Does AHCA Kill Tax Reform?
With narrow congressional majorities, it shouldn’t have been a surprise that the GOP could not repeal Obamacare, or even make a partial repeal with AHCA. Passing AHCA may have been only a Pyrrhic victory – now Democrats still own failing Obamacare, and the GOP can campaign on it in 2018. Trump comes away from the episode looking pretty good, having never made it a high priority in the first place, and coming off like a tough and principled negotiator. This puts a demand effect on Ryan and the GOP Congress to get tax reform done. The border adjustment scheme is complex and divisive, and is likely to be set aside. We think Priebus mis-spoke and spooked markets by suggesting on Sunday that Trump favored it. The issue will be how much of a tax cut the GOP Congress is willing to advocate without scoring as revenue-neutral. A good initial sign is that the Freedom Caucus, the swing bloc in the House, is setting that concern aside.