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The Republican drive to overhaul the tax code took a major leap forward Thursday. It still has a long, long way to go.
But House passage of a budget resolution — matched by the Senate Budget Committee’s approval of its own version — clears an early hurdle for the top GOP priority. A final budget agreement, once it’s worked out between the chambers, will unlock special budget instructions enabling Republicans to approve a tax package without Democratic support. And Republicans badly need the win or it could lead to a "wipeout in next year's midterm elections," as The New York Times's Jonathan Martin and Alex Burns reported yesterday.
Just weeks ago, the fate of a House budget measure remained in doubt. The colicky hard-liners in the House Freedom Caucus threatened to withhold their support over demands for deeper spending cuts and more guarantees about the tax plan itself. They mostly fell in line Thursday, as the chamber voted 219 to 206 to approve the spending blueprint.
It would help if Republicans could bottle that unity, because the hardest work lies ahead. Below is a rundown of the major remaining challenges to the GOP’s ambition for a tax code overhaul:
1. The calendar.
It took the Big Six — the leading tax negotiators from the Trump administration and both chambers — all year to come up with the nine-page framework for an overhaul they released last week. The party wants to finish the entire project by the end of the year. That will involve gathering consensus from scores of lawmakers on a bill sprawling over hundreds of pages in less than half the time that six more-like-minded leaders needed to come up with the tax policy equivalent of a brochure.
And they have work left to do on the budget. Senate Republicans expect to approve their resolution this month to launch talks with their House counterparts by the end of October. The two sides then will have substantive disputes to iron out. The Washington Post’s Mike DeBonis and Kelsey Snell report:
Republican leaders in the House and Senate predict that any differences in the outlines can be resolved quickly despite objections from some House conservatives. Black said Thursday that she did not expect a bicameral accord until early November.
Of particular concern is a provision in the Senate bill that would allow tax-writing committees in the House and Senate to craft a bill that adds up to $1.5 trillion to the budget deficit, providing for significant tax cuts. Most Republicans say that the bill will spark economic growth that will offset the revenue loss, thus not adding to a national debt that now exceeds $20 trillion, although many economists say the evidence for that claim is thin.
That would leave a matter of weeks to introduce bills in both chambers, mark them up, pass them, harmonize the differences and pass them again. But Republicans may need to move on an even more aggressive schedule. Some see the probable election of Roy Moore in the Dec.12 special election for a Senate seat from Alabama as the actual deadline, as Politico reports. That’s because Moore — unlike Luther Strange, the incumbent he just defeated in the Republican primary — will serve in opposition to Senate Majority Leader Mitch McConnell (R-Ky.) and his agenda.
2. The details.
The party is fracturing over what, precisely, the package should do — and how it should do it. Republicans have outlined about $5 trillion in tax breaks they’d like to pass but only have $1.5 trillion in wiggle room under their probable budget agreement. Making up the gap by finding new sources of revenue is proving to be painful.
Republicans from high-tax states, for example, are resisting a push from leadership to repeal the deduction for state and local taxes. Rep. Chris Collins (R-N.Y.) on Wednesday said it’s “ironclad” that the package won’t fully scrap the break, an assertion that House Ways and Means Committee Chairman Kevin Brady (R-Tex.) immediately slapped down. Of 18 House Republicans who voted against the budget Thursday, five hailed from New York and New Jersey — an early signal of their potential willingness to oppose a package that pinches their constituents. Others say they’re devoted on principle to a full repeal of the estate tax, while some who fear it’s a too-costly giveaway to the rich want to abandon the proposal.
Deficit hawks, meanwhile, are raising concerns about the red ink the package will unleash, objecting to assumptions by the administration and leadership about the ability of tax cuts to pay for themselves through new economic growth. “The numbers are really uglier than almost anybody around this place seems to have digested,” House Ways and Means Committee member David Schweikert (R-Ariz.) said this week. In the Senate, Bob Corker (R-Tenn.) is vowing to vote against a bill that adds “one penny” to the deficit.
3. The politics.
Republicans are racing to forge a tax deal as their last, best hope for their beleaguered agenda. Their desperation points to a broader dysfunction complicating the exercise. Moore’s win in Alabama is a symptom: A new wave of anti-establishment rage is destabilizing the party’s leadership just as party brass needs to marshal rank-and-file order for the tax plan. The Times's Martin and Burns talk to Moore’s could-be colleague to set the scene:
Senator Richard C. Shelby, Republican of Alabama, who was first elected to Congress in 1978, said he had never seen rank-and-file Republicans so stirred up against the party’s leaders in Congress.
