Republicans’ tax-cut MacGuffin is about to crumble

Tax cuts have become the GOP’s MacGuffin. A MacGuffin is defined as “an object, event, or character in a film or story that serves to set and keep the plot in motion despite usually lacking intrinsic importance.” (Think of the “letters of transit” in “Casablanca” or the black sand in the champagne bottles in “Notorious.”)

Ask Republicans how to turn things around and they will intone, “Tax cuts.” What does the White House expect will turn around President Donald Trump’s fortunes? Tax cuts. Ask donors or GOP activists how they can hold the party together in the Trump era and they will knowingly tell you, “Tax cuts, of course.” It’s not at all clear what would be in the tax cuts, for we have yet to see an actual plan, nor is it clear that the GOP will have the benefit of a reconciliation process that requires only 51 votes in the Senate. For that, they’d need a budget resolution to attach the reconciliation instructions and meet the socalled Byrd Rule, which among other things prohibits any increase in the deficit beyond the 10-year window.

Before Trump’s deal on the debt ceiling last week, I didn’t think a substantial tax-reform bill with the big cuts Republicans like to dream about was going to get done. The numbers are too difficult; the healthcare fight revealed moderate senators’ squeamishness about tax cuts for the rich; they have a math problem regarding the Byrd Rule (i.e. deficits beyond the budget window); and frankly, House and Senate dysfunction is so great that I thought the idea of proceeding on something as complex as tax reform was always a stretch.

In the wake of the debt-ceiling deal, others are starting to get the idea that tax reform is not in the cards. CNBC reports:

“‘The extension of debt ceiling and government funding debates into fourth-quarter 2017 may limit Congress’ ability to pass tax reform,’ wrote Moody’s analysts Sarah Carlson and Matt Kulakovskyi. ‘If the agreement goes through, negotiations on raising the currently binding debt ceiling will start again in only a few months,’ suggesting that other items on the agenda may have to take a back seat to debt debate.

“Moody’s analysis also said that any further tax cuts would ‘exacerbate’ projected increases in government debt, thereby contributing to the alreadytense political discussion.

“‘The agreement has no effect on our assessment of the government’s fiscal dynamics because it does not include any provisions for additional revenue or offsetting expenditure cuts to fund the proposed disaster relief spending or, more generally, affect the budget balance,’ added the analysts.”

So what happens if the GOP’s MacGuffin gets written out of the script?

One option would be to work on some small subset of tax reform, such as a revenue-neutral corporate tax reform (not cut). That would be logical, but in the “all or nothing” mentality that permeates the GOP, it doesn’t seem likely to attract much interest. The GOP could turn to other things that might be doable — infrastructure, a fix for the Obamacare exchanges, etc. But those in and of themselves are divisive within the GOP (as is a fix for the Deferred Action for Childhood Arrivals program, of course); moreover, these are not the sort of things that animate the whole party, bringing disparate strains of the party together and producing a kumbaya moment for a party at war with itself. You see, given that the GOP has devoted so much energy to the prospect of tax cuts, failure to attain that prize in all likelihood will leave the party more divided and dispirited than ever before.

The idea that House Speaker Paul Ryan, R-Wis., is somehow better off after the debt-ceiling deal or that the debt deal “cleared the decks” so tax reform could get done strikes me as rather delusional. If Republicans don’t get their save-their-skins-and-the-party tax plan, I suspect you’ll see a bunch more congressional retirements, a whole lot of altright challengers and a really angry GOP donor community. At some point they might even begin to ask: What good is Trump if he can’t get us anything we really want?