U.S. Office of Public Policy
Special Washington Update
2017: The First Four Months in Washington Under Trump and
a Republican Congress
The 2016 elections are behind us. President-elect Donald
Trump has held scores of meetings with potential hires
for his administration and with others to get policy
and political advice. The transition period between the
election and the inauguration is about to end, however,
and the new president’s official term in office begins
in just 14 days. Much has been made about what the
new president will do and how or if he will match his
campaign promises with performance in office. With
these questions in mind, we outline below what we
expect to happen on the policy front with the new
administration and Congress in the first four months
of the year.
(mid-January) 2017 Budget and Foundation for
Obamacare Repeal. The House and Senate are expected
to pass a fiscal year 2017 budget resolution in the next
week. The resolution will be significant because it will
instruct both chambers to meet certain budgetary goals
in part by repealing most of the Affordable Care Act
(Obamacare). Subsequent legislation accommodating
those budget goals will be considered in an expedited
manner and require only a majority vote in the Senate
(rather than the 60 votes needed to pass most other
legislation). This month’s action itself will not repeal
Obamacare. It will, however, set the foundation for an
expected successful vote in both chambers to do that
in early February.
6 January 2017
(January-February) Approval of Trump Cabinet
Nominations. The Senate will begin hearings on many
of the Trump cabinet nominations next week. The
extensive private sector backgrounds and personal wealth
of many of the nominees will be heavily scrutinized and
will be a source of controversy for some lawmakers. The
nominees will benefit from 2013 Senate rule changes
that permit their approval with a majority vote instead of
the 60-vote threshold that is applicable to most Senate
votes. Most nominees will be approved by the Senate
in late January or February (only the Senate votes on
nominations), but despite the lower bar, a few of them
will face significant challenges. The most recent three
presidents have had ten cabinet nominations withdrawn,
and we would be surprised if one or two of Trump’s
nominees don’t get tripped up during the rigorous
Senate confirmation process.
(January-February) Regulatory Reforms and the
Trump White House. Donald Trump will be inaugurated
as the nation’s 45th president on January 20. Once he
is president, we expect him right away to take action
to repeal many of President Obama’s executive orders
and to direct executive branch agencies to delay or
halt further action on regulations that the Obama
Administration has recently put into effect. The new
administration’s efforts will augment action in Congress
to reform the federal regulatory process and to eliminate
specific regulations via legislation. Much of the regulatory
rollback will focus on energy and environmental
regulations, but it will cover many other industry sectors
as well. Dozens of regulations and executive orders
will be affected, particularly those issued last year. The
new president may also give the green light to the final
stretch of the Dakota Access Pipeline project in North
Dakota, which the Obama Administration recently put
on hold.
(February) A Supreme Court Nominee. President
Trump will nominate an individual to serve on the
Supreme Court, filling a vacancy created by the death of
Judge Antonin Scalia last year. Assuming Trump’s pick is
a conservative, approval of the nomination would ensure
the court’s slight rightward leaning. Supreme Court
nominations are usually contentious, and we expect this
year’s selection to be no different. Unlike with other
executive and judicial branch nominations, a nominee
to the Supreme Court still needs 60 votes for approval
in the Senate, which means that at least eight Senate
Democrats will need to be supportive. This approval won’t
be easy in the current political environment and will
require Trump to nominate someone with gold standard
legal credentials and no apparent political biases. Maybe
that still will not be enough in the fractious Senate.
Someone will eventually be nominated and approved by
the Senate, but it may not be the new President’s first
choice. Our past two presidents have both had nominees
to the high court that were not confirmed.
(February) First Trump Budget? Current law requires
the President to submit a budget proposal to Congress
on the first Monday of February, but this deadline is often
missed, especially for the first year of a new president.
We expect Trump to miss the deadline and submit a
budget proposal in the second quarter of the year.
That budget proposal will be important because it will
outline the new president’s tax and spending priorities,
which will affect the makeup of the tax reform bill and
overall government spending next year. The proposed
budget will likely contain new spending and spending
reform initiatives and a significant increase in defense
spending. Congress will write its own budget but will
try to accommodate Trump on many of his spending
or spending cut requests.
(February) Tax Reform Process Begins. The House and
Senate tax policy committees will hold hearings on tax
reform proposals as part of an effort to build a foundation
for the advancement of a comprehensive tax reform bill
later in the year. These hearings will be part symbolic
and part substantive. Many ideas and themes from the
hearings will be included in the bill that will ultimately
move forward. However, the act of beginning the process
doesn’t guarantee eventual passage of a bill. The process
of putting a successful tax reform bill together—the
first in 30 years—will be very difficult and will have to
overcome some serious opposition by influential lobbying
factions. The process will move forward in February and
be extremely fluid through most of the year. A more final
bill should start to emerge in the summer, with a possible
final vote either then or in the fall.
(February) First Trump State of the Union Address.
President Trump will give his first State of the Union
(SOTU) address—or an equivalent speech—early this year,
but no date has been set yet. The annual SOTU speech
is a constitutional requirement that usually occurs in late
January, but new presidents who were just inaugurated
often have more flexibility in when and how they
address Congress and the American people as a part of
this exercise. Regardless, Trump will make a prime-time
presentation to Congress that will likely draw a record
number of viewers. It will detail the Trump agenda in a
greater degree of detail and help us understand what
the new president will prioritize this year.
