Year-end frenzy in DC

A raft of issues was waiting when Congress reconvened in September. Three weeks seemed hardly enough time to deal with them all. But to the surprise of many, the president quickly struck a deal with “Chuck and Nancy” that granted spending authority to begin the new fiscal year and cleared the decks for Republican efforts to repeal and replace GovCare and take up tax reform. Oops, that’s not what was supposed to happen, 9/11/17.

Did these developments signal the dawn of a new era of bipartisan cooperation? Not a chance, as subsequent developments have made clear. And the year-end impasse now shaping up won’t be resolved so easily. Here’s a rundown and our recommendations.

I. Tax reform – SAFE has followed the twists and turns as a Republican tax plan was turned into specific bills (House & Senate versions) and presented in the two houses of Congress. Although generally supportive, we doubted the legislative process would be completed this year. Status of Republican tax plan, 10/16/17.

While legislation based on the Tax Plan may be enacted eventually, we don’t believe there is much chance of a tax bill reaching the president’s desk by December (as Secretary Mnuchin has been quoted as foreseeing).

As though to prove us wrong, the House and Senate (using the budget reconciliation process) passed tax bills on their respective first tries and a conference committee is meeting to resolve the differences. Although the outcome remains uncertain, it’s quite possible that the resulting legislation will be passed by both houses and reach the president’s desk before Christmas.

Democrats don’t like the way things have been going, and they will use every tool at their disposal to stop the tax bill. It’s a giveaway to the affluent and big corporations, they claim, which would hurt middle-class taxpayers and increase the deficit. Surely a better proposal would have been developed if Democrats had been permitted to participate in the legislative process. Statement on GOP tax bill, Senator Tom Carper,
12/2/17.

Today, our Republican colleagues approved a bill that will blow a hole of nearly $1.5 trillion in our federal deficit in order to provide permanent tax cuts to corporations and millions of dollars in tax breaks to the wealthiest Americans. Within ten years, more than three-quarters of the tax cuts in this bill would go to the wealthiest five percent of Americans—nearly two-thirds of the tax breaks would go to the wealthiest one percent. That is shameful. To add insult to injury, it also begins [repeal of] the Affordable Care Act, causing premiums to skyrocket and 13 million Americans to lose their health insurance over the next decade.

Media coverage has had a similar thrust, as was exemplified by a Washington Post editorial recently run in the News Journal. After slamming the Republican tax bill from stem to stern, the editorial rattles off eight suggestions for the conference committee that would make the bill less attractive to conservatives. Taking tax bills from worse to bad,
12/7/17B.

Neither the House or Senate tax bills represents “an improvement over the status quo, and we’d be delighted if the conference collapsed and everyone agreed to start from scratch to craft a bipartisan, fiscally responsible bill.” But since “that’s not likely,” let’s consider how this legislation could be made “less-bad.” (1) Restore GovCare individual mandate; (2) Kill the provision re drilling in ANWR [a sweetener to get Sen. Lisa Murkowski of Alaska on board]; etc.

Public opinion polls indicate that Democrats have been winning the messaging war. Two new polls suggest the Republican tax bill is horribly unpopular, Joseph Lawler, Washington Examiner,
12/5/17.

Republicans’ sales effort on their tax plan has fallen far short and the public mostly disapproves of their planned tax cut, two polls released Tuesday show. A Quinnipiac poll found that just 29 percent of voters approve of the plan, while 53 percent disapprove. Similarly, a Gallup poll showed 29 percent of Americans favoring the tax cut and 56 percent disapproving.

No matter, congressional Republicans have little choice but to press ahead and hope a victory will help them in the 2018 elections.

The Republican tax plan doesn’t go far enough in eliminating tax preferences for either individuals (increasing the Child Tax Credit would represent a step in the wrong direction) or businesses. And although the tax cuts should fuel faster economic growth, thereby reducing revenue losses, projected deficits would still be boosted by some $1 trillion over the next decade. Nevertheless, we believe enactment of the tax plan would represent a solid achievement. Assessing Republican tax plan,
11/13/17.

Moreover, the conference committee review will provide an opportunity to combine the best features of the House and Senate tax bills – not to make the final product “less bad” but to make it better. Here are some examples of the choices available. See, e.g., 5 key questions for the House-Senate tax negotiations, Joseph Lawler, Washington Examiner,
12/5/17; Important differences between the House and Senate tax reform bills, Jared Walczak, taxfoundation.org, 12/2/17.


Screen Shot 2017-12-10 at 10.36.37 AM

Bear in mind, however, that Senate Republicans have a narrow margin of error. The Senate tax bill passed by a margin of 51 (all of the Republicans except Senator Bob Corker) to 49 (everyone else). Three GOP defectors would have meant defeat, and if Roy Moore wins the special Senate election in Alabama tomorrow, that would reduce the survivable number of GOP defectors on the final Senate vote (re the conference committee bill) to one!

