Barely a day after Gary Cohn told an audience at the annual meeting of the American Bankers Association that Congress has a “unique opportunity” to pass tax reform by the end of the year, Treasury Secretary Steven Mnuchin – who shares responsibility for the administration’s tax agenda alongside Cohn – acknowledged the truth about Trump’s No. 1 legislative priority: namely, that it would be “extraordinary” if the Republicans could pass tax reform by year’s end.
At a Tuesday press conference, Mnuchin borrowed a line from his boss and reminded his audience that it took a couple of years for Ronald Reagan to pass tax reform, in the process risking the end of the bull run that yesterday carried the Dow above 23,000, a rally that has largely been predicated on investors’ hopes for tax reform, according to the Hill.
"It took Ronald Reagan over two years on a bipartisan basis to get tax reform done," Mnuchin said during an interview on Fox News' Special Report with Bret Baier. "If we get it done this year, it will be extraordinary."
"Our objective is to get it on the President’s desk by December to get him to sign it this year," Mnuchin added, but cautioned that there's "no artificial deadline."
"We are going to work on it as fast as we can," the Treasury secretary added.
Mnuchin called the GOP plan to reform the tax code critical to creating a "competitive" environment for American businesses.
On Monday, Trump made similar remarks at a press conference with Mitch McConnell that was, somewhat ironically, intended to address concerns that the fractured Republican leadership might bungle tax reform like they bungled Obamacare repeal. At the conference, Trump surprised reporters by admitting that Congress still has a "long way" to go on tax reform.
“I would like to see it be done this year,” Trump said. “But don’t forget it took years for the Reagan administration to get taxes done — I’ve been here for nine months.”
“We could have a long way to go but that’s okay," he added.
To be sure, the urgency of tax reform hasn’t been lost on the Republican leadership. House Speaker Paul Ryan has threatened to keep Republican representatives – who are on vacation this week but have just 28 voting sessions left in the year - in Washington over the December holiday break if they don’t manage to write and pass a bill before then. Of course, it’s far more likely that reform will hit a wall in the Senate, where the Republicans’ razor-thin majority has allowed a handful of senators to effectively obstruct the Trump agenda.
Oddly, in a Politico interview published this morning, Mnuchin – already a master of mixed messaging – warned that passing tax reform by year end is “essential” and that, if it doesn’t happen, markets could tank.
“There is no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done,” Mnuchin said in the interview. “To the extent we get the tax deal done, the stock market will go up higher. But there’s no question in my mind that if we don’t get it done you’re going to see a reversal of a significant amount of these gains.”
Mnuchin had promised earlier this year that tax reform would be done by August. Then it was year-end. Now, it appears the only concrete “deadline” for reform is some time just before the 2018 mid-term election. And once again, market implied odds have proven correct, while many market strategists – like the team at Goldman with its 65% odds of a deal by Q1 – have been far too optimistic.
In a breakthrough for the Trump administration, Sen. John McCain said last night he’d vote yes on a budget bill that the Senate is rushing to pass by the end of the week. That bill would unlock the reconciliation process, allowing Republicans to pass tax reform with a simple majority and circumvent a Democratic filibuster.
Still, it’s unclear if Republicans have the votes to pass that legislation, which is expected to be brought to a vote Thursday morning.