trump is proposing payments of $2,000 per person — a “tariff dividend” — as part of the stimulus.  Your thoughts?

VALLIERE: That isn’t chicken feed. Voters would like it, though Congress is going to have a hard time coming up with that kind of money.  But the public wants stimulus, and they’re going to get stimulus.
 
THINKADVISOR:  What about the new deduction of $6,000 per eligible person aged 65 and older?

VALLIERE:  That’s a lot of money.  In both the House and the Senate, there’s some anxiety that they’re going to spend too much.  Five minutes ago I said no one cares about the deficit, and I still think that’s true. 

But there are a lot of moderate Republicans, like [Sen. Ron] Johnson, of Wisconsin, who are going to say that we’re just spending too much.

THINKADVISOR:  What was the biggest industry news or development in 2025 regarding tax policy?

VALLIERE: I think the Big Beautiful Bill was overrated.  It didn’t have as big an impact as some thought it would.  There was big impact with immigration, which fell to almost zero. I have to give Trump a lot of credit.  He managed to pull that one off. 

THINKADVISOR: What do you think about the Big Beautiful Bill not extending the Affordable Care Act’s premium tax credits?
 
VALLIERE:  It’s going to be a huge story as we go into next year. There’s also a side issue that will be dominant, and that’s abortion. The Republicans are saying that if the Democrats try to liberalize abortion, they won’t vote for a bill extending the Obamacare tax credits.

So it’s entirely possible we could go well into the spring or longer without resolution on this.

THINKADVISOR:  Because of the BBB, [the current] federal tax brackets are now permanent. Does this have any important implications?

VALLIERE: Not until the 2028 elections, when everything will be on the table. Till then, it’s just going to be posturing.

THINKADVISOR:  How significant is the Inflation Reduction Act?

VALLIERE: There’s going to be a lot of action there. The White House has underestimated the impact of inflation on ordinary Americans. Trump has shown an inability to have a good feel for voters.  I always thought he had decent political instincts.

He’s not the most likable guy in the world, but I thought he had pretty good instincts. He got the inflation story, the affordability issue, totally wrong.

THINKADVISOR: You have many connections in Washington. Broadly, what’s the inside-Washington buzz about the president?

VALLIERE:  Donald Trump is not going to win any popularity contest.  But most people in Washington say grudgingly that he can get things done.  He has had a good track record on immigration and several other issues.

THINKADVISOR:  From a taxpayer perspective, has Trump been a good president?

VALLIERE:  He knows the economy needs medicine. But he does not have a really good feel for what the public wants. He got caught off-guard — he didn’t realize the economy needed some stimulus.  It took him a while before he realized that he was behind the curve.

THINKADVISOR: Do you think he makes such decisions unilaterally, or does he listen to advisors?

VALLIERE: He listens to Hassett and [Secretary of State] Marco Rubio.

THINKADVISOR: What are your thoughts about repealing the $10,000 cap on federal itemized SALT deductions? [The Big Beautiful Bill temporarily lifted the cap to $40,000 for most taxpayers.]

VALLIERE:  It has a lot of support in the Northeast. And since it’s stimulative, it will get a hearing from members of Congress. But I would wager that it does not succeed — not enough votes. It has an uphill battle.

THINKADVISOR:  What do you forecast as the biggest trend in 2026 besides AI?

VALLIERE: The one thing that this administration wants more than anything else is stimulus. They worry that the midterm elections in November 2026 are going to be very difficult for the Republicans. They worry they could lose the House. That’s entirely possible.  

So the White House has to stimulate, whether it’s getting a new Fed chairman who is very aggressive in monetary accommodation, or whether 
it’s trying to get another tax bill passed.  But I have my doubts about that.

Anything that smacks of stimulus would get a very positive reception in the White House. They want the economy to be red-hot when we get into November.