Tax reform takes a backseat while Trump continues to focus on repealing Obamacare

The Senate remains in session for the next couple weeks and Sen. Lindsay Graham (R-S.C.) is pushing an Obamacare repeal approach that would block grant federal Obamacare money to the states. But at this point there is no reason to believe this approach will succeed where at least 70 other GOP efforts have failed. Senate Majority Leader Mitch McConnell has said he wants to move on.

The fundamental problem here is that the public doesn’t really want Obamacare repealed and doesn’t like any of the GOP options on health care. The only real path forward is a bipartisan effort to fix the parts of Obamacare that aren’t working. Trump could latch onto this and say he “fixed” health care. Maybe new White House chief of staff John Kelly can convince him of this. But don’t count on it.

Until the White House throws in the towel on full repeal, the rest of the Trump economic agenda will remain stalled. And Congress needs to turn its attention — and quickly — to figuring out a way to fund the government past September and raise the debt limit sometime shortly after that. Every day spent twisting in the wind on Obamacare increases the possibility of a shutdown and a debt limit scare that could rattle markets.

The White House also now faces a spiraling crisis with a belligerent and nuclear-armed North Korea that has Trump rattling the saber with China. Threats here include a military conflict with Pyongyang and an economic sanctions fight with the Chinese. Either would crush the stock market.

The box the White House now finds itself stuck in is based on a couple fundamental missteps.

The biggest is starting with Obamacare in the first place. It would have made much more political sense to kick off the administration’s legislative push with an infrastructure bill to deliver on Trump’s promises to “Make America Great Again.” That could have been tied to or preceded a tax reform effort to lower the corporate rate, switch to a territorial system and allow the repatriation of foreign earnings at a reduced rate.

Fresh off some big political wins, Trump and the GOP Congress could then have taken a crack at Obamacare repeal with a coordinated plan and strategy that it could sell to the American people.

None of this happened, of course. And so Wall Street must now contend with the fact that Congress will return in September with a month to fund the government and not much longer to raise the debt limit. There is no strategy in place for either. And Republicans will probably have to wind up relying on Democrats to help them make sure the government doesn’t shut down and the nation doesn’t default.

And who is to say Trump won’t threaten not to sign anything that doesn’t also repeal Obamacare? There is big risk brewing and the clock is ticking.

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