Posted on 08/29/2017 1:56:35 AM PDT by RC one
On taking office, the Trump administration promised to repeal and replace Obamacare. So far, it has failed. It also promised to reduce and reform business and personal taxes. That effort, too, is heading for failure. Why? The reason is that both efforts are based on mutually irreconcilable principles and conflicting goals that cannot simultaneously be achieved. Together, these two failings make political consensus virtually impossible.
The health policy conundrum is now clear for all to see. Candidate Trump pledged to replace Obamacare with a plan that would insure as many people as Obamacare does, cut out-of-pocket costs for insurance and health care, and reduce federal spending. Congressional Republicans dutifully churned out successive draft plans, vainly trying to deliver on those incompatible promises. The Congressional Budget Office confirmed that each plan would indeed cut federal spending. As honest analysts, they also pointed out that those same plans would take health insurance from millions of people, thin out coverage for millions more, and raise the price of insurance of a given quality.
When the repeal-and-replace effort stalled, Trump first reacted with a certain wide-eyed innocence (“Who knew health care was so complicated?”). Then, when the legislative effort died in the U.S. Senate, he testily scolded Senate Majority leader, Mitch McConnell (“Can you believe that Mitch McConnell, who has screamed Repeal & Replace for 7 years, couldn't get it done”). Actually, McConnell deserved kudos. By persuading all but three Senate Republicans to vote for a bill that polls showed the public detested and that would have injured tens of millions of Americans, the Senate leader nearly pulled off a political miracle.
The Republican tax reform agenda is built on equally contradictory goals. Republicans are committed to cutting tax rates because, they believe, taxes are too high and stifle economic growth. But they also think that federal budget deficits and rising debt hamper economic growth. So, the key question is whether one can one cut rates without boosting deficits and debt.
The answer is that it is possible—in principle, but not in fact, because doing so requires actions Republicans reject. Revenues can be maintained even with reduced rates if more income is taxed or if income rises. The problem is that increasing the share of income that is taxed entails doing some quite unpopular things, such as taxing employer contributions for health insurance and pensions and the currently excluded portion of Social Security benefits, or curbing such popular deductions as those for mortgage interest, property taxes, charitable contributions, and state and local income taxes. Few members of Congress, Republicans or Democrats, are prepared to vote for such measures.
Lower rates would not lower revenue if they spurred sufficient economic growth. To be sure, tax cuts will briefly boost consumer demand. But unless they also raise economic capacity, the gain will be temporary; and unless they raise capacity a lot, revenues will still fall. Gains in capacity are not in the cards, say responsible analysts. More capacity requires more investment. And although tax cuts will raise after-tax rates of return, they will lower investment anyway by diverting saving from productive investments at home or abroad to finance government deficits. Less investment means less growth, not more.
A new tax could counter the revenue loss from cuts in personal and business income tax rates. Some tax experts have urged a shift in the corporation income tax from one that applies to worldwide income of U.S. corporations to one that would apply equally to all sales in the United States of domestically produced goods and imports, but not to U.S. exports. This so-called ‘destination-based cash-flow tax’ (or DBCFT) would boost revenue because the United States currently imports about $500 billion a year more than it exports. Import-intensive businesses, such as Walmart or Target, would pay more in tax. Export industries, such as Boeing and Intel would pay less. Because this initiative splits businesses, most of whom support and contribute to Republican candidates, Republican leaders recently pronounced the DBCFT dead.
The most attractive source of new revenue is a tax on carbon, which would slow the emission of greenhouse gasses that contribute to global warming. Environmental economists of both parties support such a tax. But Congressional Republicans fear that such a tax might be used to raise overall revenues, something that most have pledged in writing not to permit.
So, the idea of “tax reform,” which almost everyone thinks is dandy in principle seems headed for the same legislative bone-yard as ‘repeal and replace.’ And for the same reason. Ideological slogans can win elections. But real legislation on complex subjects like health insurance policy and tax laws must come to grips with current laws and real economic interests.
So gentlemen, place your bets.
Here’s why: McConnell is a gutless peon of the Uni-party. If McConnell actually wanted to accomplish anything then he would have seriously disciplined all GOP senators who voted against Obamacare repeal. Let there be no doubt: he orchestrated the repeal. As is ofter done in Washington, backroom deals are made to ensure just enough people vote to ensure defeat or victory, and others are allowed to vote the opposite way to give them political cover. So we get a group of Trump opponents who are almost all not facing re-election in 2018, while Trump haters such as Flake vote in favour knowing that the fix is in. Flake can now claim he voted to repeal, even though he was participating in McConnell’s scheme to backstab Trump.
McConnell orchestrated the defeat of the repeal.
It’s a big old mixed bag. I think the key thing to remember is that tax reform is already priced into the market. As such, failure could have real consequences. There will undoubtedly be elements on the left and the right that will be happy to orchestrate the failure (as you alluded to) so they can blame it on Trump.
Wrong on all counts. A simple repeal with a half-dozen market reforms would provide reasonable INSURANCE (not “health care”). Reagan proved that tax cuts increase revenue. Spending is a totally different issue.
Trump was right. It’s not difficult—if you have a spine.
maybe. But repeal and replace did suspiciously fail so we have to consider the possibility.
> “By persuading all but three Senate Republicans to vote for a bill that polls showed the public detested...”
The usage of the phrase “polls show” reveals this commentator is an idiot. Americans hate Obamacare more than they detest ‘fixing it’. McConnell is far from being any sort of problem solver. Americans view Congress with great disrespect and suspicion, and McConnell has done nothing to reverse that view.
So it is McConnell that is to blame for the disgust with which Americans hold Congress.
> “...and that would have injured tens of millions of Americans”
Such nonsense. Americans have been injured far more by government’s interference in healthcare.
I wouldn’t bother to read this commentator’s opinions about tax reform. Aaron simply doesn’t have enough brainpower to cover this subject in a way that informs and brings value to those that try to read it.
The author and the article are actually irrelevant. all that matters is the question. We don’t know that tax reform will pass but we do know that there will be powerful interests on both sides of this fight just like the Obamacare fight. There are already powerful interests that have bet large sums of money on the prospect of tax reform passage. that’s why the stock market has set a record. There are also powerful interests out there that are gambling on its failure. failure is a real possibility. Consequences of failure are also a real possibility. From an investors possibility, the safest bet would be to cover all bases IMO.
well Mcbastard hasnt helped at all. trump himself hasnt really done anything either... Hopefully at least Tax cuts are coming... guess we will wait and see...
Here's a quote to prove your point. The screamingly obvious answer to this question is "Of course, IF you cut spending". But that won't happen, will it.
McConnel is running a kabuki theater.
He likes repealing 0dontcare as an issue, but works to keep it behind the scenes.
Same with tax reductions.
>>>failure is a real possibility. Consequences of failure are also a real possibility. From an investors possibility, the safest bet would be to cover all bases IMO.
But rather than take the lead and releasing his own tax plan, the President is once again relying on Congress to make the decisions on rates and deductions. We saw this before on healthcare reform and repeal. Leading from behind doesn’t work.
Real Clear Markets ^ | August 23rd, 2017 | Henry Aaron
Imagine that, Hammerin’ Hank is a tax expert in addition to hitting all of those home runs.
Failure to repeal Obamacare is one thing. Failure to enact significant tax relief for “the forgotten men and women” will be quite another I’m afraid. Breaking this promise has the potential to break this Presidency.
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