After multiple failed ventures on healthcare overhaul, President Donald Trump and Republican lawmakers are under more pressure than ever to deliver a legislative victory and fulfil a significant campaign promise.
But even with the political momentum, getting tax reform through the Republican-controlled Congress already faces some stumbling blocks. One big hurdle could be the possibility that the proposal would significantly increase the deficit, as Sen. Bob Corker of Tennessee said Sunday during an appearance on NBC’s “Meet the Press.”
“But if it looks like to me, Chuck, we’re adding one penny to the deficit, I am not going to be for it, ok?” Corker told host Chuck Todd. “I’m sorry. It is the greatest threat to our nation. The greatest threat to our nation.”
Corker last week said he would not seek reelection next year.
An analysis from the Tax Policy Center found that the tax framework released last week would add $US2.4 trillion to the federal deficit over the span of a decade.
Part of the deficit concerns could be alleviated by the Trump administration’s use of what is known as dynamic scoring, which assumes increased tax revenues based on expected economic growth from tax cuts. Many economists have questioned the concept of dynamic scoring.
Gregory Daco, chief US economist at Oxford Economics, said the success of the plan would come from how Republicans are “able to present this tax proposal.”
Daco told Business Insider:
“Now we know on the Senate side, Republicans have supported a budget resolution that would allow for $US1.5 trillion worth of deficit increasing measures. So there’s indeed some increased tolerance for some increase in the federal deficit and I think we’re going to see that shift away from no increase in the deficit to some tolerance for a modest increase in the deficit and add to that some dynamic scoring … and you might have greater tolerance for a plan that might not increase the deficit, at least not on paper, that substantially.”
Chris Krueger, an analyst at Cowen Washington Research Group, said that Corker could be just the start of Republican leaders’ worries in the Senate, however.
For one, using the reconciliation process could lead to the same concerns that prompted Sen. John McCain to vote against various GOP healthcare bills, and McCain has a history of raising concerns with prior tax proposals.
“We would also note Sen. John McCain’s comments about regular order — and that he voted against the Bush 2001 tax cut for Corker-esq reasons. If you lose Corker and McCain, the margin for Senate error is zero,” Krueger wrote in a note to clients Monday.
“Add in Sens. Susan Collins, Rand Paul, etc. and you can see the problems with the voting arithmetic – to say nothing of the policy arithmetic … which is far more difficult,” Krueger said. Republicans hold 52 seats in the Senate.
There are also questions as to whether more hard-line deficit hawks in the House will go along with a plan that is projected to add trillions to the debt. The conservative House Freedom Caucus said Wednesday that the group supported the framework, but with significant changes expected over the course of the process, it remains to be seen if that will hold.
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