Sunday, March 12, 2017

Watch the Progress of the Health Care Plan Carefully

The progress of the replacement of Obamacare has real implications for the future of tax reform.

Don't get lost in the noise of the day-to-day battles over the details.  Look at the politics.

Healthcare must come first to allow tax reform to be handled via reconciliation in the Senate. Healthcare "reform" is purportedly deficit-reducing legislation, so it, too, can be handled by reconciliation.  Once the "savings" from the new healthcare program, whatever you want to call it, is booked by Congress, they can then produce a 2018 budget and pass it, and then proceed to tax reform.

These steps and their sequence cannot change if the Republicans plan to use reconciliation. Without reconciliation, which allows for a majority vote to end debate (and Democrat filibusters), the bill will be subject to endless debate since it takes 60 cotes to end a filibuster.

The Democrats won't vote with the Republicans on a bathroom break right now.  Get used to the era of yoyo'ing between extremes with all forms of collegiality disappearing.

Incredibly, in less than two months since the Inaugural, the focus in the background is turning to the midterm elections.  We are in a permi-election cycle now.  So each Member of Congress must decide who to follow - Trump, Ryan, McConnell or their own course.

Sit back and watch the Republicans quake at this choice.  Every day, the fissures grow more visible and more irreconcilable.  Every day it gets safer to defy leadership, and more advantageous. This must be seen in the context of the 2018 midterms and what comes beyond it. Republicans are starting to think this through and vote with their feet.  You see it a little bit more every day, and the tone of the leadership, particularly the House Republican leadership, is becoming more strained and desperate,


So how does this relate to tax reform?  There are many serious obstacles ahead for the noxious BAT. The Senate seems to be a BAT graveyard.  One would hope that Senators could not or would not walk back their strong opposition to the BAT, but we can't rule it out.  [The growing tide of anti-BAT rhetoric from farming states is a very helpful trend, making a reversal of trend in the Senate FAR less likely.]

The failure of any of the critical path steps to progress to law or a long delay will significantly damage the prospects of tax reform. Leadership credibility may also ebb away, and you could see changes at the top as a result.  Remember, John Boehner bailed on his job as Speaker when he couldn't hold the fractious Republicans together.  Ryan's failure would be momentous - after all, the Republicans control everything now. What's going wrong?

As if we didn't know.

But the really big pressure will come from the simple passage of time. Every day we creep closer and closer to the next election. Will the Trump coalition of voters keep this Republican Congress in place, strengthen its hand . . . or will it just dissipate?  Is the Trump "majority" a one-hit wonder, a chimera? These questions will keep Republicans tossing and turning at night.

And they might make it VERY hard to vote "yes" for the BAT.  That is, for anyone interested in keeping their job.  As previously noted, being elected to Congress is one of the few jobs that cannot be turned over to a robot . . . .

So why do Ryan and Brady keep pushing the BAT?  It's a losing hand, obviously so at this point. Why isn't it politically expedient to switch horses midstream yet?  The WSJ has already written at least two prominent articles about the search for a tax reform Plan B (here and here). One wonders if these are trial balloons being floated by the House Republicans. Hard to say.  For the time being, Ryan and Brady refuse to acknowledge anything is wrong, and continue to flog their mischaracterization of the law as if no one has figured them out. Are they victims of the sunk cost effect? Working an angle so some other sleight of hand?  Is it a negotiating ploy?  This is Hot Stove League stuff, no one knows.

Whatever the explanation, we cannot rest easy at this point.  The battle may rage for months, let's hope not, but until House Republican leadership table the issue once and for all, we must continue to push HARD against these folks and their plan to bankrupt large swaths of our economy.

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