Chaos in Washington Dimming Prospects for GOP Tax Cuts

Wall Street has to be wondering: What good is a Republican government if it can’t get its act together to pass a tax cut? Photo: Chip Somodevilla/Getty Images

Nine days ago I wrote an article arguing that the highly coordinated GOP legislative agenda for 2017 was in grievous danger of slipping over the horizon into an uncertain future. Thanks mostly to massive problems associated with the repeal and replacement of Obamacare, what was supposed to be a blitzkrieg on Capitol Hill that quickly dealt with health care and then moved on immediately to tax and budget issues was instead bogging down in a “legislative Russian winter” dogged by delays and perhaps headed toward disaster and defeat.

Then James Comey was fired for reasons that seemed to involve his investigation of the Trump campaign’s possible links to Russia. Then the president of the United States gave highly classified intelligence to two top Russian diplomats. Then evidence appeared that the president of the United States asked James Comey to stop investigating Michael Flynn for his contacts with Russia.

A long, dark legislative winter is descending on Washington, with no end in sight.

And so, as Politico reports, expectations for a big tax-cut bill this year that would satisfy hungry Republican constituencies and perhaps ignite an economic boom have dropped to the vanishing point.

Wall Street and corporate America view President Donald Trump’s bold agenda for a sweeping tax overhaul as largely dead for the year.
Executives, lobbyists and Wall Street analysts increasingly believe the administration — distracted by repeated crises while facing a short and crowded legislative calendar — will be unable to deliver on Trump’s promise to slash corporate and individual tax rates this year and ignite significantly faster economic growth.

It is a truism in Washington that big, complicated legislation like a tax “reform” package cannot be enacted in an election year. So prospects for that rich tax-cut buffet wealthy Americans and corporations have been hungering for are slipping toward 2019. In Donald Trump’s Washington, that seems an eternity away. And the same factors that have bedeviled the GOP this year are making it increasingly likely that the balance of power in Congress in 2019 could tilt significantly toward Democrats, who could even control the House.

But it sounds like big-money bystanders to politics have bigger and more immediate fish to fry than wondering about 2019:

The main hope now in corporate America and on Wall Street is that the White House and Congress manage to bypass a scary fight over raising the nation’s debt limit this summer, keep the government open and avoid any major foreign policy crisis.

I guess a possible constitutional crisis over what could be presidential obstruction of justice would not help the atmosphere much, either, would it? Is there room in the 40 legislative working days before the August recess for impeachment hearings? Think that sort of thing might cast a pall over tax and budget deliberations?

Beyond disappointing lobbyists and upsetting the whole house of cards the GOP agenda is looking to be, failure on the tax front could threaten the single most important underlying asset the Republican regime governing the country possesses: a growing economy.

“I think there is room for a market correction because all of the upside seen after the election is already priced in,” said [economist Megan] Greene. “It’s just really hard to guess what the specific trigger will be.”

In other words, markets may soon signal a downward trend because the GOP has not delivered on its promises to Wall Street. As for a “specific trigger” sending markets into a swoon, that could be as close as the next unexpected international crisis, the next presidential tweet, or the next cold blast of bad news involving Russia.

In the longer run, the powerful economic interests that finance the Grand Old Party may be left pondering an important question: If a trifecta Republican government can’t get it together to pass a tax cut, what good is it anyway?

Chaos in Washington Dimming Prospects for GOP Tax Cuts