In a party-line vote on Tuesday afternoon, the Senate Budget Committee sent the Republican tax bill to the floor of the Senate, where it will be put to a vote sometime later this week or early next week. G.O.P. leaders seem confident that the bill will pass, and their confidence may be justified, although the outcome isn’t quite clear yet. If the Republican Party does pull this off, it will be another marker in the erosion of American governance.
Adam Smith once remarked that there’s a lot of ruin in a nation, and that’s true—over the decades and centuries, Capitol Hill has seen many backroom stitch-ups, efforts to deceive the public and steamroll the opposition party, and misguided proposals passed into law. But in terms of process, marketing, and substance, this Republican tax-reform effort has plumbed new depths.
The vote in the Budget Committee was taken before some of the legislation’s key details had been finalized, and before the Joint Economic Committee, the official keeper of the numbers on budget issues, had time to issue a proper analysis of the bill. (On Tuesday evening, there were reports that the Joint Economic Committee would put out a report on Wednesday.) The chairman of the Budget Committee, Senator Mike Enzi, of Wyoming, summoned no experts, commissioned no studies, and held no public hearings to consider the bill. “I thought, Mr. Chairman and colleagues, I had seen just about everything,” a Democratic member of the committee, Senator Ron Wyden, of Oregon, said shortly after the vote was taken. “But this committee has just completed a key discussion on the budget foundations for ten trillion dollars of tax-policy changes in less time than it takes to wash a car.”
Until shortly before the vote, it had seemed possible that two Republican members of the committee, Bob Corker and Ron Johnson, would vote against the bill. They had both publicly stated concerns about the effect the bill would have on the budget deficit and small businesses. After indicating that they had received assurances that the final bill would contain concessions that met their concerns, Corker and Johnson both voted yes to send the bill to the Senate floor. It wasn’t entirely clear what the concessions to these senators would look like. There was talk of the Republican leadership making the provisions for “pass through” businesses even more generous, and also of including a “trigger mechanism” that would roll back some of the tax cuts if revenues came in lower than expected. But if anybody in Congress knows how such a mechanism would work, they’ve yet to say so publicly.
Republicans sometimes compare what’s happening now to 1986, which was the last time that Congress approved broad-based tax reform. “But unlike in 1986, most of the specific provisions of the legislation under consideration have received no hearings,” Martin A. Sullivan, a former U.S. Treasury official and congressional staffer, noted at the Tax Analysts blog. “Indeed, most experts, as you read this, are still struggling to understand dozens of billion-dollar ‘details’ in this bill. Members who are voting on it have only a superficial understanding of it…. There is no reasoned justification for rushing this bill at unprecedented speed through the process. Republicans are doing it because they have the power—and that’s that.”
Actually, the Senate Republicans do have a justification for acting in haste, even if it’s a cynical one. They know that their bill, like the bill that House Republicans have already passed, is a political stinker that will only get more unpopular as time goes by and more attention is focussed on it. Hence the continuing, and almost comical, effort to portray a huge giveaway to business as a boon to the toiling masses.
During a White House meeting with Mitch McConnell and Paul Ryan—the meeting at which Chuck Schumer and Nancy Pelosi were no-shows—Donald Trump told reporters that “the biggest tax cut in history” was on the way. That was a blatant falsehood. Except for their giveaways to the heirs of large estates, the personal tax cuts in both Republican bills are pretty modest. As a share of gross domestic product, the Reagan tax cuts of 1981 were much bigger. Trump also claimed that the reform will motivate U.S. businesses to bring home four trillion dollars in capital that is sitting overseas for tax reasons. But according to most estimates, U.S. companies are holding less than three trillion dollars offshore, and it is unrealistic to expect all of that money to be repatriated.
Trump also said that cutting the corporate tax rate to twenty per cent will allow U.S. companies “to compete … that means jobs, and it means lots of other things.” That last bit was true, anyway. The “other things” are likely to include more stock buybacks and higher dividend payments, as companies distribute some of their tax savings to their shareholders.
With the economy already close to full employment, and the cost of capital already at historic lows, most reputable economists don’t see the tax cuts resulting in big boosts to corporate investment, hiring, or G.D.P. growth. The White House and some G.O.P.-leaning economists are claiming that passage of the Republican bill would increase the size of the economy by about four per cent over ten years. But as a briefing paper from the Committee for a Responsible Budget pointed out, most independent studies reckon that the G.D.P. boost will be less than one per cent. And if the budget deficit spirals and interest rates rise, it could end up being negative.
What can be stated for sure is that the Senate bill hurts the poor, does little for the middle class, and rewards the Republican Party’s wealthy donors. (An updated Congressional Budget Office report confirms all of these points.) It is stuffed full of gimmicks to disguise its true cost, and it makes a mockery of the G.O.P.’s claim to being the party of fiscal discipline. Republican leaders dispute all this, of course, but at this stage they would say virtually anything to get a bill passed. We are witnessing twenty-first-century Republican politics in the raw, and it bears virtually no resemblance to responsible governing.