An “increasingly partisan” US Congress makes President Donald Trump’s tax reforms unlikely to pass before 2018, according to Pimco.
Commenting on the state of play in Washington, Pimco head of public policy Libby Cantrill said that while the Republican Party will have little difficulty getting any proposed legislation through the House of Representatives, the same could not be said for the Senate.
“With 52 seats, Republicans lack the all-important 60-vote filibuster-proof majority,” she said.
“This means that to pass legislation, Republicans must either secure at least eight Democratic votes, which seems unlikely in an increasingly partisan Washington, or use an arcane process known as budget reconciliation, which allows the Senate to pass legislation with only 50 votes.”
Ms Cantrill said the budget reconciliation process comes “with strings attached” and due to the way the process works, the Republicans will have to overhaul the healthcare system before they can commence on tax reforms.
“This is a key point, given that a healthcare overhaul could take all year – it took President Obama 14 months, even with the benefit of higher approval ratings, healthier majorities in both chambers and a shared vision for healthcare overhaul within his party,” she said.
“Tax reform could easily slip into 2018, pushing back financial reform and infrastructure, and if it gets too close to the midterm elections in November of that year, tax reform may prove elusive.”
There are, however, three caveats to this assessment, Ms Cantrill said, noting that these headwinds could “rapidly turn in to tailwinds” if the Republican Party were able to develop a unified vision for healthcare, policy makers resolved the direction of tax reforms or Mr Trump used his “bully pulpit” to speed the process up.
Regardless of this, Ms Cantrill said “the prospects that President Trump will push through his policy agenda in the first year look tenuous at best”.