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Uh oh: Senate might delay the corporate tax cut a year to comply with its insane rules
And the House might have no choice but to go along.
This is about nothing but the Senate's Byzantine rules - the ones Mitch McConnell and most other Senate Republicans won't even consider changing - and the idiotic budgetary assumptions on which these rules are based.
We've talked about this before, and I wish we never had to talk about it again, but the long and short of it is this: In the Senate, you can't pass a tax or spending bill with a simple majority unless the Congressional Budget Office "scores" it as not increasing the deficit. The CBO is staffed by Keynesians who do not believe cutting marginal tax rates spurs growth, and as such they assume that every rate reduction worth a dollar increases the deficit by a dollar. This is idiotic beyond all measure, but these are the rules and the Republican majority shows no interest in changing these rules.
So in order to qualify tax reform for a majority vote, Senate Republicans have to go through all kinds of machinations to convince the CBO they are not adding to the deficit. One they are considering is a one-year delay in the cutting of the corporate tax rate from 35 percent to 20 percent, which would appease the CBO ever so slightly but would also delay the real growth drivers in the bill:
But the Washington Post reported on Tuesday that the Senate could include a one-year delay in its version of the bill to make it easier to comply with the chamber’s rules that aim to limit any legislation’s impact on the U.S. deficit.
Wall Street, where investors remain focused on the tax bill’s chances of passage, was trading largely flat on Wednesday as bank stocks came under pressure from a near-flat Treasury yield curve.
Asked if House Republicans would consider a delay in implementing the lower corporate rate, Ryan told Fox News Radio on Wednesday:
“So what economists tell us ... is that you still get very fast economic growth and you actually are encouraging companies to spend on factories and plants and equipment and hiring people sooner with the phase-in.”
Ryan, the highest ranking Republican on Capitol Hill and a former chairman of the House’s tax-writing panel, said both chambers of Congress would work on their own tax cut package and iron out the differences in a conference committee.
Understand: If this happens, it will not be because most Republican senators think it's better policy than making the cut effective immediately. They do not think that. But unless the bill qualifies for reconciliation (a simple majority vote of at least 50 plus the vice president if necessary), there is no hope of it passing. And unless the CBO's Keynesians bless it as a non-deficit increaser, there will be no simple majority vote.
The United States Senate is a maddening institution. It willingly imposes these rules on itself and refuses to change them. Republicans will tell you they must keep the filibuster available to the Democrat minority because some day they will be in the minority and they will need to use it themselves. That is so stupid I don't even know where to start.
For one thing, if Democrats some day have 52 seats and they want to pass something badly enough, they will eliminate the filibuster - no matter what Republicans did beforehand. They don't care. They don't fight fair.
For another thing, Democrats have had so much success over the years constructing a gigantic regulatory state and twisted, crushing tax code that it's going to take a bold piece of Republican legislation to tear it down. When your own rules make it impossible for you to pass such legislation, why are you concerning yourself with what will happen in the future when you're not in power? Do your job now. Yet Senate Republicans never seem to want to do that.
I've seen defenses of Mitch McConnell that claim he really does support the Trump legislative agenda most of the time. That's true in the sense that he votes for the bills. But it's not true in the sense that things can't pass the Senate with the rules as they are, and he's the first person who will tell you that under no circumstances will the rules change. So he can vote for bills all he wants, but that doesn't mean much if he keeps protecting the rules that won't allow the bills to pass.
As for the policy implications of the one-year delay, Ryan is trying to put on a brave face and argue, hey, if businesses know the rate cut is coming, it will encourage them to start being more proactive spending and investing. That may be true, but it will still be another year of their capital getting sucked up, which means another year's delay in the real rocket booster GDP needs to get to 4.0 percent or 5.0 percent on a regular basis.
What the Senate should do is tell the CBO to stick it and just pass the rate cut. They're afraid to do that because the media treats the CBO as a gang of soothsayers, and much of the public doesn't know just how bad the CBO's record of prognostication is. But the economy can only abide so long under the burden of the current tax code, and at some point United States Senators have to remember that they work for the people and not for their own staff.
Dan's new novel, BACKSTOP, is a story of spiritual warfare and baseball. Download it from Amazon here!