Tags: Obamacare | Donald Trump | Paul Ryan | reform

With Obamacare Repeal Stalled, Now What?

With Obamacare Repeal Stalled, Now What?

By    |   Monday, 27 March 2017 10:33 AM

The weekend started with the absence of a vote on the Trumpcare replacement for Obamacare.

President Trump has suggested the failure to achieve his campaign pledge was due to the Democrats in Congress stating: “If Democrats got together with us, and got us a real healthcare bill, I’d be totally OK with that. The losers are Nancy Pelosi and Chuck Schumer, because they own Obamacare.

They 100 percent own it” while he refused to bash the House speaker, Paul Ryan, but declined to answer a question about policy changes he would like to see in health reform.

Instead, he said he was ready to move on to tax reform, saying: “We’re probably going to start going very strongly on big tax cuts. Tax reform that will be next.”

Financial markets have now to carefully assess what this all could mean for US Presidential authority.

House Republican leaders abandoning their bill to replace the Affordable Care Act at least means that for the time being that the Congressional agenda will not be clogged up.

Other measures can now be debated and the move to tax reform is something that investors should, in theory at least, like.

Nevertheless, there is a concern about the ability to build a coalition with the current style of leadership.

Healthcare reform proved to be too complicated to be managed.

It may be that reforming the tax code, which has remained unreformed during three decades for a reason, will also prove to be complicated to manage and as Morgan Stanley put it earlier this month: “A ‘border tax’ in its various potential forms is the critical uncertainty in tax reform, often the differentiator between more and less positive risk outcomes. Building on the unintended consequences we’ve previously identified there isn't a clear case for the near-term benefits of a border tax, even when paired with regulatory reform, given the path for the dollar as seen by our FX strategists. Furthermore, our corporate credit team sees meaningful risks from this provision, given elevated business model uncertainty and a weak starting point on corporate fundamentals.”

Yes, investors should weigh all this very carefully.

The combined effect of the Trump failed Healthcare vote on Friday and in Germany, on Sunday, Chancellor Merkel winning unexpectedly a bellwether vote in the local state election in the Saarland state, which is the smallest state in Germany and that was politically very important to Mrs. Merkel ruling coalition has caused, albeit only in part, the euro to strengthen against the dollar.

Investors should keep in mind that, especially these days, when the same amount of political risk is at play, this would be more damaging to the dollar than it would be to the euro because the value of the dollar is dependent of foreign capital inflows of about 2.4 billion dollars a day and foreigners are more likely to shy away from perceptions of political problems. The euro does not have that issue.

Another vote that was important in an indirect way to China-US relations took place in Hong Kong where China’s chosen candidate for Chief Executive Lam won the electoral college.

Whether Lam would have won the popular vote is debatable, but winning an electoral college without winning the popular vote is not unheard of elsewhere in the world.

This vote matters as Hong Kong and indeed China as a whole, have to deal with the consequences of changing growth, changing trade patterns and changing monetary policy conditions, which are all serious subjects that, besides the different political standpoints on various subjects that the US and China have, should be on the table during the upcoming 2-day summit between President Trump and Chinese President Xi Jinping that is scheduled for next week on April 6-7 at Mr. Trump’s Florida Mar-a-Lago resort.

No doubt, these coming days will probably belong to the politicians, which should result in a “risk off behavior“ as far as the markets are concerned.

The fallout from the US healthcare vote has probably further to go and therefore a legitimate question could be “Now What?” after the President has suffered his first defeat on Capitol Hill and can the White House still make good on its legislative promises?

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The weekend started with the absence of a vote on the Trumpcare replacement for Obamacare.President Trump has suggested the failure to achieve his campaign pledge was due to the Democrats in Congress stating: "If Democrats got together with us, and got us a real healthcare...
Obamacare, Donald Trump, Paul Ryan, reform
Monday, 27 March 2017 10:33 AM
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