“Right now, the Moore-Bannon faction prevails,” Mr. Shelby said.
Republican leaders on Capitol Hill are making no attempt to mask their fear, predicting that failure to pass a tax overhaul in the coming months will lead to a wipeout in next year’s midterm elections….
“We had a pretty rough patch back in 2010 and 2012, and just when that sort of calms down, here comes the next wave,” said Senator John Cornyn of Texas, the second-ranking Senate Republican. At least then, he added, the fury was more coherent: “It was more ideological, whereas now it’s just more everybody is just angry at everybody.”
The base isn’t the only Republican faction in fits. Donors, exasperated by the lack of progress, are making a show of their frustration by sitting on their wallets. “The backlash is threatening to deprive Republicans of resources just as they're gearing up for the 2018 midterms,” Politico’s Alex Isenstadt and Gabriel Debenedetti report.
The toxic environment in Washington, lack of support from donors, and rising threat of credible primary challenges will all factor into the calculations of incumbents facing reelection as they decide this fall whether to run again. If a trickle of retirements turns into a tide, Republican leaders will have a new headache on their hands. As Corker has demonstrated with his newfound outspokenness since announcing his retirement, lame-duck lawmakers don’t march in line.
The House budget vote showed Republicans can still muster unity. They’ll need to do more of that — much more — to pass a major tax package.
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— Trump's Take Two on Puerto Rican debt. It turns out he wants it handled in bankruptcy court — not "wiped out" as he rattled bondholders by claiming on Tuesday. Sarah Huckabee Sanders was on familiar cleanup duty Thursday: "There’s a process for how to deal with Puerto Rico’s debt. It will have to go through that process to have a lasting recovery and growth. This is a process that was put in place and set up under Obama,” she told reporters, per Bloomberg. “The president wants it to go through that process, and that’s the stage we’re at on that.”
— They'll hate this in Bedminster. The White House isn't budging on its call for a repeal of the state and local deduction. Here was Sanders, via Politico, when asked if the administration is open to negotiation on it: “The president’s been clear about his position, and we’re moving forward with the framework that we’ve laid out."
— Hassett lays into TPC. Trump economic adviser Kevin Hassett ripped the Tax Policy Center's analysis of the GOP tax framework at an event hosted by the think tank. Washington Examiner's Joseph Lawler: "The analysis, Hassett said, contained 'many fictions' and "scientifically indefensible" conclusions. In recent days, congressional Republicans have criticized the Tax Policy Center, a nonprofit, nonpartisan think tank, as tilted to the left. Hassett said Thursday the backlash has been justified. 'I think that's what happens when you behave irresponsibly,' he declared to a room of people that included the tax experts who wrote the analysis, arguing the think tank did not have critical details about the Republican plan necessary to score its effects."
Vox's Matthew Yglesias responded:
If you don’t want analysts to score an incomplete tax plan, don’t release an incomplete tax plan!— Matthew Yglesias (@mattyglesias) October 5, 2017
— A gusher for oil drillers? Bloomberg’s Alex Nussbaum: “U.S. oil explorers could see a multibillion-dollar benefit from a move to slash the U.S. corporate tax rate but some of the industry’s biggest tax breaks could also be under fire… Still, the total tax bill for U.S. oil and gas companies could “shrink dramatically” if Congress enacts a law cutting the corporate rate to 20 percent from 35 percent… A proposal to allow immediate deduction of capital investments is likely to help companies like Exxon Mobil Corp. and Chevron Corp., although there’s also talk of limiting explorers’ ability to deduct interest costs.”
— A win for defense hawks. The Senate Republican budget offers more for defense, less for domestic programs. Politico's Sarah Ferris: "The Senate GOP's fiscal 2018 budget resolution would reduce or rein in spending for many domestic programs across the government, while setting up a record $695 billion budget for the Pentagon after 10 years... One of the biggest cuts would hit the nation’s transportation programs. That budget would be slashed by $11.29 billion over 10 years, down to $77.8 billion. And that department’s mandatory funding would be sliced further, from $55.4 billion to $37.6 billion during that period."
