Editor's Note: This is an excerpt from an institutional research note written by Hedgeye Potomac's Chief Political Strategist JT Taylor and David Hoppe, former Chief of Staff to House Speaker Paul Ryan. To read our institutional research email sales@hedgeye.com.
Source: White House
President Trump’s trip to the Middle East and Europe provided a brief respite from the continuous Russia watch and the effort to move the president's agenda forward is hurt in a number of ways by returning to this diversion. The focus of the senior staff at the White House will be divided between the agenda and responding to the questions from Robert Mueller in the coming months. President Trump's political currency is drawing down to pay for things having nothing to do with achieving his legislative goals and it soaks up some of the oxygen needed to support his initiatives.
The budget introduced recently was meant to respond to the promises made by candidate Trump during the campaign. It attacks the growing deficits of the past 17 years, but especially of the last eight years. Like most White House budgets, it will change in a multitude of ways as it winds through the process. It does set out the themes that will be argued over the next eight months in the upcoming budget and appropriations process.
Congress returns this week to kick off what’s expected to be a packed summer with, of course, plenty of fireworks as Trump’s impatience with his fellow Republicans on the other end of Pennsylvania Avenue grows.
It appears that work can begin on the FY'18 budget before Congress finishes the health care reconciliation bill. Passing a FY'18 budget will not be a picnic. Most Republicans want to balance the budget at the end of 10 years as the president's budget did. This is going to be difficult with the need to rebuild our defenses, repair infrastructure, and provide for a tax reform that might trade revenue neutrality for more growth – not to mention the politically-charged issues such as funding for Planned Parenthood and the wall.
The politics of passing such a budget are daunting. And if you don't pass a FY '18 budget, you don't have a reconciliation vehicle to use for tax reform. You also need a budget to help set the spending numbers for the appropriations process. It is entirely possible you won't see a budget until July. Look for a continuing resolution into December and then...
The opening salvo from a number of House Republicans on the debt limit is to request more spending reductions. Some would like these to be entitlement savings. OMB Director Mick Mulvaney said recently that revenues are not coming in as fast as some predicted which might require a vote on the debt limit before the August recess rather that in the fall – how many days do they have in July?
