Republicans should learn from Manchin deal

Republicans are right to oppose the new tax hike and climate spending deal from Sen. Joe Manchin. That doesn’t mean there aren’t things they can learn from the West Virginia Democrat’s effort – especially when it comes to raising taxes.The

deal appears to be yet another liberal bait-andswitch. It pledges to raise more revenue than it spends for climate and energy programs, but the scant details on the package do not inspire confidence. Almost all of the deficit reduction will come from two nebulous sources: money saved from Medicare drug price negotiation and raised from increased enforcement by the Internal Revenue Service. Those could be considerable, or they could amount to little or nothing. If those sources don’t deliver, this bill is simply a paid-for spending hike.

Manchin’s main tax hike – levying a 15% minimum tax on large corporations – will also likely be less lucrative than it looks. Businesses will fight it tooth and nail, and they have the resources to find ways to get around it should they fail. Again, specific details are lacking, but the bill reportedly intends to use reported earnings rather than taxable income as a baseline for levying the minimum tax. If that’s the case, tax lawyers and accountants will work overtime to figure out ways to hide income from taxation while still rewarding investors. In a battle between Big Government and the tax avoidant-industrial complex, I’d bet on the complex every time.

So Manchin’s bill deserves to fail – and it just might, given that other Democratic senators whose approval are necessary for passage have yet to give their assent.

Nevertheless, Republicans can still learn some essential insights from Manchin’s approach for when they regain power. Manchin grasps two things many Republicans resist: We can’t solve our deficit problem without revenue increases, and those hikes should fall on the entities best able to bear the burden. His proposals might be dodgy and tying it to spending hikes is dubious, but any politically successful deficit-reduction measure will rest on these two core premises.

Republicans who resist this need to get serious. Coincidentally, the Congressional Budget Office on Wednesday released its long-term budget outlook for 2022, and it is sobering. As with prior outlooks, the CBO projects increasing debt and deficits as far as the eye can see. Debt held by the public is projected to rise to as much as 185% of gross domestic product by 2052. The interest the government pays to service the massive debt is also projected to grow. Somehow, I don’t think Americans will like having to scrimp on social programs to repay the wealthy investors, banks and foreign sovereign wealth funds that will reap the benefits of our profligacy.

These dire predictions are coupled with the fact that we need to spend more on national defense and retirement programs. Our military must grow and modernize its aging weaponry to counter the threat of China. That will cost money, and it’s fanciful to think it will come from repositioning entitlement spending. Plus, the aging of baby boomers is in full swing, which will add significant pressure to Medicare and Medicaid costs over the coming decades. Shirking either budgetary item would be extremely irresponsible.

That’s where Manchin’s insights come in. If we need to spend more, and if we need to cut the deficit, we need to raise taxes and find other sources of revenue in a way that is politically palatable. Manchin’s answers are the right ones: It should come from the wellto-do, whether they are behemoth corporations or the upper-class Americans who have benefited most from the era of globalization.

Those hikes do not need to be increases in tax rates. Well-off corporations and individuals receive a bevy of tax breaks that collectively reduce their federal taxes by a massive amount. The Treasury Department recently listed such breaks, known as tax expenditures, and found that eliminating them could raise trillions of dollars over the next decade. We shouldn’t abolish all of them; the exclusion of employer-paid health insurance premiums is a good example of a tax break that benefits working families. But we could selectively cut them so that the burden falls on those who can afford it.

This could be coupled with cuts in federal spending that also disproportionately benefit the upper classes. For example, why do retirees earning six figures receive subsidized Medicare Part B premiums? These Americans can pay the added costs and simply use the subsidies to afford other luxuries. We shouldn’t burden our grandchildren with debt so their grandparents can enjoy another cruise.

So yes, Manchin’s bill is bad. But his insights are good, and Republicans should use them to their advantage in 2024 and beyond.

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Henry Olsen is a senior fellow at the Ethics and Public Policy Center.