Getting to "No"

President Donald Trump has provided all manner of surprises in his early days in office. In stopping healthcare legislation in its tracks, he has proven John F. Kennedy’s favorite dictum that victory has a thousand fathers but defeat is an orphan to be wrong. From Twitter and other comments, we know that mistakes were made; tackling health care should have been postponed, as the proposal was too complicated. Blame was deflected—the Democrats were obstructionist and not all Republicans cooperated.

Left un-tweeted, an opportunity was missed; by not forcing a vote in the House of Representatives, the Freedom Caucus did not have to formally rebuke their president, only threaten to do so. From an investor’s perspective, the administration is pivoting to the issue that matters most for financial markets—tax reform. However, by not confronting the Freedom Caucus, its leader, Representative Mark Meadows, and his colleagues feel empowered; this may prove troublesome later in passing tax legislation. Without question, the events of the past few weeks will shape the fiscal proposal to come.

The easiest way to understand this is to work through the possibilities facing President Trump and Speaker Paul Ryan on their decision last Friday, just before they pulled the plug on the American Health Care Act (AHCA or House Resolution 1628). A branching timeline of potential outcomes is shown below.

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