Health fail­ure hurts agenda

Trump’s tax-over­haul and in­fra­struc­ture plans im­per­iled

The Washington Post Sunday - - FRONT PAGE - BY JOHN WAG­NER, DAMIAN PALETTA AND SEAN SUL­LI­VAN

The stun­ning col­lapse of the Repub­li­can health-care bill now im­per­ils the rest of Pres­i­dent Trump’s am­bi­tious con­gres­sional agenda, with few prospects for quick vic­tory on tax re­vi­sions, con­struc­tion projects or a host of other is­sues in the months ahead de­spite com­plete GOP con­trol of gov­ern­ment.

While Repub­li­cans broadly share the goal of Trump’s promised “big tax cuts,” the pres­i­dent will have to bridge many of the same di­vides within his own party that sank the at­tempted over­haul of the Af­ford­able Care Act. And with­out sav­ings an­tic­i­pated from the health-care bill, pay­ing for the “mas­sive” cuts Trump has promised for cor­po­ra­tions and mid­dle­class fam­i­lies be­comes con­sid­er­ably more com­pli­cated.

Mean­while, other mar­quee agenda items, in­clud­ing a $1 tril­lion in­vest­ment in roads and other in­fra­struc­ture and pro­posed crack­downs on both le­gal and il­le­gal im­mi­gra­tion, will re­quire the sup­port of Democrats, many of whom have been alien­ated by the highly par­ti­san

start to Trump’s ten­ure.

The lone ex­cep­tion for neart­erm vic­tory could come with the con­fir­ma­tion of Supreme Court nom­i­nee Neil Gor­such — but even that faces the prospect of a threat­ened fil­i­buster by Democrats.

Trump and Repub­li­can lead­ers con­tin­ued Satur­day in their at­tempts to put a brave face on the health-care de­ba­cle. “Oba­maCare will ex­plode and we will all get to­gether and piece to­gether a great health­care plan for THE PEO­PLE,” Trump wrote in a morn­ing tweet. “Do not worry!”

But oth­ers in the party ac­knowl­edged the po­lit­i­cal dam­age sus­tained by pulling the House bill, par­tic­u­larly for a pres­i­dent who had touted his own deal­mak­ing prow­ess.

“It’s a mo­men­tum is­sue,” said Rep. Mike Coff­man (R-Colo.). “The fact is that, you know, you came out of the gate and you stum­bled.”

Doug Heye, a GOP con­sul­tant and for­mer con­gres­sional staffer, said Repub­li­cans, hav­ing achieved con­trol of both cham­bers of Congress and the White House, were left with a lot to prove.

“It sends a trou­bling sign to a lot of folks about the broader is­sue of whether Repub­li­cans will be able to gov­ern,” he said.

Trump has said he would have pre­ferred to start his term by cut­ting “the hell out of taxes.” Even be­fore the health-care bill was pulled Fri­day, the pres­i­dent was al­ready start­ing to turn the page.

De­ter­mined to high­light other pri­or­i­ties, Trump staged two an­nounce­ments in the White House meant to un­der­score his com­mit­ment to cre­at­ing jobs: grant­ing a con­struc­tion per­mit for the Key­stone XL pipe­line and ap­pear­ing with ex­ec­u­tives of a tele­com gi­ant as they pledged to hire thou­sands of new em­ploy­ees, although the com­pany’s plans had al­ready been an­nounced in Oc­to­ber.

Sep­a­rately, Trea­sury Sec­re­tary Steven Mnuchin said at an event Fri­day that he will push Congress to en­act com­pre­hen­sive tax re­vi­sions by its Au­gust re­cess, though he ac­knowl­edged that the timetable might slip.

The White House sig­naled Satur­day that it was ea­ger to move on. Trump’s weekly ad­dress made no men­tion of the health-care fight, in­stead fo­cus­ing on his sign­ing of leg­is­la­tion au­tho­riz­ing fund­ing for NASA and his com­mit­ment to space ex­plo­ration.

“We’re go­ing to roll our sleeves up, and we’re go­ing to cut taxes across the board for work­ing fam­i­lies, small busi­nesses and fam­ily farms,” Vice Pres­i­dent Pence said Satur­day at an ap­pear­ance in Scott De­pot, W.Va.

A se­nior White House of­fi­cial, how­ever, said it was un­likely that Trump would ramp up a ma­jor ef­fort on re­tool­ing taxes im­me­di­ately, given that his team had been plan­ning on us­ing the com­ing days to push for Se­nate ac­tion on the health-care bill.

