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Trading  | February 15, 2018

President Trump surprised a group of lawmakers during a Wednesday meeting at the White House by repeatedly mentioning a 25-cent-per-gallon increase on federal gasoline and diesel tax in order to help pay for upgrading America’s crumbling infrastructure by addressing a serious shortfall in the Highway Trust Fund, which will become insolvent by 2021.

The tax increase was first pitched by the U.S. Chamber of Commerce in January, while the White House had originally been lukewarm towards the idea.

The federal gasoline and diesel tax has been at 18.4 and 24.4-cents-per-gallon respectively since 1993, with no adjustments for inflation. It currently generates approximately $35 billion per year, while the federal government spends around $50 billion annually on transportation projects.

Senator Tom Carper (D-DE), the top Democrat on the Senate Environment and Public Works Committee, seemed pleasantly surprised at Trump’s repeated mention of the tax as a solution to pay for upgrading American roads, bridges and other public works. 

While there are a number of issues on which President Trump and I disagree, today, we agreed that things worth having are worth paying for,” Carper said in a statement. “The president even offered to help provide the leadership necessary so that we could do something that has proven difficult in the past.”

Rep. Peter DeFazio (D-OR) – the top Democrat on the House Transportation and Infrastructure Committee was also present at the meeting, in which he says President Trump told lawmakers he would be willing to increase federal spending beyond the White House’s $200 billion, 10-year proposal.

“The president made a living building things, and he realizes that to build things takes money, takes investment,” DeFazio said.

GOP Support?

Rep. Bill Shuster (R-PA), chairman of the House Transportation and Infrastructure Committee, is encouraging his GOP colleagues to support the increased gas tax as a way to keep the Highway Trust Fund solvent beyond 2021. The fund finances road, bridge and transit projects. 

“He understands that we’ve got to figure out the funding levels and where the money’s coming from, make sure it’s not smoke and mirrors,” Shuster said of the president.

The Highway Trust Fund has been flirting with bankruptcy for the better part of a decade, while the Senate passed a bill in 2015  to boost highway spending without a solution to fund it. Lawmakers eventually passed a 6-year transportation measure which keep the trust fund solvent for another three years. 

Republican leaders have already rejected the idea, however, along with various other entities tied to billionaire industrialists Charles and David Koch. 

“Our organizations worked hard over the past year to support your efforts and the efforts of tax-cutters in Congress to provide American families much-needed and long-overdue tax relief,” reads a letter from executives of the Koch-affiliated Freedom Partners Chamber of Commerce and Americans for Prosperity. “But increasing the gas tax would effectively undermine recent tax cuts by clawing back hundreds of billions of dollars — roughly 25 percent of the total benefit from tax reform.”

“The American people are just beginning to feel the benefits of the recently passed tax cuts bill,” said Brent Gardner of Americans for Prosperity in a Wednesday statement. “Instead of undermining the relief taxpayers just received, the president and Congress should focus on smarter spending and breaking through the regulatory gridlock that delays projects and drives up costs.”

Republican Senator Chuck Grassley (R-IA) doesn’t think the gas tax has any chance of even coming up for a vote in the Senate. “He’ll never get it by McConnell,” said Grassley, referring to Senate Majority Leader Mitch McConnell.

Sen. John Barrasso (R-WY), Chairman of the Senate Environment and Public Works Committee opposes the gas tax hike on the grounds that collected funds wouldn’t all go towards repairing and restoring infrastructure. 

“Today was the first of many conversations about the president’s infrastructure plan and how to fund it,” Barrasso said in a statement. “Ultimately, the final decision will be made by Congress as a whole.”

Industry Support

Several groups including the American Trucking Associations and the U.S. Chamber of Commerce support the gas tax as the easiest and most efficient way to generate money for projects. 

“We support the president’s big and bold vision for strengthening American infrastructure,” Chris Spear, president and chief executive officer of the American Trucking Associations, said in a statement. “Because it is a user fee, the fuel tax is the most conservative, cost-effective and viable solution to making that vision a reality.”

One has to wonder – considering that Congress is unlikely to pass the proposed hike – if President Trump is simply buying a little political capital with Congressional Democrats. 

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