(February) Actual Obamacare Repeal Vote. The House
and Senate are both expected to vote on legislation to
repeal Obamacare in early February. The bill will contain
a two- or three-year transition from the Obamacare
system to another health care system in order to retain
coverage for those who received it under the current law.
Congressional Republicans and President-elect Trump are
working now to identify a replacement for Obamacare,
but the full plan will not be known by the time of this
vote in February. This is a potentially risky strategy for
Republicans—eliminating one system before another is
in place—but it really is the only politically-viable option
they have. Once Obamacare is repealed in February and
a transition put into effect, various replacement options
will get more attention and Republicans will rally behind
a more specific plan as this year evolves.
(February-March) Dodd-Frank Repeal Bill Moves
Forward. House Republicans will introduce a revised
version of their plan for comprehensive financial reform in
January. The legislation, known as the CHOICE Act, would
repeal major pieces of the Dodd-Frank Act. The bill could
be passed out of a House committee as early as late
February or March, though action in the full House likely
will be delayed for months because of other priorities.
The process and timeline will be very different in the
Senate, where Republicans will need Democratic support
to successfully move any reform plan. We still believe
that Republican hopes to replace Dodd-Frank will yield,
at most, modest reforms for smaller financial institutions
late this year or next year. The process will begin with big
goals but end with limited results.
(mid-March) Debt Ceiling Hit. The nation’s debt ceiling
of over $20 trillion will be reinstated on March 16. This
will begin a process that will eventually require Congress
to extend the debt ceiling to allow the government to
continue to pay its bills. After the Treasury Department
juggles bills and finds creative ways to cover government
debts in the interim, the Congress is likely to extend the
debt ceiling in the summer. March 16 will be a significant
date because it will trigger the process of eventually
increasing the debt ceiling. The real action to do this,
however, will come later in the year when Congress will
likely enact a modest deficit reduction package and then
extend the debt ceiling with little fanfare.
(early-April) New Budget Resolution and Tax
Reform. Both the House and Senate will pass another
budget resolution—this one for fiscal year 2018—that
will carry reconciliation instructions to advance a tax
reform bill to be enacted in the Senate with only majority
support (50 or 51 votes in the Senate). We anticipate
passage of this resolution, which will lay the foundation
for a vote on tax reform later in the year. Very few details
of the future tax reform bill will be included in the budget
resolution—this is simply a procedural mechanism to tee
that bill up for easier passage later in the year.
(April) Trade Battles. Many market watchers anticipate
trade conflicts between the U.S. and major trade
partners, with some of these conflicts likely to begin early
in the year. We expect President Trump in late January or
February to formally pull the U.S. out of the Trans-Pacific
Partnership and to lay the groundwork for a renegotiation
of the North American Free Trade Agreement. We
also expect the Trump administration to threaten to
or to actually designate China a currency manipulator,
most likely in April if not sooner. Under a bi-annual
Treasury Department process mandated by law that
usually occurs in April and October, Treasury will identify
countries it believes are guilty of currency manipulation.
A designation could come sooner than April, but the
new president may use the formal process which would
suggest an April designation. As a presidential candidate,
Trump expressed support for designating China as
such, but as president he will also need to consider the
many other issues in play with regard to the U.S.-China
relationship. Trump wants to reform the U.S.-China
trade relationship, and designating China as a currency
manipulator would be one way to do that.
(late-April) A Potential Government Shutdown?
Congress and President Trump will have to finalize a
new spending package through the end of the fiscal
year (September 30) by the time current government
spending expires on April 28. This spending plan could
be contentious since the two parties significantly differ
over government spending priorities, such as defense
and domestic programs. Addressing these priorities in a
way that doesn’t add to the budget deficit will be the
challenge facing the President and Congress in late April.
This could raise the specter of a government shutdown
in late April.
(January-April) Other Cats and Dogs. Other issues
will certainly come up, some expected and others not.
We expect the Trump administration to unveil a border
security initiative to control the flow of illegal immigration
along the southern border. An infrastructure bill has been
talked about extensively, and while we think one will be
proposed and advanced in some way, it could be tucked
into the tax reform bill that will be acted on late in the
year. Numerous congressional hearings over possible
Russian intrusion into U.S. elections will get plenty of
attention. Various foreign policy challenges will persist
while new ones will evolve and have to be dealt with.
Beyond the cabinet selections, Trump will have to
appoint thousands of other people to serve in his
administration and many will require confirmation in the
Senate. Finally, a new energy reform bill to enhance U.S.
energy production will be introduced and potentially
acted on.
This report is a summary of certain recent legislative and regulatory developments that may be of interest to clients of UBS AG and its affiliates or
subsidiaries (“UBS”). This report is intended for general information purposes only, is not a complete summary of the matters referred to, and does
not represent investment, legal, regulatory or tax advice. Recipients of this report are cautioned to seek appropriate professional advice regarding any
of the matters discussed in this report in light of the recipients’ own particular situation. UBS does not undertake to keep the recipients of this report
advised of future developments or of changes in any of the matters discussed in this report.
Issued in the U.S. by UBS Americas Inc
© UBS 2016. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
UBS Americas Inc. is a subsidiary of UBS AG.
160105-4347-006