Health care failure doesn’t derail prospects for tax reform

The health care bill fiasco doesn’t necessarily alter our view on the prospect for tax cuts. We had already pushed back our forecast of both the potential size of any fiscal stimulus and its timing, so the latest bout of Republican infighting hasn’t changed our thinking that we will eventually see a modest $2trn package of tax cuts enacted by early next year. Even complete legislative gridlock wouldn’t necessarily be a disaster, however, particularly not when there is evidence of a very strong pick-up in global economic growth.