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.