David Stockman has a stern message for investors: They're living in a fantasy land about Trump.
In a recent interview on CNBC's "Futures Now," the former director of the Office of Management and Budget under President Reagan said that "Wall Street is totally misreading Washington," and President Trump's promises of tax reform will be "dead before arrival."
The president is "essentially a 70-year old kid in a candy store who wants one of everything: More for defense, veterans, border walls, law enforcement, infrastructure and 'phenomenal' tax cuts, too—without the inconvenience of paying for any of it," said Stockman.
Of the proposed tax bill announced this week, he said, "It's a wonderful fantasy…but there's no way to pay for the $7.5 trillion cost of the main features."
The White House announced a one-page tax reform plan on Wednesday, and some of the points Stockman highlighted include: Three tax brackets, double standard deduction and the reduction of corporate and non-corporate business taxes down to 15 percent.
In a research note this week, Goldman Sachs pegged the cost of the tax plan to just under $5 trillion, when factoring in key changes such as repealing of the state and local tax, and a 35 percent top marginal rate instead of 33 percent. Goldman analysts expect the tax bill is "fairly likely" to become law, but warned progress could be slow.
"I like [the tax plan] but you have to pay for it either with a new tax like the border adjustment tax, which is dead, or spending cuts which Trump has ruled off the table," Stockman explained. "What you have down there is a total fiscal calamity that is going to basically dominate Washington."
Stockman expects a "constant fiscal crisis and stalemate" in D.C., which will ultimately delay the "good stuff," like a tax cut, from ever happening.
Of Trump's first 100 days in office, Stockman again referred to the White House as a "pop up store giving out candy before the 100th day to say they've accomplished something." Adding, "this isn't a serious plan, it can't be done. And I think it's only indicative of the huge trouble that's brewing down there in the beltway."
Despite Trump's somewhat tumultuous first few months in office, the stock market has been resilient. The S&P 500 (INDEX: .SPX) Index is up 11 percent since the election and 5 since the inauguration, the third best performance under a new administration since World War 2. On Friday, the S&P traded within 1 percent of its all-time high.
Eventually, however, Stockman expects the drama in D.C. to trickle into equities, sparking a significant pullback.
"I don't know what the stock market is thinking but if they have faith in a giant fiscal stimulus and tax cut then it's a delusional faith that's going to be badly disappointed and I think fairly soon," he added.
More From CNBC