The disastrous roll-out of President Donald Trump’s clampdown on refugees and visitors from majority-Muslim countries wasn’t how his supporters were expecting his administration to begin. While it was a cornerstone of his election campaign, it was poorly thought out, with little consideration given to the inevitable legal challenges, protests and political backlash.
If this seems somewhat familiar, you need only recall President Barack Obama’s disastrous launch of the Affordable Care Act, a piece of legislation the administration strained to get through Congress. The website was unusable and crashed constantly, and was widely recognized as a costly and avoidable error. It was obvious that the people in charge hadn’t thought this through and failed to stress-test the site. It tarnished perceptions of both the program and the administration’s cherished reputation for competence.
At the time Obama took office, health care expansion wasn’t the most pressing issue; in the midst of the financial meltdown, it was banking reform. This was a case of misplaced priorities. As former White House chief of staff (and current mayor of Chicago) Rahm Emanuel used to say, “You never want a serious crisis to go to waste.” But that was exactly what the Obama White House did, focusing on health care expansion instead of taking advantage of the narrow window to implement a full regulatory reform of Wall Street. It was an enormous miscalculation.
By failing to act boldly on financial reform, the Obama team allowed a smoldering resentment to take hold and build among the public. The massive taxpayer wealth transfer to bankers who should have lost their jobs sowed the seeds of the backlash that fueled the rise of the Tea Party, and led to the huge electoral losses for the Democratic Party and Trump’s November victory.
Fast forward to 2017. It looks as if Trump is making a similar error by focusing on immigration first – and in an ill-considered and misguided way – instead of making tax reform his biggest priority.
Tax reform is key
In terms of economic impact, nothing is going to beat the combination of a corporate tax overhaul, repatriation of overseas profits and individual tax reform. Add the $1 trillion infrastructure plan discussed during the campaign and you have the makings of an economic program that might help growth for a decade. It seems deeply misguided for Trump not to make this the centerpiece of his new administration.
Instead, the White House is tripping over its own feet. It seems likely that Trump didn’t expect to win the presidency, and failed to have a plan in place to hit the ground running. The first two weeks were filled with the sorts of instability that is bad for business and introduces uncertainty into the markets.
But don’t write off the odds of tax reform just yet.
A stumble out of the gate isn’t unheard of for new presidents. Trump, never having held elected office, comes to the job with no political experience. So maybe it’s to be expected that it would take a few weeks or months before he gets his legs under him.
His supporters and the Republican leadership have been willing to give him the benefit of the doubt so far (the opposition, not so much). Regardless, the window to push through a comprehensive tax reform remains open. But it won’t stay open forever.
This has to be the administration’s highest priority. There is much to be gained from bringing $2 trillion in profits stashed overseas back to this country, reducing the 35 percent corporate tax rate and cleaning up the individual tax rules.
After that, it will be much easier for the Trump administration to achieve its other objectives. Trump may not think he has anything to learn from Obama – but if there is one lesson, this should be it.
Barry Ritholtz, a Bloomberg View columnist, is the founder of Ritholtz Wealth Management. He is a consultant at and former chief executive officer for FusionIQ, a quantitative research firm. firstname.lastname@example.org, www.ritholtz.com/blog.