After suffering a stinging defeat on healthcare, what’s next for the Trump economic agenda? The first lesson for the new President is that despite holding a majority in both the House and the Senate, lawmaking is complicated and difficult. That said, because they failed to clear their first legislative hurdle, will Trump and Speaker Ryan be able to enact the next item on their to do list, tax reform, not to mention infrastructure spending?
The question is important to investors, who have driven up stock prices by about ten percent since the election, with the expectation that these two policy initiatives, along with a loosening of regulations, would propel US economic growth. While an overhaul of the personal and corporate tax system was not dependent on health care reform, Ryan had argued that it was the first step in reducing taxes. In the last iteration of the repeal and replace plan, the taxes that ACA imposed on some Americans (an extra 0.9 percent Medicare payroll tax on individuals making more than $200,000 and couples earning more than $250,000 and the 3.8 percent tax on net investment income) would have been a big gift to the rich. The Tax Policy Center estimated that those two cuts alone would have provided the top one percent with an average savings of $32,000.
Treasury secretary Steven T. Mnuchin said that he thought tax reform would be “simpler” than passing health reform. Maybe, but while tax reform may seem like a point of agreement among Republicans, the deficit hawk end of the party, represented by the Freedom Caucus, will be an obstacle to any plan that would increase the national debt. These are the same people who helped sink healthcare and they are likely to be emboldened after defying Trump.
As a reminder, the Tax Policy Center estimated that Trump’s proposed tax plan, including interest costs, would increase the federal debt by $7.2 trillion over the first decade and by $20.9 trillion by 2036 and separately found that the House GOP tax plan would reduce federal revenue by “at least $3 trillion over the first decade and by least $6.6 trillion over the second ten years.” Additionally, while overturning healthcare would have impacted some 30 million Americans, tax reform impacts five times that number—and every cut will create a clear winner and loser, all of them ably represented by powerful lobbies.
White House press secretary Sean Spicer said “the president and the team here have left everything on the field,” on healthcare …it looks like they all need to shore up their reserves to prepare for the battles that lie ahead.