Trump policy setbacks and implications for the Gulf

Rolling back the Obamacare program has eluded the self- professed king of deal makers President Trump, and left a large hole in both his credibility and ability to pass other vital campaign promises, as well as casting a long shadow over foreign policy issues and raised expectations by Gulf countries that the new president will stick the course in matters that are important to them.

The number of dissenting Republican congressmen - around 35 - has taken everyone by surprise, given the intensive personal efforts of President Trump to change their mind and vote ‘yes’ to his healthcare program. This was an impossible task on Capitol Hill, as the dissenting Republicans were a mixed bag with those that thought the new program was cutting benefits too deep and those that wanted even more drastic changes, putting the final outcome beyond doubt and the President decided to pull his program out completely and allow Obamacare to continue.

The Democrats were elated and sensed that the seemingly infallible new President was indeed fallible. 

Shift agenda 

With this defeat, the White House will quickly shift the political agenda to an accelerated drive for the tax reform legislation, on which the President is said in fact to be restless to get going.

Legislation to replace Obamacare would be shuffled to the back of the legislative queue, to be revived in a newly written bill late into the second half of this year, but in practice may not be revived for a long time, with advisors around President Trump now looking for scapegoats for this fiasco, ranging from the hapless Republican House Speaker Paul Ryan, to even blaming the Democrats for not playing ball and supporting the new healthcare bill.

Concerning the terms of a new push on tax reform, Republican ambitions must be significantly moderated after the political setbacks with the healthcare legislation.

According to President Trump, “we will probably start going very, very strong for the big tax cuts and tax reform. That will be next.” 

Tax cuts 

However, the tax cuts were supposed to be paid for by savings from the withdrawn healthcare bill. Without the spending cuts in the failed bill, any tax cuts will add to the federal budget deficit.

Analysts suspect the border adjustment tax is also likely be dropped in part or whole, and with the loss of the revenue offset in the failed Obamacare replacement, the new tax reform bill will need to either abandon budget neutrality altogether, secure a Senate ruling overriding the Byrd Rule for reconciliation, or limit the period of the tax cuts to three to five years to lower the needed revenue offsets.

The Democrats are sensing that the Trump Administration might not repeat its astonishing electoral triumph and that a series of Congressional bill rebuffs and ongoing investigations of Trump’s advisors concerning Russian connections might be the beginning of their ‘Watergate’ moment, leading to Democrats regaining lost Congressional and Senate seats in forthcoming elections.

Dr. Mohamed Ramady



Scaling back the size of the tax cuts from 20 percent to 25 percent or 28 percent may also come into play to secure passage of the tax reform package, which some believe is still unlikely to pass before the second half of this year.

The collapse of the health care bill in the House will severely damage Speaker Ryan and could further limit his ability to steer legislation in the combative House.

This will only further embolden the so-called Republican Freedom Caucus dissidents as well as equally hard right Republicans in the Senate to dig in with demands on the much-sought tax reform legislation.

The result will be that the same problems will darken the prospects for the 2018 fiscal year budget, which is already running several months behind schedule and seems destined for a continuing resolution in September to complete the necessary 12 spending bills.

The Democrats are sensing that the Trump Administration might not repeat its astonishing electoral triumph and that a series of Congressional bill rebuffs and ongoing investigations of Trump’s advisors concerning Russian connections might be the beginning of their ‘Watergate’ moment, leading to Democrats regaining lost Congressional and Senate seats in forthcoming elections.

While it may be farfetched to believe that impeachment of the new president is even a remote possibility, this could still be in the air until the two key questions that emanated from Watergate and President Nixon are clearly resolved by President Trump – on what does the president know, and when did he know it - concerning current Russian involvement allegations.

Until these are settled, the new administration’s policy agenda will be hampered.

This has some significant implications for the Gulf and other moderate Arab allies as they have been vocal in their support of the new President, especially in his hard-liner stance against Iran. Any weakening of his position will be a setback to the high hopes for a closer strategic alliance that sees eye to eye on many issues.

A resurgent Democratic Party leadership might not be as sympathetic, or forgive and forget the hasty demonization of former President Obama´s Middle East policies by many in the region. Caution and prudence are the keywords.

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Dr. Mohamed Ramady is an energy economist and geo political expert on the GCC and former Professor at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia.

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Last Update: Wednesday, 20 May 2020 KSA 09:50 - GMT 06:50
Disclaimer: Views expressed by writers in this section are their own and do not reflect Al Arabiya English's point-of-view.
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