by Jenifer Shockley
The late governor of New York, Mario Cuomo, famously said, “You campaign in poetry. You govern in prose.”
Now that Donald J. Trump has been elected 45th president of the United States, how will some of his key campaign promises translate into law, affect policy and drive the economy? Robinson College of Business faculty offer insight.
Health CareAs a candidate, Donald Trump repeatedly called for repealing and replacing the Affordable Care Act (ACA). It is unclear what he will actually do about the ACA. It is not clear even with a Republican in the White House and Republican majorities in the House and Senate whether full repeal is possible and what replacement might look like.
The President and Congress could take several actions short of full repeal. Most alternatives offered to date retain some elements of the law. Many ACA opponents object to the mandate that individuals purchase coverage but want to retain the prohibition against denying coverage due to pre-existing conditions. The issue is that without the mandate or some similar protection insurers wouldn’t offer coverage in a market where they couldn’t manage their risks.
Full repeal likely would require 60 votes in a narrowly divided Senate and without an alternative would result in at least 18 million Americans losing health care coverage. Some would lose coverage because health insurance would no longer be offered to them at any price. Many would lose coverage because they would no longer be able to afford health insurance. It would mean fewer resources for health care especially in rural areas, resulting in decreased access to care.
President-elect Trump may opt to try to change the law enough so it is no longer Obamacare, but retain enough of its framework to avoid declines in access to care. It is not clear if the constraints of politics and the insurance marketplace will allow both those results to occur.
– William S. Custer
associate professor of health administration
director, Center for Health Services Research
Financial MarketsWorld markets, not surprisingly, are confused and nervous. Any soothing statements from President-elect Trump will calm their anxiety about the direction of foreign relations, trade environment and fiscal policy. There are too many ifs in the predictions right now, which is another name for uncertainty.
– Rajeev Dhawan
Carl R. Zwerner Chair of Economic Forecasting
director, Economic Forecasting Center
TradeIt is fair to expect that President-elect Trump will surely be more tempered in terms of his ambitions about radically altering our foreign trade and investment policy than what his campaign speeches have indicated. He also is more likely to depart from his rhetoric on trade policy than, say, tax and regulatory reforms.
There are several reasons for the above contention. First, international trade policy is no longer a unilateral choice. In the global economy, national economies are closely integrated and interdependent. For every protectionist move, we can expect a retaliatory action. Second, a major reason why we have lost manufacturing jobs in the U.S. is due to technological advances, not necessarily trade. Third, the impact of freer trade and investment policies are not uniform across all economic sectors. Firms in, say, aircraft, pharmaceuticals, medical devices, telecommunications, banking, etc., benefit tremendously from freer trade. Protectionist moves will surely hurt these industries and firms.
At the end of the day, we suspect Trump’s actions will be more tempered and selective. For example, we are likely to see some serious relief efforts for those regions and sectors that are economically disadvantaged due to trade. In this regard, watch for a substantial boost in the Trade Adjustment Assistance program, a Federal initiative to lend a helping hand to workers, firms, and communities that have been adversely affected by trade.
With respect to renegotiating NAFTA, and trans-Atlantic and trans-Pacific trade deals, yes, they will be reviewed and picked apart. But, I expect no major overhauls there.
– S. Tamer Cavusgil
Fuller E. Callaway Professorial Chair
director, Center for International Business Education and Research
TaxesComprehensive tax reform is high on the agenda for the new Administration. It is listed on President-elect Trump’s 100-day plan, and House Speaker Paul Ryan (R-Wisc.) promised just weeks ago that he would force major tax cuts through Congress quickly if the Republicans held both Congress and the presidency. The broad outlines of the different Republican plans represent major tax reform—a reduction in rates for both individuals and corporations, elimination of many deductions and credits in return for those lower rates, and perhaps even a move from the U.S.’s current worldwide system of international taxation to a territorial system, which is used by our major trading partners.
Both Trump and the House GOP (Speaker Ryan’s “A Better Way” initiative) already have comprehensive plans for overhauling the tax code, and some blend of these plans is likely to form the blueprint for any tax reform bill. At first, these plans had major differences, but when Trump’s first tax plan was estimated to lose too much revenue, he revised his tax platform to include many of the House GOP provisions, including collapsing the seven tax rates into 3 rates, 12 percent, 25 percent, and 33 percent, doubling the standard deduction, and repealing the estate and gift taxes.
We can expect a major reduction in the corporate tax rate, from 35 percent to 15 percent or 20 percent, which would reduce the motivation for U.S. corporations to move their headquarters overseas, termed “inversions.” Any new tax reform bill also is likely to provide a reduced tax rate for repatriation of corporate profits now held overseas. Trump has mentioned a 10 percent rate on offshore holdings while the Ryan-House GOP plan has an 8.75 percent rate. Trump also has indicated that pass-through businesses, such as partnerships and S corporations, will get the reduced corporate rate. Currently, pass-through income is taxed to the owners at individual tax rates up to 39.6 percent.
Whether tax reform will get done early in the Trump Administration could depend on what happens with the relationship between Speaker Ryan and the new President. If Ryan stays on as Speaker, the legislation may move through more quickly and may look more like the House GOP Plan. If the Speaker is not reelected or is rebuffed by Trump, it may take longer to move the plans forward. In any event, it will not be an easy process. Even with a united Republican front, tax bills have many winners and losers, and the negotiations are always complex.
In short, major tax reform may not get done in the first hundred days, but there is a high probability we will see far-reaching changes in tax policy within the first two years of the new Trump Administration.
– Lucia Nasuti Smeal
clinical associate professor of accountancy