Donald Trump's uncharacteristically conciliatory speech – at least compared with his past brazen performances – to Congress this week cheered bullish investors and wowed political pundits.
But a cold hard reality remains; actions speak far louder than words.
"Watch what we do, not what we say," president Richard Nixon's attorney-general once famously said.
However toned town and cloaked Trump's nationalist message to lawmakers was on unifying the country, the hard yards of passing legislation are in front of the untested new President.
Sharp divisions are emerging among congressional Republicans – let alone Democrats – over Trump's top two priorities: overhauling healthcare and reforming the byzantine tax code.
"The trench warfare on Capitol Hill remains a stalemate as the clock ticks," says Washington political analyst Chris Krueger of Cowen and Company.
Persistent controversies, such as revelations Attorney-General Jeff Sessions misled Congress under oath as a senator by denying any contact with Russian officials during the election campaign when in fact he spoke twice to Moscow's ambassador, threaten to distract from and derail major policy overhauls.
Republicans demanded Sessions recuse himself – as he ultimately did – from investigations into any contacts between Trump's team and Russia during the election campaign. Democrats demanded he quit.
Meanwhile, US sharemarkets have raced ahead to seemingly price in a large amount of Trump's pledged "big, big cut" for American companies and "massive tax relief" for the middle class.
As Trump himself boasted, US stocks have added nearly $US3 trillion in value since his election.
Since November 8th, Election Day, the Stock Market has posted $3.2 trillion in GAINS and consumer confidence is at a 15 year high. Jobs!
— Donald J. Trump (@realDonaldTrump) March 2, 2017
The Dow Jones Industrial Average this week topped 21,000 points for the first time, to be nearly 15 per cent higher after the November 8 poll. The forward price-to-earnings ratio is about 18 times, versus a historic average of 16.5.
PIMCO's head of public policy Libby Cantrill says: "However strong the speech was on style and however bullish the reaction has been among certain risk markets, President Trump's speech did not significantly change the stubborn facts about policymaking in Washington.
"The two priority issues for President Trump and congressional Republicans in 2017 – healthcare overhaul and reform of the tax code – are two of the most complex and time-consuming issues Congress can tackle."
Republicans, who narrowly control the Senate, largely agree that the Obamacare health insurance law must be overhauled.
There are gaping divisions on how to provide market-based healthcare efficiently and affordably without ripping away coverage from about 20 million Americans.
Due to complex budget accounting and Senate voting rules, healthcare reform must proceed before Trump's tax-cutting agenda can go ahead.
As PIMCO points out, it took Barack Obama 14 months to broaden healthcare coverage as a hugely popular president with a larger Democratic majority in Congress than Republicans currently have.
When Congress last undertook comprehensive tax reform in 1986 during Ronald Reagan's presidency, it took the experienced former state governor several years to herd the cats to achieve bipartisan support.
Toxic politics
In today's toxic political environment, Democrats display little willingness to approve Trump's agenda.
Republicans have 52 of 100 Senate seats, leaving Trump little room for conservative dissenters.
Trump's Treasury Secretary Steven Mnuchin has set an ambitious August deadline for tax reform before Congress breaks for recess.
JPMorgan chief executive Jamie Dimon said this week if Trump made repealing Obamacare a priority, it could take at least 12 months before any material change in the tax code.
Dimon signalled that tax reform was critical to US competitiveness and to attract investment.
"We have been driving brains, capital, business, and research away from this country," he said.
To correct that trend, House Republican leaders are pushing a $US1 trillion border adjustment tax (BAT) for corporations, akin to a value-added tax.
Retail importers
Several Republican senators oppose it as protectionist and worry it will drive up prices for retail importers.
Trump has hedged on the BAT, signalling some support in his address by advocating a "level playing field" for US firms on tax and trade.
Without the revenue-raising BAT or drastic spending cuts, Trump can't afford major tax cuts without blowing out the budget deficit. Fiscal hawks in Congress are worried.
Citigroup economist Dana Peterson thinks a significant tax overhaul will probably happen before the end of the year.
"However, there is a risk that important elements of the Trump and Congressional pro-growth agendas may not be realised to provide the fiscal stimulus we currently project will manifest in 2018," she notes
Trump, The Art of the Deal author, faces a big negotiation test.
