Goldman On Trump: “Prospects Have Deteriorated Much More Than We Would Have Imagined”

Ok let’s just be honest with ourselves about something: the first four months of Donald Trump’s administration have been an unmitigated disaster.

As noted earlier this week, it’s hard to imagine how it could be going any worse.

Even if we give Trump the benefit of the doubt and assume that the Russia investigation is a “witch hunt,” the very fact that there is indeed a “witch hunt” going on means that both the White House and Capitol Hill are hopelessly distracted. That, in turn, means they can’t get anything done.

If, on the other hand, we assume there is indeed a “‘there’ there” when it comes to Trump associates colluding with the Kremlin, well then the President’s son-in-law may have committed treason, the Attorney General probably perjured himself, and Trump is likely to be impeached for obstructing all kinds of justice.

Meanwhile, Trump has i) aggravated the already tenuous situation on the Korean Peninsula, ii) pulled out of an international alliance aimed at saving the environment, iii) tried to ban Muslims from entering the country, iv) leaked classified Israeli intelligence to the Russians, v) pissed Angela Merkel off so badly that she subsequently said America is no longer a reliable partner.

And that’s all in the space of four months.

The idea that this administration is going to be able to pass comprehensive tax reform, overhaul the country’s healthcare system, and embark on an ambitious infrastructure plan against the fractious backdrop outlined above is quite frankly laughable.

And the market – record high stocks notwithstanding – quite clearly knows it:


Well, Goldman is out with something new on the situation inside the Beltway and while we won’t bore you with the entire note on a Saturday, we will excerpt one brief passage and one chart which underscore everything said above.

Via Goldman

Q: The political situation since the election has been a roller coaster.Where do things stand in general?

A: At the start of the year, our expectations were somewhat less optimistic than consensus regarding the prospects for enactment of tax reform and infrastructure legislation this year, and the prospects for enactment of either have diminished much more than we would have imagined a few months ago. Most recent presidents have been able to enact at least one key piece of legislation in their first year, and occasionally two or three before their first midterm election. This year, it appears unlikely that any of the Administration’s key legislative priorities will be enacted by the fall, and it looks increasingly doubtful that any will be enacted in the first year.

In our view, congressional Republicans and the Administration face three basic challenges in enacting substantial policy changes. First, the recent public focus on various investigations has been a clear political setback, as it has reduced the President’s political support (Exhibit 1) and has distracted from the Administration’s policy agenda.


Second, Republican leaders in Congress and the White House appear to be in disagreement on key issues, like what the top political priority is and, to the extent that it is tax reform, whether this means a revenue-neutral structural reform or a simple tax cut. We note that even within the Administration, there continues to be apparent disagreement on some of these key points.

Third, some congressional Republicans appear torn between the “once in a generation” opportunity to accomplish major structural reforms and the current political reality, in which major political agreements—particular bipartisan agreements but even intra-party deals—have become increasingly difficult and smaller changes might be all that is politically achievable.

That said, the legislative agenda could still get back on track. In part, this is because we expect that Congressional Republicans will become increasingly motivated to get at least one major legislative accomplishment enacted into law ahead of the midterm election. In our view this is likely to be a tax cut—perhaps coupled with elements of reform—but they will need to get through several other issues first, including the pending health legislation and approaching fiscal deadlines. This is a challenge, because the window of opportunity may not be open much longer. To put this in perspective, President Bush signed his signature tax cut into law on June 7, 2001, and President Reagan enacted his tax cut August 13, 1981; the White House has indicated it hopes to send a draft tax proposal after the August recess (i.e., September or October).

So what’s the silver lining?

Well, sadly it’s been reduced to this…



One thought on “Goldman On Trump: “Prospects Have Deteriorated Much More Than We Would Have Imagined”

  1. Arguably the only genuinely surprising thing has been how “surprised” some commentators seem to be that this has been a disaster.

    Perhaps people who focus on markets for a living neglected to study political science?

    It has been obvious to me from the word go that the Trump administration would be a debacle. Yes, it has started spiralling the drain faster than one might have expected, but only a fool would have bet on this administration being successful.

    Or a fool hoping that he could find an even bigger fool just before the wave comes crashing in, I suppose.

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