Trump’s top ad­vis­ers had en­vi­sioned a three-step leg­isla­tive agenda this year, start­ing with scal­ing back Pres­i­dent Barack Obama’s sig­na­ture do­mes­tic ini­tia­tive. After that was com­plete, they wanted to move to a com­pre­hen­sive over­haul of the tax code, fol­lowed by the cre­ation of a $1 tril­lion in­fra­struc­ture pack­age.

The im­plo­sion of the health­care ef­fort com­pli­cates the tax over­haul both lo­gis­ti­cally and po­lit­i­cally.

House Repub­li­can lead­ers had been count­ing on changes to the tax code in­cluded in the health­care bill to make the task of pay­ing for fu­ture tax cuts eas­ier.

Amer­i­cans for Tax Re­form Pres­i­dent Grover Norquist said the bloc of hard-line Repub­li­cans who helped stymie the health­care over­haul were guilty of “rip­ping the lungs out of tax re­form.” If they don’t re­visit the health­care bill im­me­di­ately, Norquist said, they will soon re­al­ize that “they didn’t shoot and wound health-care re­form, they shot and killed per­ma­nent tax re­form.”

House Speaker Paul D. Ryan (R-Wis.) ac­knowl­edged Fri­day that the health-care de­feat “does make tax re­form more dif­fi­cult, but it does not make it im­pos­si­ble.”

“We are go­ing to pro­ceed with tax re­form,” Ryan said.

Hours be­fore the health bill was pulled, Mnuchin said a “com­pre­hen­sive” over­haul of the tax code should prove less com­plex. “Health care is a very, very com­pli­cated is­sue,” he said at a Fri­day event hosted by Ax­ios. “In a way, [tax re­form is] a lot sim­pler. It re­ally is.”

Trump has pro­posed cut­ting the cor­po­rate tax rate from 35 per­cent to 15 per­cent, though many Repub­li­cans on Capi­tol Hill have been aim­ing for a 20 per­cent rate. Trump has also pro­posed con­sol­i­dat­ing the ex­ist­ing seven in­di­vid­ual in­come-tax brack­ets into three brack­ets of 10 per­cent, 20 per­cent and 25 per­cent.

Trump’s ad­vis­ers have ar­gued that th­ese changes would trig­ger a big ex­pan­sion of eco­nomic growth, but some bud­get an­a­lysts have said the changes would widen deficits by any­where from $2.6 tril­lion to $7 tril­lion over 10 years, de­pend­ing on the mea­sure­ment method used.

Many Repub­li­cans have long vowed that an over­haul of the tax code must be “rev­enue neu­tral,” which means they need to find new rev­enue to off­set the re­duc­tion in rates. Trump’s ad­vis­ers have not iden­ti­fied spe­cific tax breaks they would elim­i­nate to raise new rev­enue, and Trump him­self of­ten waved away debt con­cerns dur­ing the cam­paign.

Mean­while, House and Se­nate Repub­li­cans are at odds over the wis­dom of a key com­po­nent of tax re­struc­tur­ing.

Ryan has pro­posed a bor­der­sales tax that would es­sen­tially cre­ate new taxes on items im­ported into the United States as a way to raise close to $1 tril­lion in new rev­enue while also pro­vid­ing in­cen­tives for com­pa­nies to move op­er­a­tions to the United States.

Many other Repub­li­cans op­pose this idea, though, and the fight prob­a­bly will only in­ten­sify now. Some Repub­li­cans, in­clud­ing Sen. Lind­sey O. Gra­ham (S.C.), ar­gue that the scheme would drive up prices on con­sumer goods, and many large re­tail­ers are strongly op­posed.

Given such di­vides, as well as the me­chan­ics of the bud­get process, it’s highly un­likely that law­mak­ers will pro­duce a com­pre­hen­sive tax bill by the Au­gust re­cess, if at all, said Jim Man­ley, a for­mer long­time aide to for­mer Se­nate ma­jor­ity leader Harry M. Reid (D-Nev.).

“It’s clearly not re­al­is­tic, and it’s not go­ing to hap­pen, on pol­icy and po­lit­i­cal grounds,” Man­ley said, adding that the Repub­li­can agenda is also un­der­cut by “a pres­i­dent who’s out of his league and doesn’t know how to leg­is­late.”

Repub­li­cans had planned to use a bud­get pro­ce­dure called “rec­on­cil­i­a­tion” for both the health-care over­haul and for the tax changes, as that would al­low them to pass their plans with a sim­ple ma­jor­ity in the Se­nate and make it im­pos­si­ble for Democrats to block the changes through a fil­i­buster.

That’s still the plan with a tax over­haul.

