Balkinization: Procedural Misconceptions about the Senate Tax Bill

Procedural Misconceptions about the Senate Tax Bill

David Super

By the end of this week, passage of the massive Republican tax bill may be all but assured. Disappointingly, a great deal of the media coverage of this process has been confused or confusing. This is an effort to clarify some crucial points.

First, numerous stories suggest that a House-Senate conference committee will have difficulty reaching agreement on a final bill. That may well be wrong, not just as to the difficulty of reconciling the two versions of the legislation but even in its assumption that a conference committee will convene at all. At this writing, House and Senate Republican leaders are negotiating with hold-out Republican senators, working to arrive at a bill that the House can pass as-is once it leaves the Senate. Under intense pressure from donors to pass something, and understanding that the bill becomes increasingly unpopular with each passing day and with each new published analysis, the leadership cares far more about speed that substance at this point. Once they find a bill that can get fifty votes in the Senate, the House leadership is more than willing to strong-arm its Members into voting for it.

The differences between the House and Senate bills are unlikely to disrupt this strategy. Surprisingly for some, the Republican debacle in this month’s elections and dismal polling actually simplify Speaker Ryan’s task here. A number of previously marginal Republicans are now looking at a strong likelihood of losing their seats, whether or not they support legislation that raises taxes on many of their constituents. If so, then the futures of those that want to stay in public life – whether as staff at right-wing policy shops, as commentators on Fox News and its ilk, or as lobbyists specializing in Republicans – depends much more on their loyalty to the Party. Although more than enough Republicans come from high-tax states to sink the legislation over its reductions in the deductibility of state and local taxes, their anemic showing when the House passed its bill likely reassures the leadership that this will not be a deal-breaker, even if the final version is harsher. And House Republicans certainly will not vote down a tax bill because it repeals the Affordable Care Act’s individual mandate: they were willing to repeal the entire act, causing far more people to lose coverage. The House leadership likely will argue that a vote against the Senate bill is a vote to kill the entire tax cut enterprise as any changes could make repassage in the Senate problematic (all the more so if Alabama were to elect a Democratic senator).

Second, much has been made of the fact that the tax cut legislation would trigger a “sequestration”, or mandatory across-the-board spending cut, under the current version of the old Gramm-Rudman-Hollings deficit control legislation. Under this law, legislation that increases spending or decreases revenues must be offset to avoid triggering automatic spending cuts. Because budget process law puts revenues in the same category with direct spending programs (commonly, if imprecisely, called “entitlements”), these cuts would come from direct spending programs only. (Were legislation to exceed statutory caps on discretionary, or annually appropriated, spending, sequestration would hit those programs instead.) The legislation exempts Social Security and several major low-income programs from sequestration and limits Medicare cuts to four percent. Because of the magnitude of the pending tax cuts is so large, even after the 4% Medicare cut sequestration would completely zero-out all other mandatory programs subject to sequestration, including farm price supports and the administration of Pell Grants and other student financial aid (and even at that fail to achieve the required savings). Republicans seem unfazed by the possibility of being held accountable for these cuts, and understandably so: at some point, they will move legislation to avert these cuts and dare Democrats to vote against it (and be portrayed as the proximate cause of the sequestration).

Third, some reports suggest that the leadership is trying to buy the votes of self-identified “deficit hawks” with some sort of a trigger that would suspend or terminate some of the tax cuts if the promised economic growth fails to materialize or revenues fall below the levels promised by optimistic dynamic scores. If so, this will be the ultimate gimmick in a bill already filled with them. Corporate interests, insisting on the importance of “stability” for companies’ ability to plan, will likely insist on a “trigger” that is merely symbolic, with no real chance of affecting their tax cuts. But the problem goes much deeper: it is all but impossible to imagine a trigger that would actually accomplish its supposed purpose. To see why, one has to think about why revenue or economic growth targets might not be met: presumably a slowing economy. If that occurs, Republicans (suddenly reembracing Keynesianism) will argue that tax increases are absolutely the last thing the economy needs and dare Democrats to vote against legislation to suspend the trigger. For the same reason, the provision in the current Senate bill that would impose small revenue increases if revenue targets are not met is unlikely to have a meaningful impact. (Indeed, it may even offend the Byrd Rule.)

Fourth, reporters seem convinced that we will learn what the Republican leadership is doing in time to analyze and discuss it. That seems highly unlikely. Under the reconciliation procedures Republicans have invoked to pass the tax bill, floor debate is limited to twenty hours. The usual practice is to bring a reconciliation bill up, exhaust that time, and then have a “vote-a-rama” on amendments to the bill. With no more time for debate, senators must vote on these amendments without the opportunity to read them or to hear meaningful debate about their merits. (Sometimes the parties agree to allow each side one minute to summarize the arguments for or against an amendment.) Senate Majority Leader McConnell is likely to allow the debate time to be exhausted, and perhaps to have many amendments resolved in vote-a-rama, before offering his substitute amendment. That substitute would be the actual legislation on which he believes he can receive fifty votes in the Senate (enough to allow Vice President Pence to cast the tie-breaking vote) and subsequently get accepted in the House. Senators could have less than half an hour to decide on a substantially new piece of legislation, which (as noted above) will be the final version. Senators negotiating with the leadership may have seen the parts about which they have raised concerns, but only a handful of senators will know what is in the whole package and little if any information will be available from the Congressional Budget Office or the staff of the Joint Committee on Taxation.

Finally, media accounts portray “deficit hawks” as a major impediment to passage of the legislation. That seems increasingly unlikely. The bill is so thoroughly fiscally irresponsible that any serious deficit hawk still possessed of his or her talons would have announced firm opposition to the bill long ago. None of the changes being discussed would make the bill remotely affordable. Even if all the numerous gimmicks that conceal the bill’s true impact were removed, its stated goal of reducing revenues by $1.5 trillion just as the baby boomers are retiring – without any coherent plan of how to fill the gap and with adamant promises that its expiring provisions will be made permanent – will trigger rolling deficit battles for at least a decade. (By contrast, the Affordable Care Act was fully paid-for, and the sunsets in the Obama stimulus package were intended to, and did, actually take effect.) The Republican leadership has insisted that the measure’s dynamic effects – spurring economic growth and with it new revenues – will close the gap, but as the Congressional Budget Office reiterated over the weekend, the leadership is insisting on moving the legislation at a speed that prevents the Joint Committee on Taxation’s staff from producing such a dynamic estimate. The absence of even a single Republican senator declaring firm opposition to this legislature with so much about its nature now well-known strongly suggests that Republican deficit hawks are no more.

If this bill fails, it likely will be because of its deeply regressive impact. Senator McCain voted against the 2001 Bush tax cuts for distributional reasons, and this package is much, much more extreme – and lacks the cyclical macroeconomic justification that the 2001 legislation had. The question is whether he will do so again this week and, if so, whether two other Republican senators will join him.

Posted 6:47 PM by David Super [link]