Enacting the Trump fiscal agenda won't be easy

The stock market has been ebullient since President-elect Donald Trump’s victory. Many financial experts are expecting quick congressional approval of a major stimulus program consisting of infrastructure and defense spending and tax cuts.

I would not spend the money yet. There are some difficult steps along the way to Trumpian economics:

1. After he is inaugurated, President Trump will present his own budget. That will involve making numerous decisions that go far beyond his most publicized tax and spending plans. It is hard to imagine this process being completed before early March.
    
2. March brings another problem that may not be resolved quickly. Current law limits the gross debt of the United States at the level that will exist on March 16. But a multi-trillion dollar increase will be necessary to accommodate Trump’s agenda. That will not be an easy vote by a Republican-controlled Congress that includes many lawmakers who have been outspoken critics of ever raising the debt limit. Congress will eventually raise the borrowing cap, but we may see time-consuming debates involving temporary increases and much rhetoric about closing the government and defaulting on our debt.
    
3. The next big step involves passing a Budget Resolution that sets targets for total spending, revenues, and the deficit for fiscal 2018. The Congress has recently found it extremely difficult to pass such a measure: The resolution for fiscal 2016 was the first in more than 5 years. Then lawmakers failed to agree this year, in part because of disagreements among factions of the Republican party. But without a budget resolution, the Senate cannot use so-called “reconciliation” that would allow it to pass a tax cut with only 51 votes instead of the 60 needed for most bills.

Even getting 51 votes for a big, unfunded tax cut will require the support of some moderate Republican deficit hawks—itself not an easy goal. But without reconciliation it is hard to image such a bill getting out of the Senate.

Congress is supposed to pass a budget framework by April 15, but rarely meets that deadline. Given the profound differences within the Republican party, it is likely that the resolution will be passed very late—if at all.

1. Assuming passage of a resolution with reconciliation instructions, the House Ways and Means and the Senate Finance Committees will then have the hard at work to draft the details of a tax cut. The issue will become extremely complicated if they decide to combine tax cuts with business tax reform. Even a revenue-reducing tax reform will create many losers who will fight vigorously to keep their benefits.
    
2. There is a broad agreement within the Congress that the nation badly needs infrastructure investment. However, there is no consensus on how to pay for it. Some liberals would simply increase the deficit given that today’s low interest rates make higher deficits virtually costless. Conservatives would like to pay for infrastructure by reducing other spending.

A broadly popular approach would tax profits from abroad at a low rate, hoping that there would then be a surge in new revenue that could be earmarked for infrastructure investment. There are many other ideas, but assuming Congress can agree on an approach, it will then take a long time to jump over the environmental and other regulatory hurdles that now impede construction. I would not expect significant new investment until 2018.

What is clear from all this is that our budget process does not allow quick action even when the Congress would like to give away lots of money to lots of different people. Of course, Congress could simply suspend all the rules that delay and sometimes prohibit action. However, I suspect that a more likely outcome, after much bargaining, will be a stimulus that is but a pale shadow of what Trump’s campaign promises implied.

This story originally appeared on TaxVox.