As Republicans gain control of the White House, Senate and House of Representatives for the first time in a decade, they face both the opportunity and challenge of turning their agen-da into reality.
For President-elect Donald J. Trump, it is an ambitious agenda that includes overhauling the U.S. tax code, dismantling the Dodd-Frank Wall Street Reform and Consumer Protection Act, and halting or undoing other regulations that he says burden businesses, such as the Department of Labor fiduciary rule. He also has pledged to invest heavily in infrastructure and other measures to stimulate economic growth.
Missing from the immediate agenda is retirement.
“Aside from a Trump campaign promise to strengthen Social Security that did not include details, I don't see retirement policy at the forefront,” said Will Hansen, senior vice president of retirement policy for the ERISA Industry Committee in Washington.
Republicans in the House and Senate, who retained their majority status, share the president-elect's interests, but have their own ideas on how to achieve them. In the Senate, Republicans' slim majority means they will have to work with Democrats to avoid filibusters. Both houses also will have to figure out how to work with Mr. Trump, who ran as a populist, even under the Republican banner.
“(Mr.) Trump is much less predictable,” than previous presidents-elect said Erik Knutzen, multiasset-class chief investment officer at Neuberger Berman LLC. “He is very inexperienced when it comes to governing.”
Mr. Trump's tax reform ideas illustrate the challenge. His campaign platform called for tax cuts that would cost $4.4 trillion in new federal revenue over 10 years. It includes popular ideas such as slashing corporate and business income rates to 15% from the current top rate of 35% and reducing rates for partnerships that use pass-through accounting, including private equity firms, but it also would end corporations' ability to defer paying taxes on their overseas income.
His campaign to end what he called “special-interest loopholes” includes getting rid of the special tax treatment of carried interest. It's the “proverbial political football,” said National Venture Capital Association President and CEO Bobby Franklin, who said Mr. Trump “misunderstands” the value of carried interest.
Michael Bresson, a tax partner with law firm Baker Botts LLP in Houston, sees the carried interest talk as mostly symbolic. “He was running as a populist and that was a popular proposal. It is not part of other Republicans' plans,” he said, noting that having one party in control doesn't guarantee success. “There is a variety of plans that have been floated, so everybody needs to agree on a plan. I'm sure there's going to be a lot of talk. Who knows if they can all come together?”
There is more consensus among Republicans about dismantling Dodd-Frank, but critics argue much of it already has been implemented, and wholesale repeal would attract a lot of unwelcome attention from Wall Street watchdogs like Sen. Elizabeth Warren, D-Mass., and Rep. Maxine Waters, D-Calif. Mr. Trump also will have to compare proposals with House Financial Services Committee Chairman Jeb Hensarling, R-Texas, an outspoken advocate for repeal.
The same is true for the fiduciary rule, scheduled to take effect in April 2017. “It's pretty likely that an emboldened Congress will take aim at things like the DOL rule,” said Robert Dannhauser, head of global private wealth management at the CFA Institute in New York. “We think that's regrettable.” Erasing it completely could be tricky because financial services most affected by the rule already have begun overhauling their systems, and investors are more aware of it, he said. “In some ways what we've gone through has been good in informing the marketplace and investors. I would hope that the whole process has opened everyone's eyes,” said Mr. Dannhauser.
A resolution to block the rule that was passed by both chambers along party lines earlier this year was vetoed by President Barack Obama in June, but could reappear now.