In the wake of abandoned efforts to replace Obamacare legislation, strategists are weighing whether Donald Trump’s fiscal policy agenda is in jeopardy, with the president previously linking health-care reform with large tax cuts.
A slew of policy challenges, from implementing a modified health bill, to reaching an agreement on next year’s budget and an increase to the government debt ceiling, will forestall progress on tax cuts this year, warn analysts.
As the House Budget Committee begins the markup of a key resolution Wednesday, here’s a roundup of what analysts are saying:
BMO Capital Markets
“The broader implications of this health-care failure may reverberate a bit more over time than markets may be currently assuming,” according to strategists Ian Lyngen and Aaron Kohli. They suggest the failure will prompt investors to focus on risk of a “very delayed" hike to the debt ceiling. Expect investors to “start looking at the issue more closely in the coming weeks, but don’t expect any visceral market response till the 11th hour from either Congress or the markets,” they wrote.
Goldman Sachs Group
Economists led by Alec Phillips suggest passage of health legislation within the next several months remains possible. Legislation that preserves more of the existing subsidies in return for regulatory flexibility at the state level might be able to win support, the analysts wrote, or a fallback bill that stabilizes the individual insurance market next year.
They are also sanguine on tax cuts. “Despite recent legislative setbacks, we continue to believe that a tax bill is more likely than not to become law in 2018, though there remain many unanswered questions, including the potential size (we expect a $1 trillion tax cut over ten years)."
Beacon Policy Advisors
Analysts at the D.C.-based research firm are bearish, suggesting there won’t be enough room for maneuver to gain the support of enough moderates without alienating too many conservatives. Meanwhile, “a straight-up repeal bill with a lengthy time for replacement also will not garner sufficient support," the analysts write. "Finally, the third option being discussed -- a bipartisan insurance market support bill -- is also unlikely, at least in the near- to medium-term, due to the risk of a more protracted Republican civil war.”