Speaker of the House Paul Ryan has a plan: To get rid of nasty deficits, he says, all we need to do is “grow the economy, cut spending.” Under this tax plan, only one of those is likely to become a reality.
Republicans say that the tax plan currently working its way through the House and Senate is supposed to accomplish that first goal: growing the economy. It won’t succeed. Evidence suggests that the tax plan is highly unlikely to create more than a trickle of growth, and that that growth will stay snugly right where the tax plan is putting it: with corporations and billionaires.
The next step, according to Ryan, is cutting spending. And while Congress hasn’t gotten that far yet, the agenda is clear. If a version of the tax plan passes, the next major item of business in Congress will likely include major cuts to Medicare, Medicaid and Social Security.
Read My Lips: No New Jobs
The entire tax plan is built around one premise: that cutting taxes causes the economy to grow and creates jobs. The problem is, this doesn’t appear to be true.
This time, “welfare reform” won’t just target low-income mothers; it will mean drastic cuts to Medicare, Medicaid and Social Security.
A study from the University of Pennsylvania’s Wharton School of Business found that additional economic growth due to the tax plan would be miniscule — less than a tenth of a percent per year in the near term. That’s not the kind of growth the economy needs to produce more, or better-paying jobs.
Meanwhile, a study from the Institute for Policy Studies found that corporations that paid lower tax rates actually cut jobs — while passing the gains on in the form of higher CEO pay.
Stuck with more or less regular economic growth, the massive tax cuts will just add to the nation’s debt. The nonpartisan Joint Committee for Taxation found last week that under the original Senate tax plan, the United States will be left with an additional $1 trillion in debt. By some estimates, that debt would be even higher.
This is not a particularly partisan assessment for those who aren’t currently in Congress. As the bipartisan duo Alan Simpson and Erskine Bowles recently wrote in the Washington Post, “Economic growth isn’t going to wash away this debt.”
Welfare Reform Redux: Medicaid, Medicare and Social Security at Risk
As President Trump told supporters at a rally in Missouri, “We’re going to go into welfare reform.” What he didn’t say was that this time, “welfare reform” won’t just target low-income mothers; it will mean drastic cuts to Medicare, Medicaid and Social Security.
The increased national debt gives the perfect political cover for cutting social programs.
The president has support among his party in the Senate and House: former presidential candidate and Sen. Marco Rubio, Rep. Paul Ryan and Sen. Patrick Toomey have all spoken about — or refused to deny — the intention to bring about massive spending cuts as Act II of their agenda.
The tax plan is an important key to this momentum toward bringing back “welfare reform,” which, of course, wasn’t a good idea the first time, either (and which still seems to bring out many of the ugliest stereotypes about poverty). The House and Senate versions of the tax bill have one big thing in common: adding significantly to the national debt.
It may seem counterintuitive at first, but to “small-government” types, this is a dream come true. The increased national debt gives the perfect political cover for cutting social programs. And this reform won’t be limited to traditional welfare programs for struggling parents, which in 2016 amounted to less than half a percent of the total federal budget. Instead, lawmakers will take direct aim at the social programs where the most money is spent, and upon which the most Americans rely: Medicare, Medicaid and Social Security.
For starters, there are cuts that will take place to these programs even if Congress takes the rest of the year off after they pass this tax plan. These are the result of deficit-reducing mechanisms enacted under a 2010 law that would kick in to the tune of a $25 billion cut to Medicare this fiscal year, even without congressional action. Sen. Mitch McConnell has said that Congress won’t let that happen, but it’s not clear that he can deliver on that promise.
Even if Congress doesn’t permit automatic cuts to Medicare as a result of its tax plan, members have openly said that they’ll be back to cut programs like Social Security and Medicare.
Cuts to these programs are highly unpopular among both Republican and Democratic voters, and as a candidate, Trump campaigned on promises to keep them intact. However, current signals from congressional leaders, and Trump himself, are that he will break those promises.
The House and Senate bills amount to a tax cut for the rich that will be paid for by the poor.
The Non-Repeal Repeal of the Affordable Care Act
The Senate version of the tax plan has a provision that repeals a foundation of the Affordable Care Act: the individual insurance mandate.
Insurance markets only work if some healthy people pay into the system to cover the costs for those who get sick. By getting rid of the individual mandate, the Senate tax plan will encourage some currently healthy people to skip health insurance — making the costs go up for everyone who chooses to stay insured.
According to a nonpartisan estimate from the Congressional Budget Office, this one change would result in 13 million Americans losing health insurance over the next decade — and those who have insurance can expect their premiums to go up by 10 percent.
The House version of the bill doesn’t include the individual mandate repeal. Thus, one of the biggest questions about any final legislation is whether it will include this attack on the Affordable Care Act.
Don’t Look Behind the Curtain: It’s Not About the Money
While congressional leaders bemoan the expense of Social Security and Medicare — which do cost a lot, at $982 billion and $604 billion respectively in 2016 — don’t expect them to mention in the same breath that they have voted to increase the military budget to $700 billion.
Each of the differences between the House and Senate versions represents an opportunity to limit the damage this tax plan can do, or possibly to derail it entirely.
Apparently, some things are worth paying for. Those things would include the F-35 jet fighter, an ill-fated and never-used jet that pro-military Sen. John McCain has called “a tragedy and a scandal,” and slated to cost nearly $11 billion this year. They’d also include a $20 billion annual bill for nuclear weapons, as well as total payments to for-profit corporations likely to be in the neighborhood of $300 billion.
This should clear up any confusion about what supporters of the tax plan and spending cuts are after. It’s not about the money; it’s about priorities.
House vs. Senate: It’s Not Over Until It’s Over
The House and Senate still need to bridge their differences. Here are a few high-stakes differences:
• The Senate version includes the repeal of the individual health insurance mandate under the Affordable Care Act, which would result in 13 million Americans losing health insurance. The House version does not currently include this provision.
• The House version treats graduate student tuition as regular income — even though graduate students never actually receive this money, and can’t use it to buy housing, food or anything except an education. The Senate version does not include this provision.
• The House version gets rid of the estate tax — which is paid by , with values over $10 million for couples. The Senate version raises the limit on which estate taxes must be paid, but keeps the tax.
Each of these differences — among others — represents an opportunity to limit the damage this tax plan can do, or possibly to derail it entirely.
The tax plan is astoundingly unpopular: just 25 percent of voters approve of it. Activists are working around the clock to defeat this legislation, with feet on the ground and nonstop calls to House and Senate offices. These efforts will continue until the last vote is cast.
Even if one of these tax plans does pass both the House and Senate, this activist work will continue. Efforts to reverse the damage will, and must, grow. A bill this unpopular, that benefits only corporations and billionaires, is not built to last.