The Thune-Johnson Stock Market Selloff

A continuing resolution is no substitute for tax and spending cuts

Trump bought a Tesla, as seen in an image from White House social media, March 11, 2025.

Conventional wisdom about the cause of the recent stock market selloff has to do with President Trump’s increased tariffs and tariff-related threats against Canada, Mexico, and China. That and a radically revised downward view of the market value of Tesla, related to Elon Musk’s involvement in the Trump administration. It sent us back to reread our July 18, 2024, column, “Trump and Vance Could Crash the Stock Market.”

Okay, but the smart money view has been also—as Citadel Founder and CEO Ken Griffin put it, “for the United States, you know, all these issues around tariffs…It’s all second order. First order: we’re back to business.”

So what’s new? Speaker Johnson on Saturday March 8 rolled out a continuing resolution that would fund the government through September 30 and, as a CNN account put it, “buy time for Donald Trump and GOP leaders to steer key pieces of the president’s agenda through Congress this summer.” This summer? Why wait that long?

Trump and the Republican members of Congress were elected in November. Trump has managed to implement the tariffs—which are tax increases—already, without a six- or nine- or ten-month delay. The Senate was pliable enough to confirm, swiftly, nominees like Robert F. Kennedy Jr and Tulsi Gabbard. Why should non-tariff tax and budget policy proceed on Biden-style autopilot for another six months?

Trump had executive orders ready to go on day one. Why didn’t Johnson and Thune have a tax and spending bill ready? Not just a skeletal budget framework, but actual legislation implementing the key provisions?

Steve Forbes warned them. He wrote on December 17, 2024, “We Need a Big, Fat, Tax Cut Fast,” “Donald Trump’s second-term success depends on his getting a substantive tax cut bill passed—and quickly….The Trump team should start putting together a tax cut proposal ASAP. A running start come January could create critical momentum in getting a package fast-tracked through both congressional chambers through the reconciliation process….The big tax rate reductions of Ronald Reagan’s first term were fatally phased in, which meant that the real punch didn’t come until 1983, two years after the Gipper took office. The economy suffered from the delay, and the Democrats made sizable gains in the House in the midterm elections…A similar mistake was made in Donald Trump’s first term. The tax bill was delayed, not passing until December 2017. A year of extra growth was lost, and Republicans were decisively defeated for control of the House, with Nancy Pelosi becoming Speaker. Republicans shouldn’t again fall into the trap of delay.”

Forbes warned in December, “Another factor the GOP must keep in mind: tariffs. Depending on circumstances, President Trump will likely impose some. We’ll need big tax cuts to help offset them.” Thune and Johnson should have listened to Steve Forbes.