Barry Ben­nett, an ad­viser to Trump dur­ing the gen­eral elec­tion, said he thought it was a “tac­ti­cal mis­take” for the pres­i­dent not to have started his term by push­ing for tax changes.

“Now you’re go­ing to have to carry th­ese bat­tle scars into the tax de­bate,” he said.

For­mer House speaker Newt Gin­grich, who was a close ad­viser to Trump dur­ing the cam­paign, said the White House should post­pone what is ex­pected to be a messy bat­tle over the tax code and in­stead pivot to­ward try­ing to build a large in­fra­struc­ture pack­age. Pro­ceed­ing with in­fra­struc­ture could at­tract bi­par­ti­san sup­port, he said.

Some Democrats and la­bor unions have said they could sup­port a big in­fra­struc­ture pack­age, though the White House has not spec­i­fied how it plans to fi­nance a pack­age that in­cludes roads, bridges, air­ports and broad­band ca­pa­bil­ity, among other things.

Mnuchin said Fri­day that the pack­age would prob­a­bly in­clude sev­eral hun­dred bil­lion dol­lars in pub­lic money but that the rest would be fi­nanced by the pri­vate sec­tor, with pub­lic sup­port as in­cen­tives. Democrats are wary of that ap­proach and pre­fer more di­rect gov­ern­ment spend­ing.

Many Democrats and Repub­li­cans have tried — but failed — to pull off tax re­vi­sions in re­cent years. A prin­ci­pal rea­son chang­ing the tax code is so dif­fi­cult is that in­ter­est groups flood Washad­just­ment in­g­ton look­ing for tax cuts but fight vig­or­ously against any mea­sure that would in­crease their bills.

“It’s very, very hard to get done,” said Doug Holtz-Eakin, a for­mer di­rec­tor of the Con­gres­sional Bud­get Of­fice who served as eco­nomic ad­viser to Sen. John McCain (R-Ariz.) when he ran for pres­i­dent in 2008. “There are tons of dif­fer­ent in­ter­ests in­volved, and there are very dif­fer­ent views within the Repub­li­can Party. Now you are go­ing to en­ter into a sec­ond ex­er­cise of that type where you have clear ev­i­dence that hold­outs can kill it. That em­pow­ers the hold­outs.”

Demo­cratic lead­ers said Repub­li­cans would be doomed to fail­ure in fu­ture de­bates if they didn’t seek to build more con­sen­sus.

“We don’t know what they’ll do with tax re­form,” said Se­nate Mi­nor­ity Leader Charles E. Schumer (D-N.Y.), who warned, “if it’s huge tax cuts for the wealthy . . . it won’t fly.”

Loom­ing on the Se­nate cal­en­dar is a con­fir­ma­tion vote for Gor­such for the Supreme Court. Se­nate Democrats have said they plan to force Gor­such to clear a 60-vote pro­ce­dural hur­dle, forc­ing Repub­li­cans to try to find eight Democrats to cross over and vote to ad­vance the nom­i­na­tion.

Repub­li­cans have raised the prospect of turn­ing to the “nu­clear op­tion” to force through Gor­such’s nom­i­na­tion, a rule change that could fur­ther strain re­la­tions beyond the par­ties and un­der­mine prospects for co­op­er­a­tion on other mat­ters.

Beyond Gor­such, Congress is fac­ing a late-April dead­line to pass a stop­gap spend­ing bill to keep the fed­eral gov­ern­ment run­ning. That could also spark a par­ti­san clash that could risk a gov­ern­ment shut­down.

Se­nate Democrats have warned that they are will­ing to risk a shut­down fight if Repub­li­cans in­clude fund­ing in that pack­age to con­struct a U.S.-Mex­ico bor­der wall, an­other mar­quee cam­paign prom­ise from Trump.

Bud­get an­a­lysts fear Congress must also reach an agree­ment to raise or sus­pend the debt ceil­ing by Au­gust or Septem­ber or the Trea­sury Depart­ment could run out of flex­i­bil­ity to con­tinue pay­ing the gov­ern­ment’s bills.

Trump, on Fri­day and in the days lead­ing up to the vote, seemed un­daunted by the chal­lenges ahead.

“I hope that it’s go­ing to all work out,” he told a House Repub­li­can din­ner be­fore the col­lapse of the health-care bill. “Then we im­me­di­ately start on the tax cuts, and they’re go­ing to be re­ally fan­tas­tic, and I am look­ing for­ward to that one. That one’s go­ing to be fun.”

MATT MCCLAIN/THE WASH­ING­TON POST

Pres­i­dent Trump walks through the Capi­tol on Tues­day after mak­ing pitches to House mem­bers on the now-failed health-care bill.

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