The policy analysis provided by the Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any political party.
President Donald Trump’s address to a joint session of Congress on Feb. 28 ranks as one of the high points of his young presidency. It’s unclear whether the speech will help advance his policy goals—Washington and the rest of the country remain sharply divided—but in terms of tone, style, delivery and substance, it was surely the most conventional speech Trump has given since he assumed office. Substantively and stylistically, it echoed the State of the Union speeches of his predecessors, with a long list of promises and calls on Congress to act.
But the lack of detailed plans for accomplishing the president’s most important policy priorities—health care overhaul, tax reform and an infrastructure package—underscored just how much work still has to be done to fulfill these core campaign promises. Trump’s speech was also notable for its lack of commitment to particular timetables for his key issues—a sign that perhaps the president is realizing how resistant Washington can be to change.
Despite the relatively well-received speech, the path to success on these key issues for investors and the markets remains as murky as ever.
A “reset” speech
In the days leading up to the speech, Trump’s aides touted it as an opportunity to “reset” his presidency after an often-chaotic first five weeks. To that end, the president hit several notes that appealed to both parties, including his condemnation of recent anti-Semitic incidents across the country, as well as issues like paid family leave and improved treatment for drug addiction. The night’s longest standing ovation came when Trump introduced an emotional Carryn Owens, the widow of a Navy SEAL who was killed in Yemen in January, and paid tribute to the fallen commando.
Much of the speech, however, left Democrats sitting quietly on their hands. Indeed, the president’s most important goal in his address may have been to reassure skittish Republicans, many of whom worried that the party’s political capital was being squandered on Twitter fights and reported White House dysfunction.
The speech likely bought the president some more time and goodwill from Republicans, by reassuring them that he can be presidential, that he does have an agenda and that he can rise to the stature of his office. What remains to be seen, of course, is whether he can use that goodwill to build consensus on his key priorities.
Trump’s lack of timetables for accomplishing his policy goals was an implicit admission that his ability to control the pace of action in Washington is limited. Congress will have to drive the issues.
Before he even took office, Trump and GOP leaders spoke of having a bill to replace the Affordable Care Act (ACA), former President Barack Obama’s signature health care reform law, on his desk by Feb. 20. However, with Republicans on Capitol Hill far from agreeing on an alternative, the president seemed to shift the focus from speed to the key principles he thinks should guide the reform effort. He put no time constraints on when such an overhaul would get drafted, approved or go into effect. In an interview last month, Trump acknowledged that it would probably be 2018 before the health care replacement law is in place.
Trump also avoided committing to any deadlines for other proposals and made no reference to accomplishing any of them in the first 100 days of his presidency. The 100-day mark has been a key bellwether of every presidency since Franklin Delano Roosevelt took office in 1933. Roosevelt, who came into office facing the Great Depression, a failing banking system and 25% unemployment, moved quickly in the first months of his term to carry out sweeping policy changes. The 100-day checkpoint stuck and has become a key measuring stick for all incoming presidents.
But Roosevelt faced a very different world in 1933. He had big Democratic majorities in Congress, a distinctly less polarized nation and a national crisis that galvanized action. In the decades since, presidents have increasingly tried to distance themselves (usually unsuccessfully) from the artificial timeframe.
Trump’s first 100 days have already been complicated by the slow pace of confirmations to key posts and his own penchant for distraction. The coming weeks will present even more hurdles, including the mid-March start of the confirmation process for his Supreme Court nominee and a looming fight at the end of April to avoid a potential government shutdown (a temporary government funding measure expires on April 28). These potentially time-consuming fights could make it difficult to set deadlines in the coming months.
Path forward remains uncertain
Expect his supporters and, perhaps, the markets to keep the pressure on to make good on some of his promises. The post-election market run-up has been driven at least in part by a sense that lower taxes, changes in health care and deregulation could be a boon for businesses of all types. The longer it takes for Congress to turn these promises into actual laws, the higher the risk his supporters and investors could end up disappointed.
Beyond the struggles congressional Republicans are having in putting together a consensus alternative to the ACA, both tax reform and an infrastructure package are only at the earliest stages of coming together. There is no draft legislation for any of these issues yet. Moreover, pushing laws through the narrowly divided Senate, where Republicans have just a two-seat margin, is going to be very tricky. For now, investors appear inclined to give the new president some time. But with tax reform and infrastructure looking more and more likely to be pushed out to the fall—at the earliest—the markets’ patience may be tested.