2. Healthcare – As already noted, the Senate tax bill includes a provision to repeal the individual mandate in the Affordable Care Act. And here’s why many conservatives like this idea.

•Repeal of the mandate would soften the GOP’s previous failure to “repeal and replace” GovCare. Some features of GovCare may be popular, but the individual mandate isn’t one of them. Note that the only people directly affected are individuals who are willing to pay a “tax” for the privilege of not signing up for healthcare insurance (HCI) that they don’t want to buy at the going price.

•Congressional Budget Office projections indicate that IM repeal would generate a fiscal savings of $338 billion over 10 years (by reducing the signup for individual HCI plans and Medicaid coverage), which would help meet the overall deficit increase ceiling for the tax bill. Tax reform: How the GOP can win big, Joseph Lawler, Washington Examiner,
11/14/17.

Being more focused on maximizing HCI coverage than on individual liberty, liberals tend to see things differently. It is also argued, with some reason, that IM repeal would boost HCI premiums because people eligible for individual HCI policies wouldn’t have an incentive to sign up for coverage so long as they were healthy.

Several Senate Republicans have expressed concerns about IM repeal, and Senator Susan Collins (R-ME) has reportedly been promised that two other bills (Collins-Nelson bill to set up high risk reinsurance pools; Alexander-Murray bill to continue unfavorable loss experience payments for HCI insurers in exchange for more flexibility in state administration) will be enacted to stabilize HCI premiums.

House Speaker Paul Ryan wasn’t privy to the arrangement with Collins, however, so the other bills might not be included in the year-end spending deal that is being hammered out. In that case, Sen. Collins might change her vote. Ryan won’t commit to deal Collins was promised for her vote on the tax overhaul, pressherald.com,
12/6/17.

Why is Speaker Ryan being difficult? Perhaps House conservatives are getting tired of being expected to cater to every whim of Senate Republicans, especially after the House passed a bill to “repeal and replace” GovCare while the Senate fell short. In any case, House conservatives are threatening to balk, and Ryan must necessarily give serious consideration to their views. Rep. Mark Walker says “no energy” for Obamacare bills, Robert King, Washington Examiner,
12/6/17.

A top House Republican said there is “no energy” to take up two Obamacare stabilization bills and that leadership has not discussed the legislation with him. Rep. Mark Walker of North Carolina, chairman of the 170-member Republican Study Committee, would not speculate on whether he would support the two bills if President Trump throws his weight behind them. Senate Republicans who are pushing the two bills believe that the president will help ensure their success in the House, despite public opposition by House Speaker Paul Ryan, R-Wis.

3. Immigration – The Deferred Action for Childhood Arrivals (DACA) program was instituted by executive action in June 2012. Although the idea of not deporting children (aka “dreamers”) who have been brought to this country through no fault of their own has obvious appeal, the decision to circumvent Congress on the issue was dubious. Postelection update: Illegal immigration, 11/17/14.

. . . the president’s role under the Constitution is not to make the laws of this country, whether by ignoring laws he doesn’t like or issuing new ones, it is to “take Care that the Laws be faithfully executed.” Article II, Section 3. And don’t take our word for this, because some high-profile observers have said much the same thing – including columnist Charles Krauthammer, liberal law professor Jonathan Turley, and the Washington Post. Watch out for a power grab on immigration, 8/25/14.

The DACA program was cancelled in September, with a six-month delay in implementation so Congress would have time to act on the matter. After Trump acts, DACA is now Congress’ problem, Byron York, Washington Examiner,
9/6/17.

If there was consensus about the new ground rules, six months for the DACA transition would be ample. But Republicans are expecting some steps to curb illegal immigration as part of the deal, and Democrats aren’t inclined to agree.

Demands put on the table by the two sides suggest that a mutually agreeable deal may prove elusive. The omnibus [spending bill] is the chance for Congress and the president to get a win for Article I, Natalia Castro, netrightdaily.com,
12/6/17.

Americans for Limited Government President Rick Manning notes, “If Nancy Pelosi and Chuck Schumer want to shut down the government over DACA, Mitch McConnell and Paul Ryan should tell them to ‘make our day’. The priorities in the omnibus are to cut spending on discretionary programs and use the House omnibus as a path to remove AFFH [Affirmatively Favoring Fair Housing], fund the wall, and defund sanctuary cities.”

The president addressed the subject at a campaign style rally in Pensacola, FL on December 8. All of the usual conservative talking points were included (this is from memory; a transcript doesn’t seem to be available), with the exception that we don’t recall any mention of enforcing the E-verify program to ensure undocumented workers aren’t being illegally employed.

•Republicans don’t want a government shutdown, that’s the Democrats’ idea, but the president promised to secure the border and that’s what he intends to do.

