A lot of the angst surrounding the long, perpetually-snarled GOP effort to enact health care legislation is the knowledge there are big, important things in the queue behind it. As old-timers recall, a health care bill was supposed to be enacted very quickly at the beginning of the year as the one thing Republicans could come to an agreement over without a lot of thought.
A bit over seven months later, the major question bugging Republicans is whether they can shove health care under the bed like so much dirty laundry, and move ahead with the more pleasant task of cutting taxes. If they insist on finishing health care first, the time to handle everything else will obviously be shortened.
But as look at the vast number of unanswered questions about how, exactly, tax legislation is supposed to be enacted, it begins to make health legislation seem simple by comparison. Here are a few basic questions:
1. Will a tax cut bill require a budget bill? This could be the most important question of all, and amazingly, the answer is still up in the air. Originally, the plan was to first move the health care bill via a budget resolution for Fiscal Year 2017, and then move the tax bill through a budget resolution for Fiscal Year 2018. In both cases Congress could authorize “reconciliation instructions” to produce legislation that could clear the Senate by a simple majority vote, making filibusters impossible and Democrats irrelevant. This “double reconciliation” strategy was decided on before Donald Trump even took office, and it looked fiendishly smart until it broke down completely on the health care issue. One problem was that deal-cutting Republicans were constantly in danger of having deals unraveled by the Senate parliamentarian’s interpretation of budget rules. But more fundamentally, cutting Democrats out of the process entirely meant that Republicans had to have all but two of their senators on board. This proved to be a bridge too far.
While it’s been taken for granted all year that the GOP will use the budget process for tax legislation, some doubts seem to be creeping into their deliberations. Earlier this week, Sen. Orrin Hatch, chairman of the tax-writing Finance Committee, said it might be easier to appeal to Democrats for cooperation on taxes than to pursue reconciliation. Part of what Hatch may have had in mind is that lashing a fun-and-easy tax cut bill to a budget resolution that has a lot of other ramifications could be perilous, because it takes Republicans into the treacherous territory of deficit reduction and spending cuts.
2. Is a bipartisan tax bill feasible? While many Republicans would be relieved to never again hear jargon like “reconciliation” or “Byrd Rule” or other complicated budgetary legerdemain (here, we agree), using the regular legislative process to cut taxes the way they want to cut taxes would be difficult if not impossible. Yes, quite a few Democrats think corporate taxes rates are too high and too easy to evade. Some of the more conservative Democrats would be fine with pairing upper-end and middle-class tax cuts. But the kinds and amounts of tax “relief,” for corporations and individuals, to which Republicans believe they are entitled go well beyond what most Democrats would even consider. And outside the budget process, Senate Democrats would have veto power over the whole enchilada. 45 out of 48 Senate Democrats just publicly announced they won’t support any tax bill that benefits the top 1 percent of taxpayers or increases the national debt. More likely than not, Republicans will decide to use the budget process and then try to pick off a Senate Democrat or two to offset possible GOP defections.
3. Would using the budget process require deficit neutrality? This is far and away the most confusing thing about the nexus between budget and tax legislation. It is entirely possible to pass a budget resolution that boldly, proudly, increases budget deficits. The budget resolution that moved the so-called “Bush tax cuts” in 2001 and 2003 did just that. But budget rules prohibit measures that increase deficits beyond a ten-year “window,” so tax cuts that cause increased deficit beyond the “window” have to expire. And that’s why the Bush tax cuts were not permanent. Some Republicans (particularly those associated with the Tea Party Movement in the past) really don’t like adding to budget deficits, and most of them dislike temporary tax cuts. But the talk about “offsetting” tax cuts with revenue measures or spending cuts is political, not something required by budget procedures. That is important because if push comes to shove, Republicans probably won’t let deficit hawkery get in the way of tax cuts. There has even been talk of dealing with the “ten-year window” problem by simply extending it to, say, 25 years, since the budget resolution itself determines the size of the “window.”
