Donald Trump swept into office on a populist wave. His promise of greater growth for the United States economy resonated with a large part of those disappointed with stagnant wages and a lack of opportunity. He said he would bring manufacturing jobs back and provide better healthcare coverage at a lower cost. All politicians know that they can make promises during a campaign that voters will not remember or that they will understand an administration not being able to accomplish, but the new team in Washington has an ambitious agenda and is off to a slow start. Trump has said that he expects to bring real GDP growth up to 4%, but he will be doing well if his stimulative initiatives result in 3% growth. We have been below 2% since the recovery began in 2009, the slowest comeback in the post–World War II period.
As I see it, there are three impediments standing in the way of significant progress. The first is the difficulty of getting an effective team in place and working out a set of operating procedures within the White House, with Congress and with our traditional foreign allies. The President has had some disappointments in assembling his team – first with the resignation of his National Security Advisor over relations with Russia and second with the recusal of his Attorney General in matters related to Russian involvement in the U.S. election. On the heels of this setback, the Trump tweet alleging that former President Obama tapped the Trump Tower telephones during the campaign distracted the White House from dealing with its pro-growth initiatives. The president has not backed down from his view. This first phase is largely behind us now with most of the cabinet positions filled.
An imperative for the White House has been to get going on its legislative agenda. The electorate and the investment community are counting on it. Donald Trump put repealing the Affordable Care Act first. This was probably a mistake similar to the one both Barack Obama and Bill Clinton made when they tackled healthcare right away when they took office. Creating a program of universal coverage that both individuals and the government can afford is a monumental task and the present Obama program has flaws that would require changes no matter who was in the White House. In my view, the Trump repeal and replace program failed for three reasons.
First, the so-called Freedom Caucus of 30 conservative Republican Congress people was dissatisfied with some of the mandated healthcare benefits and believed that the problem of rising premiums was not adequately addressed. They were never going to be persuaded to vote for the legislation in its present form. The bill had some creative solutions to major healthcare problems, such as the establishment, with Federal support, of high-risk “pools” for people with pre-existing conditions. But the bill had too many critics among both moderate Republicans and Freedom Caucus members. As a result, the House Majority Leader fell short of the 216 votes he needed and he pulled the bill rather than face the humiliation of having it turned down in a floor vote.
The second reason it failed was that too many people were either going to lose coverage, have it diminished or see their health insurance costs rise significantly. The Affordable Care Act has brought the percentage of uninsured Americans down from 18% to 11%. Approximately 20 million additional people are covered and many of them (perhaps 15 million according to the Brookings Institution) would lose coverage under the Ryan plan. That’s why there was no Democratic support.
The third reason was that the House leadership and the administration failed to go through the tedious effort of explaining the bill and selling it to Congress. This takes time, but the administration seemed to be in a rush to move on to other items on the agenda. I hope this is a lesson learned and it won’t be repeated.