•The Border Patrol has done a great job of slowing the influx of illegal immigrants, but they will be able to do an even better job after a border wall gets built.

•There must also be enforcement of visa overstays, and “sanctuary cities” must start cooperating with the federal authorities if they expect to keep receiving federal funds.

•It’s time to end chain migration, e.g., automatically admitting relatives of immigrants whose presence in the country has been legalized. And new arrivals should be getting jobs, not going on the welfare rolls.


For their part, Democratic leaders have insisted that the DACA issue should be settled to their satisfaction without building a wall, etc. Chuck Schumer predicts Trump won’t veto spending bill if DACA fix included, Al Weaver, Washington Examiner,
11/7/17.

"Here's the bottom line — we feel very strongly that DACA must pass and pass by Dec. 31. We're going to work very hard for it in the must-pass legislation that comes forward," Schumer told reporters at his weekly press conference. *** Schumer also predicted there will be no need for Democrats to threaten a government shutdown over a lack of a DACA fix in the year-end spending package. "We won't come to that," Schumer said. "I think we'll have Republicans joining us to support DACA."

4. Spending bill – Under its own budget rules, Congress is supposed to get all of its appropriation bills enacted into law by the beginning of the fiscal year, e.g., 10/1/17 for fiscal year 2018. However, this rarely if ever happens.

Current spending levels for discretionary programs are typically extended by a continuing resolution and mandatory programs (over half the total budget) continue operating on autopilot. Shortly before Christmas, or whenever Congress gets around to it, an omnibus appropriation bill is enacted to establish funding levels for the fiscal year (which has already been under way for several months).

Such an approach is not conducive to effective planning or control of operating expenditures, and it would never be accepted in a properly run enterprise. The effects on the huge and vitally important US defense organization are especially pernicious. An updated view of the economy, Government services,
11/27/17.

Both houses of Congress have passed the National Defense Authorization Act for fiscal year 2018. This bill provides for more defense funding than the president requested initially, and the Pentagon brass is itching to move ahead. *** But wait, this is merely a “policy bill,” which neglects to lift the $85 billion lower spending cap that is currently in place. So don’t announce that raise or start ordering planes and ships just yet.

A continuing resolution was enacted in September, which was set to run until December 8. With no appropriation bills having been enacted, the CR was extended last week until December 22 and could well be extended again if necessary. Democrats are reportedly prepared to go along with increased defense spending if, but only if, there are proportionate increases for nondefense programs.

How can Democrats demand this when they are in the minority? Blame it on the Senate filibuster rule, which permits 41 senators to block discussion of any spending bill they don’t like. No wonder Congress never seems to cut spending except on an across-the-board basis, which never works for long, witness the endless carping about and adjustments to the spending caps that were imposed pursuant to the Budget Control Act of 2011.

The long-term consequences of habitual deficit spending and rising debt could be severe, as we have often noted. And a big tax cut, coupled with spending increases (versus spending cuts), doesn’t seem likely to improve the situation. Trump could join Obama in the $1 trillion deficit club, Rick Newman, yahoo.com,
12/5/17.

The deficit will hit $1.05 trillion in 2019 and $1.1 trillion in 2020, according to the Committee for a Responsible Federal Budget, if Congress passes the tax cut legislation it’s currently negotiating, along with disaster relief and other measures meant to avert arbitrary limits on spending established several years ago. The tax cuts alone would add about $150 billion to the deficit each year, on average, with other likely changes pushing that up by another $25 billion per year, or so. Deficits will only get larger, unless there are major cutbacks in spending or new taxes in the future.

5. Conclusions – None of the principals want a “government shutdown” just before Christmas, but how should the issues in play be resolved? Here are our recommendations.

•The GOP tax plan should be enacted after resolving the differences between the House and Senate bills to optimize the results (see SAFE’s suggestions).

•GovCare is an expensive mess, and repealing the individual mandate would serve as a reminder to all concerned that reform is needed. Pass the GovCare stabilization bills that have been negotiated, but continue efforts to find a longer-term solution.

•The status of the dreamers must be legalized, but there should be a quid pro quo. The president’s ideas for curbing illegal immigration seem to be basically on target; a commitment to enforce the E-verify system should also be made.

•The year-end spending bill should provide funding increases where they are truly justified, e.g., for defense, but not across-the-board increases for all functions. Moreover, the nation’s political leaders should firmly commit that (1) a serious start will be made on shrinking the deficit next year, and (2) appropriation bills for fiscal year 2019 will be developed and enacted before October 1, 2018.

Finally, Republicans have borne the onus for all of the government shutdowns that have taken place over the years. If there is a government shutdown this year, which has perhaps a 20% chance of happening, we think Democrats may be perceived to have overplayed their hand.

© 2018 Secure America’s Future Economy • All rights reserved • www.S-A-F-E.org