After the unravelling of the GOP’s plan to revamp the American healthcare system, Republican leaders have turned their attention to other legislative matters.
But the failure has laid bare the warring factions within the Republican Party and signalled that fights to come may turn out similar to the one over the American Health Care Act.
During the debate on the AHCA, conservative Republican members of the House Freedom Caucus were able to hold out and block the bill because it did not meet their ideological muster in repealing Obamacare, the healthcare law known formally as the Affordable Care Act. At the same time, attempts by the Trump administration to appease these conservatives caused more moderate Republicans, such as the Tuesday Group caucus, to withdraw their support of the bill.
President Donald Trump has selected tax reform as his next target after the healthcare bill’s defeat, and battles over government funding and raising the nation’s debt ceiling loom. These issues will reveal the extent of the divide in the GOP — and how well Trump can lead a political party.
The debt ceiling and shutdown fight
Trump and his top advisers have hinted that his next agenda item will be tax reform. But another fight on the horizon would have immediate and deeper implications.
Government funding is set to run out late next month, setting up a potential government shutdown on April 29, the 100th day of Trump’s presidency. Then, sometime over the summer — most likely in July, according to estimates — Congress will have to raise the nation’s borrowing limit or face defaulting on some of the federal debt.
A default would be disastrous for the US and the global economy. But far-right members of the GOP pushed the country to that brink in 2011 and 2013, when the federal government shut down for more than two weeks and Congress hurled toward the edge of the debt ceiling.
Greg Valliere, a political analyst at Horizon Investments, said the possibility of another shutdown and a default would mirror the fight over healthcare.
“Despite all the glib predictions that tax reform can now move quickly, that overlooks the near-certainty of an epic spring battle over spending,” Valliere wrote in a note to clients on Monday. “Talk about deja-vu: Once again the fight will be among Republicans, with the Freedom Caucus seeking deep spending cuts while moderate Republicans fight to soften Trump’s spending reductions.”
Moderate Republicans would want to avoid a shutdown, while conservatives, including the Freedom Caucus, would not want to raise the ceiling or pass a spending deadline without cuts. This could leave Trump with no real option but to get Democrats on board, meaning they could push for provisions for legislation that would keep the government funded or raise the debt ceiling.
Of course, there is always the outside-the-box option to mint a trillion-dollar coin to pay down some of the debt, which evidently was seriously considered by the Obama administration during previous debt-ceiling fights.
Tax reform in the vein of what Trump and Republican leaders have suggested would also be difficult to achieve.
Trump has said he wants to slash the federal corporate tax to between 15% and 20% from its current 35%, as well as lower personal taxes. On February 9, Trump said he would unveil “something phenomenal in terms of tax” over the next two or three weeks.
But Valliere said neither congressional GOP leaders nor the Trump team had a full plan ready to go.
“By summer, tax reform finally may be moving with a bill making it to the House floor, but don’t expect much action anytime soon (the Ways and Means Committee will convene a meeting tomorrow but the panel’s bill isn’t ready),” Valliere said. “The Trump Administration doesn’t have its tax plan finished, either; Treasury Secretary Steven Mnuchin and most congressional Republicans are not fully up to speed on the enormously complicated tax issues that have to be resolved.”
As Business Insider’s Pedro da Costa wrote, Trump and his team like to talk about the fact that the tax system hasn’t been reformed since President Ronald Reagan did so in 1986. There are reasons for this: Taxes are complicated, congressional Republicans have to serve a variety of interests and businesses in their home districts, and there will be sharp rebukes from Democrats.
Gluskin Sheff’s David Rosenberg touched on a similar theme in a note to clients on Monday. He noted that it took Reagan five years to craft his tax reform and get it through Congress — and right now, there is “no one firm GOP plan for the initiative,” Rosenberg said. This is compounded by the fallout from the fight over healthcare.
“In any event, a leader with a sub-40% approval rating and who spent political capital on his failed ‘repeal and replace’ Obamacare bill is not likely to have an easy time getting a tax bill through the Republican Party, where the schisms are wide as ever,” Rosenberg said.
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