I feel a lot of pressure when people ask me if the Republicans will succeed in passing Tax Cuts through Congress using the budget reconciliation process. To understand why, a good place to start is the front-page piece the New York Times is running right now. A quick summary of the article is that the Republican Establishment is under siege and feels like their last, best hope of surviving a populist revolt is to deliver on taxes. It’s also true that they’re getting an earful from their donors and many of their supporters, but it’s their perception of crisis that is the most important factor arguing in favor of them succeeding in passing a bill. They’ve begun to look at tax cuts as the life boats and flotation devices lashed to the deck of their Titanic. It will be hard for any Republican senators not to go along when they see the panic in their colleagues’ eyes.
But every single other sign I see argues against the Republicans succeeding.
To begin with, the reason the budget reconciliation process is being used is because it allows the Senate to bypass a filibuster. The GOP has a 52-48 advantage, but it would take sixty votes to overcome the objections of even a single senator. To pass something, the Republicans need fifty votes from their own caucus because it’s highly unlikely that any Democrats will vote with them. With a fifty-fifty vote, Vice-President Pence can break the tie, just as he did yesterday to help gut consumer protections against forced arbitration clauses. Another way of putting this is that the Senate Republicans can only afford to lose two votes from their own caucus, and that gives all of their members an extraordinary amount of leverage to make demands or objections. Anything that three of them insist upon must be included, and anything that three of them reject must be abandoned. It’s not unlikely that opposing blocs of three (or more) could create an impasse that can’t be circumvented. This could happen on a variety of issues, as various as how we regulate 401(k) programs or whether the bill will be deficit neutral.
In the House, the majority is clearly there to pass a bill, but things begin to look dicier when we get into the details. The far-right conservatives are still steaming that all their budget negotiations this year have come to nothing as the president has insisted that they pass the Senate’s budget resolution. The House budget insisted that any tax reform bill be deficit neutral and also called for “more than $200 billion in savings from changes to mandatory programs like Social Security and Medicare.” The Senate bill insists on neither of those things. Things could break down further when it comes time to find ways to pay for or at least partially offset the cost of the tax cuts. For example, eliminating the exemption for state and local taxes would hammer middle class voters in states like Texas, California, Pennsylvania, New Jersey and New York that collectively have enough Republican representatives to kill the bill. It’s unclear how many deficit hawk hardliners there are who will never vote for the kind of bill that is currently under consideration.
The biggest problem, however, might be the president. He’s asking for things that are mutually exclusive and nixing one proposal after another. His press secretary announced yesterday that he wants the tax cuts to be permanent, but they’ll have to sunset after ten years if they aren’t budget neutral. Trump doesn’t want a budget neutral bill and is in fact insisting on larger Corporate Tax Cuts than can conceivably be enacted even with a sunset. He promises that people’s 401(k)’s won’t be touched and that there will be no cuts to Social Security or Medicare. It seems like every time a tax writer in Congress floats a plan to raise revenue or cut costs, the president comes out and says that it will never happen. And his White House isn’t providing any real guidance that Congress can use.
We could get to a point reminiscent of the Skinny Repeal of Obamacare that the Senate attempted just before the August recess. Some kind of dramatically pared down bill will be produced that has little resemblance to their initial ambitions. It will entail only that on which they can all agree, which won’t turn out to be much. And then they’ll try to ram it home on the premise that they’ll suffer political death if they do not.
Even then, though, there are senators like Jeff Flake, Bob Corker, and John McCain who are not running for reelection and have broken dramatically with the president. They might go along with a bill to save their colleagues’ bacon but they’re unlikely to support a bill don’t like for Trump’s benefit. Flake and Corker, in particular, are fiscal hawks who won’t want to add to the deficit. They might not be too keen even on passing corporate tax cuts that will unhelpfully sunset after ten years, since that’s transparently stupid policy.
My best guess is that we’ll get to some kind of endgame like this. The pressure is so great to produce something that I would place my money on something passing. But I wouldn’t place a lot of money on it. The way I see it, the flames are already licking on the curtains and walls, and the functional Republican majority in the Senate is about to be consumed. The worse the relationship between the White House and the Senate gets, and it will probably deteriorate at an accelerated pace now, the worse the prospects for a successful tax bill. Time is not their friend.
What’s hard to envision is total failure. I think they’ll be able to achieve some face-saving gesture this time, unlike with their effort to repeal Obamacare.