— CFPB issues new payday lending rules. The Post's Renae Merle: "The rules could radically reshape the payday lending industry by requiring firms to verify that borrowers can afford the debt and capping the number of times someone can take out successive loans. The rules are likely to “restrict” the industry’s revenue by two-thirds, largely by limiting repeat loans, according to the CFPB... The CFPB says it still expects more than 90 percent of payday borrowers to be able to obtain a loan, but it has been highly critical of the industry, which the agency says profits from trapping cash-strapped workers in a vicious cycle of borrowing. For example, the CFPB has said that about 80 percent of payday loan customers don’t pay off their first loan and have their debt rolled into another loan. About 45 percent of payday customers take out at least four loans in a row. And the loans often come with steep fees."
— Mnuchin travel tab: 7 flights for $800k. But the Treasury Department’s inspector general says he’s in the clear. The New York Times’s Alan Rappeport: The inquiry into Mr. Mnuchin’s air travel, prompted by an Instagram posting by his wife, found he broke no laws in his use of military aircraft but lamented the loose justification provided for such costly flights. “What is of concern is a disconnect between the standard of proof called for” by the Office of Management and Budget 'and the actual amount of proof provided by Treasury and accepted by the White House in justifying these trip requests,' the inspector general wrote.
Mr. Mnuchin has made nine requests for military aircraft since assuming his position earlier this year and has taken seven flights. A request to use a military plane for his European honeymoon with his wife, Louise Linton, in August was withdrawn. A ninth flight is scheduled for later this month, when Mr. Mnuchin is expected to travel to the Middle East."
— Trump to decertify Iran deal. The Post's Anne Gearan and Karoun Demirjian: "President Trump is expected to announce next week that he will 'decertify' the international nuclear deal with Iran, saying it is not in the national interest of the United States and kicking the issue to a reluctant Congress, people briefed on the White House strategy said Thursday. The move would mark the first step in a process that could eventually result in the resumption of U.S. sanctions against Iran, potentially derailing a deal limiting Iran’s nuclear activities reached in 2015 with the United States and five other nations. But Trump would hold off on recommending that Congress reimpose sanctions, which would constitute a clearer break from the pact, according to four people familiar with aspects of the president’s thinking."
— Russian propaganda may have been shared hundreds of millions of times. The Post's Craig Timberg: "Facebook has said ads bought by Russian operatives reached 10 million of its users. But does that include everyone reached by the information operation? Couldn’t the Russians also have created simple — and free — Facebook posts and hoped they went viral? And if so, how many times were these messages seen by Facebook’s massive user base? The answers to those questions, which social media analyst Jonathan Albright studied for a research document he posted online Thursday, are: No. Yes. And hundreds of millions — perhaps many billions — of times."
— Russian hackers stole NSA data. The Wall Street Journal's Gordon Lubold and Shane Harris: "Hackers working for the Russian government stole details of how the U.S. penetrates foreign computer networks and defends against cyberattacks after a National Security Agency contractor removed the highly classified material and put it on his home computer, according to multiple people with knowledge of the matter. The hackers appear to have targeted the contractor after identifying the files through the contractor’s use of a popular antivirus software made by Russia-based Kaspersky Lab, these people said. The theft, which hasn’t been disclosed, is considered by experts to be one of the most significant security breaches in recent years. It offers a rare glimpse into how the intelligence community thinks Russian intelligence exploits a widely available commercial software product to spy on the U.S."
— Mueller now looking into the dossier. Reuters's Mark Hosenball: "The special counsel investigating whether Russia tried to sway the 2016 U.S. election has taken over FBI inquiries into a former British spy’s dossier of allegations of Russian financial and personal links to President Donald Trump’s campaign and associates, sources familiar with the inquiry told Reuters. A report compiled by former MI6 officer Christopher Steele identified Russian businessmen and others whom U.S. intelligence analysts have concluded are Russian intelligence officers or working on behalf of the Russian government."
From The Post's Philip Bump: Only about 1 in 10 Americans have a lot of friends of the opposing political party
The Heritage Foundation will hold an event on the direction of FINRA .
The American Enterprise Institute hosts an event on “How has a decade of extreme monetary policy changed the banking system” on October 10.
From The Post's Tom Toles: "The United Staes offers the world some multi-layered assurances."
White House press secretary Sarah Huckabee Sanders says Trump has 'great frustration with inaccurate information:'
The gun device that Congress is thinking of banning:
Fact Check: Can the NFL fire players for protesting?:
Sen. Bernie Sanders (I-Vt.) discovered that Larry David, the actor who frequently portrayed him on "Saturday Night Live," is a distant cousin:
From the Late Show with Stephen Colbert: "A Suicide Pact Within The Trump Administration:"
Jimmy Kimmel says no one produces more fake news than President Trump: