Reince Priebus has resigned as White House chief of staff a day after a feud among top staffers burst out into the open, in yet another sign of infighting in the administration of US President Donald Trump despite efforts to add more clarity to their tax reform goals.
Trump has replaced Priebus with Homeland Security chief John Kelly, a former four-star general and Marine Forces commander, who only took up his last post in January on the day the President was inaugurated.
Priebus, who was chair of the Republican National Committee until he joined Trump’s team, had been savaged by Anthony Scaramucci, the new director of communications.
On Thursday Scaramucci told a New Yorker reporter: “Reince is a fucking paranoid schizophrenic, a paranoiac.” He also suggested that Priebus would be fired if he were found to be a source for leaks to the press.
Trump said on Twitter: “I would like to thank Reince Priebus for his service and dedication to his country. We accomplished a lot together and I am proud of him!”
He described Kelly as a “Great American and a Great Leader” who has done a “spectacular job” in his six months as Homeland Security head.
Tax reform direction change
Meanwhile the White House attempted to add clarity on tax reform, one of the policy promises most widely hoped for among investors.
In a joint statement the Republicans' senior voices on the economy said they will abandon plans for so-called border adjustments on imports, a heavy tariff to discourage importing and boost domestic production.
House speaker Paul Ryan, senate majority leader Mitch McConnell, Treasury secretary Steven Mnuchin, national economic council director Gary Cohn and others said: "There are many unknowns associated with it and [we] have decided to set this policy aside in order to advance tax reform."
The border adjustments tax would have represented a radical change to the US economy, but would have also dealt a heavy blow to some of the biggest US companies, with importers like Walmart in the firing line.
Glyn Fullelove, chair of the Chartered Institute of Taxation’s technical committee, said: "Any corporate reform that focused on border tax adjustments or destination-based cash-flow taxes would have replaced one distorting system with another, and it is in our view sensible that this route is not being followed."
Struggles to pass legislation
Yet the prospects for tax reform remain distant, with serious questions over the White House's ability to marshall Republican politicians towards a consensus.
The latest resignation of a top official barely six months into Trump’s reign as President, following former press secretary Sean Spicer and former national security adviser Michael Flynn. It comes after another botched attempt to pass major legislation.
The first effort: Donald Trump suffers major defeat as healthcare bill fails
The second effort: Trump has failed to pass healthcare reform for a second time
Three Republican senators teamed up with the entire cohort of Senate Democrats to defeat a so-called skinny bill to repeal the Affordable Care Act introduced by former President Barack Obama, known as Obamacare.
The Republican party has now made three attempts to repeal Obamacare, a signature pledge during Obama’s entire time as President and a key campaign issue. Yet despite having a majority in both houses of Congress, the party has floundered in its attempts to pass its healthcare bill, the only piece of major legislation to be put to a vote.
The difficulties hinge on a deep split in the Republican party between the right wing which is opposed to higher spending and the more moderate centrists, three of whom were responsible for the latest defeat.
The centrists wish to ensure nobody loses healthcare coverage in the Republican replacement bill – a promise made by Trump himself of the campaign trail. However, independent estimates showed packages so far would have resulted in millions of Americans.
The split also has important implications for investors, who have keenly awaited signs Trump will introduce massive tax cuts as well as a spending boost.
Gregory Duco, head of US economics at Oxford Economics, said: “The ideological healthcare reform battle in Congress, and ongoing political rumblings in DC, are weighing on consumers’ expectations.”
He added: “What we’re witnessing is a slow but steady private sector realisation that policy promises of a substantial fiscal stimulus will be just that, promises.”
Deep tax cuts at the time of a trillion-dollar infrastructure plan promised by Trump would almost certainly result in the US government deficit growing. This would likely be anathema to fiscal conservatives already concerned about the size of the debt load, which stood at 106 per cent of GDP in the first quarter of the year, according to the St Louis Fed.