On Friday morning, in the aftermath of Trump’s surprising victory forcing the GOP Healthcare bill repealing Obamacare through the House, we noted that Goldman’s DC analyst Alec Phillips responded that, somewhat paradoxically, the impact on Trump’s broader economic agenda would actually be more adverse than most economist and pundits expected, stating that “the main effect of House passage is to delay the consideration of tax legislation, which looks even more likely than before to be delayed until 2018.“
In a subsequent, and far more detailed note titled “Health Reform Gains Momentum as the Rest of the Agenda Slows“, over the weekend Phillips has provided an extensive explanation why he believes that the passage of Trumpcare will likely adverse implications on Trump’s tax policy timeline.
Here is the summary from the Goldman analyst:
House Republicans have passed their American Health Care Act (AHCA), moving repeal of the Affordable Care Act (ACA) one step closer to reality. However, while the House vote was necessary for ACA repeal, it is far from sufficient, and the process is likely to become harder after this first step. House passage increases the likelihood that health legislation will be enacted this year, though it still faces several obstacles. In the meantime, uncertainty regarding insurance regulation and subsidization could lead to lower enrollment and plan participation in the existing system, which has already struggled with weaker than expected enrollment and declining plan options. In isolation this legislative victory is likely to be interpreted as bullish for other aspects of the agenda, including tax reform, as it demonstrates that congressional Republicans may be able to form a working majority on controversial issues after all. However, the revival of health legislation, which could at least take a few more months to conclude, could substantially delay consideration of the remainder of the legislative agenda. This further reduces the likelihood that Congress will enact a tax cut before year-end, in light of the additional steps that would be necessary once the health bill has been enacted. While we continue to believe that tax legislation is likely to be enacted in early 2018, further delays could push consideration of tax legislation too close to the upcoming midterm election, reducing the likelihood that tax legislation is enacted in the next two years.
This post was published at Zero Hedge on May 7, 2017.