By James Capretta
Saturday, August 19, 2017
The outlook for an ambitious Republican reform agenda is
bleak at this point, to put it mildly. The GOP effort to repeal and replace the
Affordable Care Act (ACA) foundered in the Senate. The president’s budget plan
is already long forgotten, filled as it was with fanciful assumptions and
implausible policies. The chances of a GOP-written budget plan with significant
spending and tax cuts making it through both the House and the Senate are slim.
Even tax reform on its own looks less and less likely, as the main players
continue to utter only the vaguest generalities about what they have in mind.
It didn’t have to be this way. Republicans have driven
their agenda into a ditch through a combination of inexperience,
overconfidence, and an ill-advised legislative strategy. They bet everything on
their ability to pass a series of highly controversial bills through Congress,
one after the other, with just Republican votes. That was a fatal mistake.
In November, they thought they would pass a repeal-only
health-care bill by January or February with just Republican votes, which would
then give them time (perhaps a year or two) to pass additional legislation
replacing what was repealed with different provisions. But it was never likely
that a repeal-only plan would pass, because of the anxiety it would cause to
people getting subsidized insurance through the ACA.
After wasting the two months following the election on
that doomed plan, GOP leaders then switched gears in late January and said they
were going to pass a full repeal-and-replace plan — again with just Republican
votes — by spring or early summer, even though they had done very little to
build consensus among Republicans on what should be in a replacement plan. They
planned to pass a tax bill quickly after completing health care, followed by an
infrastructure plan. They were going to do all of this despite holding just 52
seats in the Senate, which means they can’t pass anything through the upper
chamber if there are three or more Republican defections.
Lo and behold, the Senate failed to pass a health-care
bill last month because at least three Republicans opposed every variant of
repeal and/or replace that Majority Leader Mitch McConnell put before them.
Now the Trump administration and Republicans in Congress
are embarking on an effort to pass either deficit-neutral tax reform, which
would mean politically treacherous decisions to eliminate popular tax breaks,
or a large tax cut that would increase the federal budget deficit by trillions
of dollars over the coming decade, again with just Republican votes. Nothing
that has taken place since January would indicate the GOP can deliver either
plan to the president’s desk.
The new administration, working alongside allies in
Congress, could have set in motion a very different legislative plan with a
better chance of success earlier this year. That plan would have sought as its
sole objective enactment by the August recess of a single reconciliation bill
containing the most achievable and worthwhile tax and entitlement reforms
Republicans are seeking. The key to making such a plan work would have been the
development of a coherent budget plan in Congress, preferably based on clear
and detailed ideas from the president’s budget submission, followed by a
comprehensive reconciliation bill that combined many disparate tax and spending
provisions into one piece of legislation.
In the first year of a presidency, this kind of
legislation, if assembled correctly, often generates a great deal of support,
because it becomes identified with the changes that a new president was elected
to pursue. Of course, it was more challenging for the Trump administration to
pursue such a plan because Trump’s campaign didn’t offer any detailed policy
ideas. The incoming team essentially had to start from scratch when assembling
its agenda beginning in January. And the budget they put together was so
unrealistic as to be an ill-suited starting point for a credible budget plan in
Congress.
Still, it would have been better for the administration
and the GOP Congress if they had taken the time necessary at the beginning of
the year to put together a fiscal plan that was logical and achievable and
could set in motion a budget-reconciliation bill that would pass.
The overall objective should have been deficit reduction
on a scale that sounds impressive but is well within reach — say, a bill aiming
to cut the deficit by $1 trillion over the next decade. This could be achieved
through a combination of doable entitlement reforms and a freeze on or slight
decrease in spending caps for non-defense discretionary accounts. The bill’s
entitlement reforms could include provisions to roll back some elements of the
ACA and replace them with less expensive alternatives, as well as realistic and
measured changes to Medicare, agricultural programs, and federal employee
benefits. Its spending reforms could also include inexpensive improvements to
veterans’ benefits, a small infrastructure investment, and additional training
and support for workers who have lost their manufacturing jobs in recent years.
The various adjustments in spending programs could then be combined with a tax
package that lowered rates as much as could be accomplished with the revenue
raised by eliminating wasteful tax breaks.
This is the kind of legislation that has something for
everyone to like, and dislike. There are tax-rate cuts, loophole closures,
spending cuts, and benefit improvements for politically important groups. Such
a bill would be very difficult for a Republican in Congress to vote against. It
would necessarily be much more incremental than the combination of a full ACA
repeal-and-replace plan and comprehensive tax reform, but it would be far more
achievable too.
A partial model for this approach is legislation Bill
Clinton pushed through Congress in 1993, his first year in office. Called the
Omnibus Budget Reconciliation Act of 1993, or OBRA, it contained most of the
important agenda items of Clinton’s first term, including tax increases,
expansions of the Earned Income Tax Credit, student-loan liberalization, a new
vaccine program for children, cuts in payments to hospitals and other providers
serving Medicare patients, and expansions of other federal income-support
programs. Mainly through tax increases, it reduced the federal budget deficit
in the ensuing years.
Clinton has always pointed to the 1993 legislation as the
foundation of his economic program. When he ran for reelection in 1996, the
economy had expanded at an average annual rate of 3.5 percent since the
beginning of his term, and he pointed to the law he passed in his first year as
the primary reason for the strong growth. Of course, the economy was already
growing crisply when Clinton came into office in 1993, and steady growth was
likely to continue if OBRA had not passed. But in political terms, that didn’t
matter, because Clinton was able to make the connection between the policies he
pushed as president and the strength of the economy that voters felt and
observed. He sailed to a comfortable reelection.
The OBRA legislation is an imperfect model for what
Republicans ought to have done this year because Clinton passed it with just
Democratic votes. There were 56 Democratic senators in 1993, and six voted
against the bill. Senator Bob Kerrey was a reluctant “yes,” allowing Vice
President Al Gore to break a 50-50 tie and send the bill to the president. The
legislation was signed into law in August 1993.
Republicans have a much narrower margin in the Senate
than Clinton did in 1993, which means they should bend over backwards to make
their legislation attractive to at least a few Democrats. That would give them
more maneuvering room to lose a few votes and still get something passed.
Attracting Democrats would require concessions, of course, some of which would
be painful. But the result would be a bill containing perhaps 60 or 70 percent
of what Republicans are trying to achieve, and it would pass.
At this point, there probably isn’t that much that can be
done to salvage the GOP’s legislative agenda. The controversies of this
presidency have made bipartisan cooperation all but impossible, and there is
not enough unity among Republicans to pass politically charged legislation on a
partisan basis. Still, given where things now stand, the GOP doesn’t have much
to lose by trying something different. It should abandon the idea of massive,
sequential, partisan bills and start over with an approach that provides a
fighting chance of passing one bill with meaningful reforms.
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