US: Obamacare repeal may face a long road ahead, but tax reform likely – Goldman Sachs

Alec Phillips, Research Analyst at Goldman Sachs, points out that the financial markets are focused on the prospects for passage of the House Republican proposal to “repeal and replace” Obamacare because the vote is seen as a referendum on the ability of Congress to enact its broader policy agenda.

Key Quotes

“While this view has some merit, we would note three important nuances.”

“First, the Senate is likely to pose at least as much of a challenge as the House, and reconciling the likely differences between the two chambers will be hard. This week’s vote is the start of a process that could last several more weeks, and may not be the hardest part of the process.”

“Second, passage of the health bill is not what is important for tax reform. Instead, the most important issue for financial markets is for Congress to be finished with this bill one way or another so that it can move forward with tax reform, which is likely to have a greater effect on corporate earnings and the real economy. While the prospects for the health bill are murky, we would be surprised if Congress has not begun debating tax reform by mid-year, even if it means putting the health bill aside to return to it later.”

“Third, while there are lessons for tax reform in the current health debate, there are also differences. The trouble that congressional Republicans face in achieving majority support for the health bill is a reminder of how difficult it might be to reach near-unanimous Republican support for major tax reforms, like border adjustment. However, there is likely to be much broader support for tax cuts than there is for the health legislation. Even if the health bill fails, we would continue to believe the odds of tax legislation passing by early 2018 are high.”