Hurricane Harvey has devastated Texas. Now board your windows, evacuate the low ground and watch the damage it is poised to unleash on the nation’s finances.
Harvey makes landfall in Washington as soon as next week, when President Trump is expected to ask for what could be tens of billions of dollars in storm relief. And paying for storm recovery — probably with few offsetting spending cuts — will be but the first blow to fiscal discipline in what looks to be a particularly active, and calamitous, spending season.
After Harvey comes the debt ceiling, and there are rumblings that the vote to raise the limit could actually be used to increase spending. (In the past, such votes were used by fiscal hawks to cut spending.) At the same time come negotiations to fund the government for fiscal year 2018, and indications are that lawmakers will try to avoid a shutdown with a short-term spending deal that will include a Pentagon slush fund worth tens of billions of dollars.
Then, still forming over the Treasury Department is a fiscal Category 4: Trump and Republicans have given clear signs they are moving away from tax reform (a simplification of the tax code that doesn’t necessarily reduce revenue) toward all-out tax cuts, financed by deficit spending.
Trump, who came to power promising to eliminate the $20 trillion debt, or at least to cut it in half, is poised to oversee an exponential increase in that debt. Republicans, who came to power with demands that Washington tackle the debt problem, could wind up doing at least as much damage to the nation’s finances as the Democrats did.
Rising are the floodwaters of hypocrisy. Surging is the tide of amnesia. Blowing are the gales of profligacy.
If the red ink rises according to worst-case forecasts, “we’re talking additions to the debt in the trillions,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, tells me. All from actions to be taken in the next few months. “It turns out the Republican-run Congress is not willing to make the hard choices,” she says. “It is a fiscal free-lunch mentality on all sides.”
Trump, announcing his tax-reform plan in a speech Wednesday afternoon in Missouri, left little doubt that he’d ditch tax reform for tax cuts. He dutifully read out his principles from the teleprompter — which he uses when giving a speech somebody else wants him to give — but made clear that he isn’t expecting Democratic cooperation. “We must lower our taxes, and your senator, [Democrat] Claire McCaskill, she must do this for you,” Trump said. “And if she doesn’t do it for you, you have to vote her out of office.” Democrats, Trump said, “are looking to obstruct tax cuts and tax reform, just like they obstructed so many other things.”
There is no way to pass a comprehensive tax-reform plan of the sort Ronald Reagan secured — a simplified code, lower rates and closed loopholes — without bipartisan support. And Democrats want tax reform that doesn’t add to the deficit and doesn’t benefit the wealthiest 1 percent of households. But Republicans could pass a simple, deficit-mushrooming tax cut without Democratic support.
Trump’s partisan speech confirms other indications that his administration has essentially abandoned tax reform in favor of cuts. Treasury Secretary Steven Mnuchin and chief economic adviser Gary Cohn have not been reaching out to Democrats, party leaders complain. And Senate Majority Leader Mitch McConnell has indicated he plans to use the same “reconciliation” resolution he used on the failed attempt to repeal Obamacare to allow for a party-line vote on a tax cut. That process would nominally prevent Republicans from ballooning the deficit — but they could avoid such concerns by using the well-worn gimmick of having the tax cut expire before 10 years.
MacGuineas calls this “the predictable spiral from tax reform to tax cuts.”
Of course, if Trump and Republican leaders were to come right out with a pure tax cut that would add trillions to the debt, the blatant hypocrisy might swamp the effort. But what if that were to come after months in which other, smaller storms had already saturated the ground and weakened the roots of fiscal responsibility?
First, a Harvey recovery bill without the spending “offsets” so many Republicans demanded of previous bills. Then, a debt-limit increase, possibly secured with promises to spend more money on defense (which would buy GOP votes) and domestic priorities (for Democratic votes). Next, a spending deal that busts previously agreed budget caps by allowing an extra $70 billion or so for an “Overseas Contingency Operations” slush fund. Eventually, a reckless tax cut doesn’t seem so crazy — particularly with midterm elections looming and no accomplishments to show.
When it rains, it pours.