Think the Healthcare Fight Was a Mess? Wait for Tax Reform

When two key senators said they would not even vote to begin debating the latest Republican healthcare plan on Monday night, the GOP's seven-year crusade against the Affordable Care Act looked awfully close to death. But here we are on Friday, and neither Senate Majority Leader Mitch McConnell nor the White House is ready to throw in the towel. There's still a healthcare vote planned in the Senate next week, though things are so chaotic and malleable now that some Republicans genuinely seem to have no idea what they'll actually be voting on.

Yet even as their healthcare agenda has stalled out, Republicans did make progress this week on another priority: tax reform. In America in 2017, this most likely means massively cutting taxes on the rich and corporations. On Wednesday, the House Budget Committee advanced a 2018 budget resolution, which, if accepted on House floor, would start a reconciliation process allowing big changes to the tax code with bare majorities in both houses of Congress. This agenda item hasn't moved as fast as the GOP hoped, but in this administration, any movement in Congress on any big-ticket item is noteworthy. And tax reform is likely the GOP's last hope to prove its worth to voters in 2017.

There's just one hitch: trying to pass this budget resolution could turn into a real struggle, too.

"There's certainly enough for everybody to cause a stink about" in it, said budget expert Jasmine Farrier of the University of Louisville, pointing out the proposal would cut "sacred cows all over the place."

In theory, a budget resolution shouldn't be too controversial—especially when one party has unified control of the government. These documents are just basic numbers and guidance for discretionary spending, which inform appropriations committees who do the actual shelling out of cash that isn't absolutely required by the law. (That's what makes it "discretionary.") And this year's resolution was so delayed that those committees had already drafted their actual spending bills without said blueprint. GOP leaders could have just skipped issuing the document, as they did last year, and let appropriators get on with funding that basically accords with their short-term (that is, one-year) goals. But they need the resolution's reconciliation power to help them get tax reform through a closely divided Senate.

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Still, pretty much every Republican is on board with some kind of tax reform in abstract, so in theory, passing a shell budget towards that end entirely should have been a cinch.

"This is really a perfunctory motion," as Joshua Huder, a congressional affairs expert at Georgetown University, put it. "It's a symbolic resolution, in some ways, to get to tax reform." That makes it similar to the symbolic shell Republicans passed in January to open up the option of using reconciliation for healthcare reform—a vote over which there wasn't too much internal party rancor at the time.

But it speaks to the disarray of Republicans in Congress that even getting this budget released and debated in the House Budget Committee took months of careful debate and negotiation. That delay was thanks in large part to the Freedom Caucus, the same voting block of around three dozen super conservative Republican Representatives who gummed up the first Republican healthcare vote in the House in March.

These die-hards didn't just want to jigger with discretionary spending levels, as is typically a core debate in crafting budgets. Rather, they want to use the bare majority reconciliation process to make deep cuts to mandatory spending, a.k.a money that must be spent by law for programs like Medicaid, Medicare, and Social Security. This kind of change, outside of special tactics like reconciliation, requires a 60-vote majority in the Senate. Freedom Caucus members wanted to shove mandatory spending cuts into the January reconciliation directives, which govern exactly what can and should be put in bills that only need a simple majority to pass. But Freedom Caucus folks held off on the promise they could score some in this budget.

Moderates, like members of the Tuesday Group, a loose alliance of up to 50 House Republicans, have stood against these cut. That's because they recognize, as Doug Elmendorf, a former Congressional Budget Office director, told me, that while lowering spending is popular in the abstract, those programs are popular in and beneficial to a broad swath of Americans. Even Donald Trump's hack-and-slash agenda hasn't made it a point to touch them; he also explicitly ran, unlike most Republicans, on not cutting Social Security or Medicare or Medicaid. Moderates mostly believe such drastic and unprecedented cuts will just stir a shit pot, needlessly complicating tax reform.

Wednesday's budget was an attempt to find a happy medium, offering Freedom Caucus types $203 billion in mandatory spending cuts to get the block onboard without disaffecting a critical mass of moderates. (The House can only lose 22 GOP voters for any bill passing on partisan lines.) The plan passed committee with a yes vote from every Republican, even Freedom Caucus members. Even Trump's budget man, Mick Mulvaney, endorsed it, despite proposed cuts to programs the president promised to spare on the campaign and did spare in his own budget proposal.

"But we've seen this before, where [a bill] is voted out of committee and then it doesn't go anywhere," warned Huder, who thinks debate will only heat up on the floor. Freedom Caucus members have sought $400 billion in mandatory spending cuts and openly suggest now that the budget doesn't have their backing yet. Huder notes that they rarely cave on demands like this.

Even if leadership can offer the Freedom Caucus enough cuts to mollify them without alienating too many moderates, which Farrier cautions is very tricky calculus to begin with, the group may pick other fights. They're reportedly steamed about how little say they had in drafting healthcare legislation and want more input on tax reform. One of their members actually broke a deal with the Budget Committee on Wednesday and tried to push an amendment banning a controversial method of tax reform, only to be shot down. "You need the budget resolution to get a tax plan," said Elmendorf, "but you've got to get the tax plan ready, too." After all, why support a budget resolution making it easier to pass tax reform if you don't know what the latter looks like yet?

Party leaders appear to be hoping that these debates will fizzle out, as everyone knows intellectually that if this budget doesn't go through, tax reform and the entire Republican agenda for 2017 is pretty much toast. Backroom deals and promises, Farrier explained, could blunt some Freedom Caucus ire and convince them to get out of the way.

But Huder cautions that trust between the Freedom Caucus and GOP leadership is not exactly high. "That's one of the reasons they're pushing for $400 billion," he told me. "They've asked for a lot of stuff and they've gotten very little in response." Plus, Farrier admitted, many in the Caucus are used to staunchly holding to their views as obstructionists, which was fun and easy under Barack Obama, rather than negotiating productive deals.

Most of the experts I've spoken to believe this infighting will tank the current budget iteration, which hopeful Republicans want to pass next week. But just about everyone agrees that, eventually, the kinks will get worked out as the political risk of inaction comes into focus. "The imperative to pass tax reform is [so large] they'll get it across the line somehow," Huder said. "It'll be ugly and weird. But it'll get across the line."

He just thinks it might take until late fall.

That'd be something. But it would still represent just the first step towards tax reform. The Senate has barely started its own budget process, which looks like it may conflict with the House's in some ways. Those two budgets will need to be reconciled. And as healthcare has shown, the calculus in the Senate is vastly different from the one in the House, and we have yet to see a major bill navigate that divide in the Trump era. The fights that pop up in that process, not to mention similar debates that will emerge over specific tax changes once someone writes an actual bill, will be equally complex, drawn-out, and bruising.

"There's a hashtag trending" on economist Twitter, Elmendorf pointed out. "#TRIH. Meaning: tax reform is hard." Clearly, given how this first step to reform is unfolding, that's an understatement. Republicans shouldn't hold their breath on this last-chance legislative achievement—and the rest of America shouldn't, either

Follow Mark Hay on Twitter.