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Trump and Your Money: How Policy Could Touch Your Pocketbook

Personal Finance
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Many people voted for Donald Trump hoping he could help them refill pockets picked by an economy that hasn’t worked for them. Now people may need to be on guard against having their pockets picked by companies freed from consumer protections.

A Trump White House and a Republican Congress could repeal measures meant to protect consumers from predatory lenders, greedy insurers and unethical advisors. Below are some of the ways your bottom line could be affected if campaign promises should come to pass; we’ll update you regularly on what to expect.

HEALTH INSURANCE

Congressional attempts to repeal the Affordable Care Act collapsed this summer. The General Accounting Office had warned that replacement plans floated by congressional Republicans would cause tens of millions of Americans to lose coverage and that premiums would spike for older Americans. Three Republican senators ultimately joined Democrats to vote against a slimmed-down proposal that essentially would have repealed Obamacare without providing a replacement. Trump has said his plan now is to “let Obamacare fail” but lawmakers have begun a bipartisan effort to fix portions of the law. Meanwhile, the Centers for Disease Control reported that there were 20.5 million fewer uninsured Americans now than in 2010 and 500,000 fewer since the beginning of the Trump administration.

Trump has said his plan now is to “let Obamacare fail” but lawmakers have begun a bipartisan effort to fix portions of the law. Meanwhile, the Centers for Disease Control reported that there were 20.5 million fewer uninsured Americans now than in 2010 and 500,000 fewer since the beginning of the Trump administration.

MEDICARE

Speaker of the House Paul Ryan and other Republicans hope to effectively end Medicare and replace it with a privatized system of vouchers seniors could use to buy coverage. The government would subsidize coverage, making payments to private insurers rather than to medical providers. If those payments aren’t enough to cover costs, seniors will have to make up the difference. This has led the Kaiser Family Foundation to predict that health care costs for seniors would double by 2022 and take up half of their income rather than the 22% predicted under the current system. The changes would be phased in to affect only newly eligible beneficiaries, presumably to avoid disrupting current retirees and earning their wrath.

Trump said during the campaign he would try to protect Medicare and Social Security benefits, but his Office of Management and Budget Director Mick Mulvaney had introduced several bills to cut both programs while he was a congressman from South Carolina.

MORTGAGES

The president wants to repeal the Dodd-Frank Act, the post-financial crisis reform bill that, in part, required mortgage lenders to ensure people had the ability to repay the money they were borrowing. Critics say that loosening those strictures could make it easier for people to obtain unaffordable home loans, setting them up to lose those homes and raising the specter of another foreclosure crisis. Federal Reserve chief Janet Yellen and others have warned that the regulations helped make the financial system safer.

Critics say that loosening those strictures could make it easier for people to obtain unaffordable home loans, setting them up to lose those homes and raising the specter of another foreclosure crisis. Federal Reserve chief Janet Yellen and others have warned that the regulations helped make the financial system safer.

» Latest story: How the Trump presidency will impact housing in 2017

» Latest story: 2017 mortgage rate outlook: The Trump effect

INVESTING

The president already has tackled a wide-ranging agenda, and the Dow Jones industrial average surpassed a tantalizing, if largely symbolic, marker of 20,000 during his first week in office, while other indexes also reached new highs. There are reasons investors may remain cautious, including questions about how long the economy will continue its expansion, the future of interest rates and how Trump’s agenda could impact future earnings.

» Latest story: Advisor: How to manage investments during the Trump presidency

THE CFPB

The Consumer Financial Protection Bureau, a watchdog agency created by the Dodd-Frank Act, may meet its demise. The CFPB helped resolve millions of consumer complaints, created rules to make mortgages safer, reformed how credit bureaus handle disputes, started to clean up the debt collection industry and proposed limits on payday lenders, among many other changes. No other agency prioritizes consumers, and if there’s no cop on the beat, critics say, there is a much greater risk that financial services companies will be able to deceive and overcharge customers.

» Latest story: Your wallet will suffer if this agency is gutted

THE FIDUCIARY RULE

The new fiduciary rule by the Department of Labor requires advisors to put customers’ interests first when giving advice about retirement savings. That’s a big step up from previous rules, which required advisors to only make “suitable” recommendations and essentially allowed them to recommend investments that pay the advisors more, even if the investments are more expensive or perform worse than available alternatives. The new rule has been hugely controversial, with many financial services firms fighting it every inch of the way.

The Trump administration ordered the Labor Department to review the rule and its initial implementation was delayed by a few weeks. The Labor Department has since allowed parts of the rule to go into effect but has sought an 18-month delay in implementing other parts. Plus, there are indications the department will try to undo a key part of the rule, which would have allowed investors to file class-action lawsuits over violations. The lawsuit provision is the major way the rule would have been enforced.

» Latest story: Why you still can’t trust your financial advisor

STUDENT LOANS

Trump wants to eliminate the subsidized loan program that pays low-income students’ interest charges while they’re in school. He also wants to change the student loan repayment program by capping a borrower’s monthly payment at 12.5% of their income and offering undergraduate borrowers forgiveness of remaining balances after 15 years. Graduate students could get forgiveness after 30 years. Currently, the lowest-income borrowers can get monthly payments as low as zero and forgiveness is offered after 10 years in public service jobs or 20 to 25 years otherwise.

Trump’s proposed budget would slash Education Department funding by 50% and move responsibility for financial aid to the Treasury Department. Since income-based repayment requires Treasury involvement, the latter idea has some bipartisan support.

Trump’s education secretary, Betsy DeVos, a Michigan millionaire and school choice advocate, abandoned a plan to reduce the number of student loan-servicing companies from nine to one. But she froze rules that would have benefitted people cheated by for-profit schools, prompting lawsuits by 18 Democratic-led states and the District of Columbia.

TAXES

Trump proposed big changes to the U.S. tax system during his successful run for the White House. The president’s plan would affect virtually all taxpayers in some way. Among the proposals:

  • Condense the current seven federal income tax brackets (which range from 10% to 39.6%) to just three (12%, 25% and 35%).
  • Cut the corporate tax rate to 20% from 35%.
  • Expand the standard deduction (to $12,000 for individuals and $24,000 for married couples) and eliminating personal exemptions
  • Eliminating most other deductions except for mortgage interest and charitable deductions (although the larger standard deduction mean fewer taxpayers would benefit from taking these deductions)
  • Repeal several taxes, including the estate tax, the generation-skipping tax, the alternative minimum tax and the Obamacare tax on investments

The impact of each proposal, of course, would depend on your individual tax situation. Whether your taxes will change, however, is uncertain. That’s because the president doesn’t have the power to set tax policy. Congress would have to approve any changes.

Updated Sept. 29, 2017.