I’m going to make this post shorter than the last one. Presumably, you will thank me for this. I’m not going to get down in the weeds of all the procedure involved in trying to pass tax reform using the budget reconciliation process. Instead, I’ll just note that the process shares most of the characteristics we saw in the effort to repeal Obamacare with the budget reconciliation rules.
In both cases, the idea is that the Republicans can pass a bill through the Senate without worrying about a Democratic filibuster. In both cases, the Republicans have to pass the legislation with almost no defections from their own side. And, in both cases, it’s a time consuming process that needs to be completed by a definite deadline. In the case of health care, their chance officially expires after September 30th when the fiscal year ends. In the case of tax reform, the deadline would be next September 30th.
Now, Trump did Congress a favor by clearing the looming debt ceiling and government shutdown crises off the September calendar, which should allow them to work on a budget which can include reconciliation directives for tax reform. But we saw the health care effort fail because of the inability to unite Republicans on the issue of Medicaid expansion. Any tax reform bill will be complicated by several similar conundrums. For example, what happens when you eliminate the exemption for state and local taxes and you discover that this is a good deal for some Republican senators’ states and a horrible deal for others’ states? That’s just one example, but it’s well known that tax reform is difficult because it creates winners and losers and that those winners and losers don’t break down neatly along partisan lines.
President Trump now needs to decide if he wants to begin this process anew after it failed him on health care. Does he want to risk not getting any tax cuts or tax reform at all because he trusted Paul Ryan and Mitch McConnell to deliver on something that they could not actually deliver?
It’s obviously tempting to try this approach, because the party is kind of demanding tax reform, but also because who wants to make concessions when they might not have to?
On the other hand, why take the risk of complete failure?
The Democrats are not opposed to working on a tax reform bill, but they do insist on a few conditions:
Schumer and 44 others in the Senate Democratic caucus signed a letter in August that laid out “three key principles that we believe are prerequisites to any bipartisan tax reform effort.”
These are that any tax-reform plan should provide no tax cut for wealthy people, be fiscally responsible and move through so-called regular order.
The “regular order” part of that means that they won’t agree to negotiate unless the Republicans abandon the effort to pass the bill using the budget reconciliation rules. In other words, as long as they can filibuster and kill the bill if they don’t like it, they’re willing to work on tax reform.
Now, if Trump, quite sensibly in my opinion, concludes that he’s more likely to get some kind of tax cuts by working with the Democrats than he is by going along for another excellent budget reconciliation adventure with Ryan and McConnell, does that mean he’s pivoting or making a very defensible risk/reward analysis?