US: Healthcare hinders, but does not doom, tax legislation – Goldman Sachs

According to Ian Tomb, Research Analyst at Goldman Sachs, while the abandoned health vote was a clear political setback for Trump and congressional Republicans, GS do not think it presents as much of a setback as some have argued, and the enactment of tax legislation this year still looks likely.

Key Quotes

“We now see downside risk to our expectations for a tax cut − around $1.75 trillion over the next 10 years, or about 0.75% of GDP. We will be watching three issues in the coming weeks for clues on the direction of tax reform: (1) the border adjusted tax, (2) revenue-neutrality and (3) the FY2018 budget resolution.”

“Sentiment still surging. Consumer confidence increased 9.5pt to a 16-year high yesterday, well above consensus. The improvement was broad-based, with large increases in both the components measuring expectations and present economic conditions. The persistence of consumer confidence in the face of legislative headwinds suggests to us that ‘animal spirits’ have further to run, even if the Trump administration’s fiscal agenda looks increasingly challenged.”