Now that repealing Obamacare is out of the picture indefinitely, here is what the timeline looks like for the balance of Trump’s policy agenda, which includes reform of Trade, Budget and Tax policy, courtesy of Barclays, which takes a pessimistic outlook for what is in store and writes “Trump’s short-term agenda (reforms of healthcare, taxes, and trade policy) seems overly optimistic and has met resistance; healthcare’s lack of progress begs the question – is this GOP Congress an opposition party or a governing party?” We should know the answer once Trump/Ryan try to pass the next key item on the Trump agenda: the much anticipated tax reform.
Some additional thoughts from Barclays:
Healthcare may negatively affect tax reform negotiation, as the GOP needs to transition from a party of opposition to a party that governs.
- Healthcare: House delays American Health Care Act (AHCA) – The GOP’s goal is to minimize intra-party struggles, re-focus on comprehensive tax reform, and leave the option to revisit healthcare
- GOP calls to repeal and replace ACA over the past seven years were more political rhetoric than an actual plan. GOP has not resolved an internal dispute with healthcare’s three-legged stool – the individual mandate, providing subsidies, and enforcing the guarantee for pre-existing conditions – as removing any one of them requires trade-offs between cost and coverage
- We expect an intense intra-GOP fight, especially between the president and Speaker Ryan. There are concerns that the GOP domestic policy agenda could dissolve, but we think this delay will increase efforts to pass tax reform (or targeted tax cuts) before the Nov 2018 mid-term elections
- Tax Reform or Tax Cuts: GOP to re-focus immediately on taxes and pursue comprehensive reform, with a goal of passing legislation by August, well before the 2018 mid-terms
- Outlook: Comprehensive tax reform will very likely meet significant obstacles, as there are limited revenue raisers to offset the proposed substantial tax cuts. We think tax reform could evolve to tax cuts (corporate rates possibly from 35% to 20-30%) and a repatriation of foreign earnings (potentially taxed at 8-15%). The House-proposed border adjustment tax (BAT) faces hurdles, given concerns of price increases, WTO compliance, and possible domestic job losses. Current costs of individual tax cuts will likely alarm fiscal hawks; we expect a more muted plan than the current one
- Trade: Administration aims to implement protectionist measures (eg, tariffs), as they view this form of economic nationalism as spurring long-term growth
- NAFTA process has started; expect formal notice to trading partners shortly
And as an added bonus chart, here is Barclays on its take of Trump’s proposed Tax reform, which the GOP Aims for August, but expect late 2017 or early 2018: “While GOP-led Congress aims to use budget reconciliation (FY2018) to pass tax reform, politics of ACA reform will complicate tax negotiations”