Saturday, April 15, 2017

Chaos at the Top - Wither the BAT?

Actual news on the Border Adjustment Tax has slowed down, but media attention has not diminished.  How is this possible, and why is it happening?

It's possible because there is just no clear direction in Congress, or more generally in Washington, on how to proceed on taxes.  The confusion frankly runs in every direction. Among the problems is a real absence of leadership.  Paul Ryan says that the House, the Senate and the White House are all on different pages.  And, of course, the White House is on a different page every day.  Consider, for instance, that Mick Mulvaney, the OMB Director said the following on March 24th:  

"Standing on the White House lawn Friday morning, Mulvaney told CNBC that President Trump decided to stop negotiating with lawmakers over the healthcare bill because he 'has other things he wants to do. He wants to get tax reform done. He wants an infrastructure bill approved. He’s got other jobs programs moving through the White House,' Mulvaney said.

That seems clear, right?  Today, the WSJ says it's the exact opposite:  

"After losing a fight to revamp the health-care system, President Donald Trump said last month he was prepared to put the setback behind him and move on to the next challenge, rewriting the tax code. Three weeks later, he said he is determined to resurrect the health-care bill even if it means delaying the tax overhaul, telling The Wall Street Journal in an interview: 'I want to get health care done… I think I will get it done.'  The tax overhaul, he said, would have to wait."

And so why is the media continuing to pour resources into covering the BAT?  Simple, the leadership continues to plug it like nothing's changed. The threat hasn't lifted and as House Republican leaders cling to the BAT despite the bad odds, one must either regard it as a last gasp by fading leadership or that the odds are growing that bad policy could be become bad law at some point.

As if to make the point that anything could happen and that chaos is reigning, consider these WSJ articles published on the SAME day this week:  Trump Threatens to Withhold Payments to Insurers to Press Democrats on Health Bill and Trump Administration Takes Steps to Stabilize Health-Insurance Market.  The threats are wild, inconsisten and vary by the day.  Or by the hour.

Nutty events are reported daily. This may be my favorite recent BAT story, from the Washington Post on April 11th:  

"In recent weeks, the president has held meetings with his counterparts from other countries. But in some cases, those sessions have only heightened doubts that Trump has a clear sense of what direction he intends to take U.S. foreign policy. Few if any world leaders, for example, have had as much experience in dealing with U.S. presidents as German Chancellor Angela Merkel, who is on her third. During their White House meeting last month, Merkel tried to pin down Trump on one of the top concerns of U.S. trading partners: a proposed “border adjustment tax” to be imposed on imported goods. Publicly, Trump has signaled an openness to the idea, but he also said it has drawbacks."

"'Don’t worry,' Trump told Merkel, holding his thumb and forefinger close together. 'It will only be a little bit.' Trump’s breezy answer — and Merkel’s exasperation — has been the talk of diplomatic circles in Washington and Europe. 'So all the chancellor of Germany knows is that, ‘It will only be a little bit,’' said a senior European diplomat in Washington, holding up his fingers as Trump did, and repeating an account confirmed by others in anxious embassies in Washington. 'It’s very puzzling.' The White House did not reply to a request for information about the exchange between Trump and Merkel."

Given all of this nonsense and noise, whatever rational argument is being made to declare the impending death of the BAT, it lives on and continues to get coverage.

We are in a dangerous phase. The BAT remains a threat.  Too many people have written it off, but with this kind of volatility and a terrible leadership vacuum, it could come roaring back.  Please note that this is all politics, not policy.  In Washington, politics and policy are from different planets.  Bad policy, regrettably, does not disqualify legislation.  In some circumstances, it even makes it more attractive (for political reasons). Politics is the real driving force here.  And the BAT may make good politics for some people at some point.  

I still think the BAT will die, but am not comfortable with the present situation.  One would think that if Trump were going to support the BAT, he would have hitched his wagon already. Trump has an uneasy alliance with Ryan (and vice versa) which may become politically toxic to both of them at some point, in which case the BAT dies for sure.  However, politics makes strange bedfellows.  We must remain vigilant until Paul Ryan concedes.  

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