In the end there will probably be “offsetting” tax “loophole” closings to help “pay for” tax cuts only if Republicans favor them as ends in themselves. A good example is the federal income tax deduction for state and local taxes, which has popped up in various accounts of the Trump administration’s tax “ideas.” The deduction mainly benefits wealthy blue states like New York, New Jersey and California. If that idea doesn’t offend too many House Republicans from the same states whose votes are needed to pass a tax bill, it will probably be included. But the biggest potential revenue offset—the so-called Border Adjustment Tax, or BAT, which House Speaker Paul Ryan proposed—appears to be dead; it offended importers and businesses that relied on imports, and did not scratch the administration’s protectionist itch. So the tax cuts aren’t going to be offset on the revenue side of the ledger.
4. Do tax cuts require spending cuts? [rephrase this] As noted above, this subject only comes up if tax cuts are enacted via a budget resolution, which sets overall spending and revenue goals for Congress and the federal government. And also as noted above, there’s no firm requirement that budget resolutions cut budget deficits or are even deficit-neutral. But because some Republicans want to show progress towards a balanced budget, and perhaps even more want to cut certain kinds of domestic spending whether or not it is necessary to “pay for” tax cuts, the tax cut dessert has been linked tightly to the broccoli of spending reduction in the minds and budget planning of congressional Republicans. How far to push spending cuts, particularly in the political minefield of “entitlements” like Social Security, Medicare, Medicaid, food stamps, and agricultural subsidies, has been a huge question haunting the FY 2018 budget debate that in turn controls when and how tax cuts occur.
5. Where is Congress on the FY 2018 budget process, anyway? Not remotely as far as one might expect considering how long discussions have been going on. After months and months of efforts to reach consensus within and beyond her House Budget Committee, chairman Diane Black finally brought a draft budget resolution up for approval late last month. In a compromise between House Freedom Caucus members and the rest of the GOP Caucus, the bill “only” required $203 billion in “entitlement” cuts—though Black threw conservatives the bone of a vision statement that aimed at much, much deeper future cuts, including reforms of Social Security and Medicare. There are no plans yet to move the budget resolution to the full House, and the basic viability of the House budget effort has now been endangered by Black’s decision to run for governor of Tennessee. If she steps down as Budget Committee chairman, there will be a leadership vacuum at the worst possible time, and if she doesn’t, she may be loathe to support measures that will lose her votes back home.
In the Senate, the FY 2018 process really hasn’t even begun.
6. Are Republicans at least united on the tax cuts themselves? Um, not really. It was a big deal when the so-called “Big Six” of tax policy—the House Speaker and Senate Majority Leader, the chairmen of the House Ways & Means and Senate Finance Committees, and the Treasury Secretary and National Economic Council director—released a “statement of principles” on tax legislation last week. But as the New York Times put it:
The five-paragraph joint statement in many respects raised more questions than it answered, providing fewer specifics than the previous plans released by House Republicans and President Trump. The lack of detail highlighted the challenge that Republicans face as they try to make difficult trade-offs on legislation that could reshape the entire economy.
So the answer to the above question is “no.”
7. How much time to Republicans have to get this all done? Another subject of confusion is the relationship between the FY 2017 budget resolution and reconciliation bill that is still hanging out there to facilitate health care legislation, and the FY 2018 budget measures intended (unless Republicans abandon this approach in favor of a bipartisan bill) to enact tax cuts and Lord knows what else.
The consensus of budget experts is that once a FY 2018 budget resolution is enacted, the FY 2017 measures expire. Up until that point, Congress can theoretically work on two budgetary tracks.
From a more practical point of view, congressional Republicans really need to wrap up the health care debate once and for all before moving decisively towards consuming the last cookie on the once-heavily-laden plate of their 2017 agenda. For one thing, there are provisions in the stalled health legislation that Republicans really need to move into the budget/tax legislation if they want to enact them in a 51-vote context, like Planned Parenthood defunding, and perhaps repeal of some of the Obamacare taxes. For another, the pressure on their own members of Congress to get along will be significantly heightened if there is just one final opportunity to go into an election year with a legislative trophy in hand—particularly if it is one that is reasonably popular, unlike the health care legislation Republicans have been pursuing in vain.
As all of the foregoing questions indicate, abandoning health care legislation for this budget and tax morass won’t make life easier for congressional Republicans. Their hard deadline for getting this done is the end of the year. They probably should not make any big plans for the holidays.