Is Trump All There Is?


That’s it for Republican health care reform plan. For now.

After an emergency meeting in the White House with President Donald Trump, Speaker of the House Paul Ryan pulled the American Health Care Act (AHCA) from a vote on the House floor.

The AHCA was the Republican leadership’s effort to repeal and replace the Affordable Care Act (ACA), or Obamacare, which was signed into law seven years ago Thursday. But it faced a mutiny by both moderate and conservative Republicans in the House of Representatives, and so the Speaker folded his cards rather than face certain defeat.

It was a major setback for the president in his first legislative effort, and for some pundits it called into question his ability to push through the ambitious legislative agenda that triggered the Trump rally on Election Day.

But markets, which sold off a little this week, reacted well. The Dow Jones Industrial Average, which was off more than 100 points earlier, rebounded a bit and closed down around 60 points. The Standard & Poor’s 500 Index closed down less than 1/10 of one percent. The Nasdaq Composite index actually closed up a bit.

So, some investors are looking on the bright side.

They say with health care out of the way, the deck has been cleared for the administration to submit its tax plans to Congress. On Friday, Treasury Secretary Steve Mnuchin repeated his goal of getting a big tax reform bill, cutting taxes on businesses and the middle class rather than the top 1%,  passed by Congress by August “or right afterward.”

“It’s a big priority,” Mnuchin told a conference in Washington. Health care, he conceded, was “a very, very complicated issue,” but tax reform, he said, was “a lot simpler.”

We’ll see how simple it is when the bill is introduced and the special interests start protecting their exemptions. It took President Reagan nearly three years to get his tax reform bill through Congress, and Washington, D.C., had far fewer lobbyists in those days.

Frankly even if there are big tax cuts I don’t expect them to turbocharge economic growth. They didn’t have a lasting effect in the Bush Administration. And an aging population and slower productivity growth puts a cap on GDP growth well under 3%. That would still be better than the 2% we have now.

But growth is picking up overseas, earnings are back in positive territory, the Federal Reserve is in no hurry to hike interest rates quickly, and, well, investors are looking for reasons to buy. That may be good enough to keep the market going, whatever happens with health care and tax reform in the weeks ahead.