Mar 1, 2017

He Came, He Saw, He Delivered: President Trump’s Address to Congress

President Donald Trump is having a good day. In his first address to Congress last night, Trump stuck to the script, struck a more presidential tone, and knocked it out of the park. Most viewers and pundits agree that Trump delivered his best performance to date. “It was very positive. We are breathing a huge sigh of relief,” as one GOP senator told McGuireWoods Consulting this morning.

Here’s what the media outlets are saying:

Washington Times : “Donald Trump delivered the most finely crafted speech of his political life Tuesday night in what will go down as one of the best speeches delivered to a joint session of Congress in the past two decades.”

New York Times : “…rising to the occasion, Mr. Trump on Tuesday night sounded as presidential as he ever has since taking office.”

NBC News : “It was Donald Trump at his most presidential.”

Fox News : “Donald Trump, the most unconventional president of our lifetimes, did a very conventional thing tonight, delivering a message of unity in a soft voice…”

According to a CNN/ORC poll, 57 percent of viewers said they had a positive reaction to the speech and 70 percent said it made them feel more optimistic about the direction of the country. Those are some impressive numbers no matter which side of the aisle you’re on.

Trump’s speech, while largely similar to previous ones in substance, was more restrained and reassuring in tone. “I am here tonight to deliver a message of unity and strength, and it is a message deeply delivered from my heart,” Trump intoned at the start. Absent was the usual bombastic pronouncements and apocalyptic rhetoric. Instead of picking fights with the media and Democrats, Trump declared that “the time for trivial fights is behind us,” asking both parties to put aside their differences and get to work for the American people. Trump said he would like to work with Democrats and Republicans to enact immigration reform, improve women’s health, provide access to affordable child care, strengthen the military, and rebuild the nation’s infrastructure.

Where’s the Beef?

Although many of President Trump’s talking points adhered closely to the Republican playbook — calling for deregulation, border security, and job creation — he also ventured into non-GOP territory when discussing issues like infrastructure spending, trade policy and child care tax credits.

The president provided few new details on healthcare, tax reform, and infrastructure. Republican lawmakers were hoping Trump would help fill in the policy blanks on those hot-button issues but received little additional guidance on how to proceed legislatively. In short, the president laid down principles rather than policy details.

“Tonight I am also calling on this Congress to repeal and replace Obamacare.”

On healthcare, Trump did not say anything that House Republicans haven’t already said. Trump wants to rescue Americans from the failings of Obamacare, calling on Democrats and Republicans to work with his administration to provide a replacement plan that lowers costs, increases access, and expands choice.

Trump, however, did not provide additional details regarding the healthcare reform plan that his administration has been working on. In his view, a better healthcare system would embrace five key principles:

  1. Continue to protect those with pre-existing conditions by ensuring access to health insurance coverage.
  2. Help Americans purchase health plans of their choice by providing age-based tax credits and expanded health savings accounts (HSAs).
  3. Give states more resources and flexibility with Medicaid.
  4. Find ways to lower the price of prescription drugs.
  5. Allow Americans to purchase health insurance across state lines.

Open Questions : The lack of specifics leaves policymakers and lawmakers with three big policy questions: (1) What will the administration and Republicans do to encourage insurers to stay in the market to help ensure a stable transition? (2) The cost of providing tax credits and expanding HSAs is substantial, where will congressional Republicans find the money to pay for them? (3) How will the federal government allocate resources in an equitable way to give states the flexibility to manage their respective Medicaid programs? Consensus on healthcare remains elusive for the GOP, as the House Freedom Caucus is still pushing for a simple repeal of Obamacare.

“My economic team is developing historic tax reform…”

As much as the administration and Republican lawmakers have been talking about overhauling the tax code, President Trump dedicated surprisingly little time on tax reform last night. Those who have been following tax policy developments closely were disappointed to hear the same pitch calling for a lower corporate tax rate and tax cuts for the middle class. Trump also pointed out how the current U.S. tax code tends to favor imports and disadvantage exports, but he did not specifically mention the border adjustment tax. Trump’s comments, however, indicate that he may be open to fixing the disparity.

Open Questions : House GOP tax writers may feel relieved that the president did not reject border adjustability outright. But given the provision is a linchpin of the House GOP tax reform blueprint, the administration will have to take a firm position on it soon. Another question that the administration must answer is just how low should the corporate tax rate be? Trump wants 15 percent, but the House blueprint calls for 20 percent. Additionally, Trump has yet to spell out what his middle-class tax cut package will include.

“I will be asking the Congress to approve legislation that produces a $1 trillion investment in infrastructure…”

Trump explained that his infrastructure plan would be guided by two principles: Buy American and hire American. Again, details are lacking. The president, however, did make clear that his infrastructure investment plan — “a program of national rebuilding” — would include both public and private capital. The statement is significant because initial signals from the president have led many to believe his plan would rely solely on private financing to fix the country’s infrastructure

Open Questions : Where will the administration find the public money to fund infrastructure projects? Will Trump’s infrastructure initiatives be tied to tax reform? Or will the president ask Congress to address the infrastructure problem in a separate piece of legislation?

What does all this mean?

President Trump may have hit a “home run” last night per House Speaker Paul Ryan. But unless the administration quickly sketches out some details on how to fix the healthcare system, the tax code, and the nation’s infrastructure, Republicans will have a tough summer and fall ahead of them. The GOP’s big agenda for 2017 faces an unforgiving legislative timeline. And Republicans have little room for error as they attempt to push their healthcare plan and tax reform through Congress via budget reconciliation. The internal division on repealing Obamacare has already led to delays, and the longer Republicans dwell on the healthcare piece, the harder it will be for them to get to tax reform in 2017. Republicans do not want to find themselves heading into the midterm elections of 2018 with empty hands.


Frank Donatelli

Executive Vice President

Lai King Lam

Assistant Vice President