The Economy, Stupid.

Much of the rise in the stock market can be attributed to the anticipated gains to corporate net income of the lower tax rate. Were corporations in the DJIA previously paying tax at 35% then the cut to 21% would have increased their net income by 66%, which translates to a rise in the DJIA index from 18,000 last year to 30,000; the markets are over half way there. In addition, some gains are likely to come from the rescinding of regulations put in place during Obama's administration.

Higher net income, if passed on to employees, will have a positive effect on GDP which may go some way (but not all the way) to pay for the tax cuts; estimates suggest that this will cost the Treasury about $150b a year, about 5% of the budget. If it is spent on automation, some gains may come from increased sales, and from the making of the equipment, though any related reduction in employment would dampen the effect. And if returned to shareholders, some might go back into the economy though increased spending, though at a lower multiplier than through increased wages.    

There are additional costs to which the relaxing of regulations will give rise; increase pollution will lead to sickness, lost work productivity, and increased demands on Medicaid, not to mention the clean-up costs that are less likely than before to be borne by the polluter and more likely now to be borne by tax payers. So while the fundamentals were in place before Trump took office, it would be fair to say that the Republican agenda over which he is now presiding is having a positive effect in the short term. Whether this will be outweighed in the long run by the unintended costs remains to be seen.