President Trump has frequently reiterated his three most
important goals: Jobs, Jobs, Jobs. To that end, he has proposed Tax Cuts, Deregulation,
and Repeal and Replace Obamacare.
First, let’s examine progress on deregulation. On January 30, 2017, Trump ordered a freeze
on federal employment and required that every new regulation be accompanied by
removing two existing regulations. On
February 24, 2017, Trump issued an Executive Order on Enforcing the Regulation
Reform Agenda. He instructed every
executive department and agency to establish a Regulatory Reform Task Force to
review existing regulations and send him a list for repeal, replacement, or
modification within 90 days. On March
13, 2017, he issued an Executive Order directing the Office of Management and
Budget (OMB) to reorganize the Executive Branch. The order requires every federal department
and agency to review existing programs and recommend those that should be eliminated,
pruned, or revised within 180 days; the Director of OMB must then integrate
these recommendations into a master government reorganization plan for the
president within 180 days. Other presidential
orders addressed construction of the Keystone and Dakota pipelines.
Thus far, President Trump has reversed only a handful of regulations. We will have to wait until mid-May or later to
see the full list that each department and agency recommends for elimination,
replacement, or modification. Three
months affords special interests time to organize to lobby to retain favorable
regulations.
(Your friendly proprietor had hoped that Trump would have instructed
his staff to use the time between his election and inauguration to prepare a lengthy
list of Obama’s Executive Orders, which he could have repealed or modified on
Day One.)
President Trump and Congressional Republicans seriously
erred in placing Repeal and Replace Obamacare (RRO) before Tax Cuts. RRO has become bogged down in Republican intraparty
disagreements (Ryancare vs. the Freedom Caucus). RRO is eating up time and Trump’s political
capital. RRO has become so contentious
that Treasury Secretary Steven Mnuchin, White House Domestic Policy head Gary
Cohn, and Senate Majority Leader Mitch McConnell all concur that tax cuts/tax
reform is not likely before the August recess.
They have stated that it can be accomplished by Christmas; if not then,
in early 2018. Meanwhile, RRO is making
enemies between Republicans that could complicate developing a consensus among
Republicans on tax cuts when bills are marked up in the House Ways and Means
and Senate Finance committees for consideration by the membership of both
houses. By September, factions within
the Republican Party are likely to have stopped talking to each other.
Tax cuts are the centerpiece of Trump’s growth
strategy. Without them, the economy will
putter along, perhaps at a faster pace than 2%, but not the 3-4% required to
achieve Jobs, Jobs, and Jobs. For want
of tax cuts, an administration will fail.
The bold, sweeping tax cuts and reform that Trump proposed,
and on which Members of Congress campaigned, are slowly slipping away. Reducing corporate and individual tax rates
requires broadening the tax base, i.e., eliminating and/or reducing deductions,
exemptions, credits, subsidies, and loopholes.
Capping mortgage interest deductions and charitable contributions at,
say, $200,000 has already been replaced with maintaining the current interest
deduction on a million dollar mortgage with no limit on charitable
contributions. 150 Representatives have
submitted a letter seeking to retain tax exemption for municipal bond interest. Ivanka Trump wants a tax credit for
child-care expenses. Ryancare includes
tax credits for purchasing health care insurance. Unions and employers want to preserve deduction
of health insurance. And on and on it goes
for dozens of other special interests.
The erosion of the tax base from these “loopholes” means that
Congressional hawks will insist on higher tax rates for businesses, say, 25%
instead of 15% for corporations, and 33% for small businesses instead of 25%,
in order to reduce the budget deficit.
Higher rates than proposed by President Trump will reduce the incentive
to expand or locate in the United States.
Even if Congress succeeds in enacting tax cuts by Christmas,
the resulting legislation risks becoming a mere shadow of Trump’s bold plans. Congressional deficit hawks are likely to
insist that tax cuts not take effect until January 1, 2018, to preserve revenue
collected in 2017. In that event, the
boost in growth from tax cuts will be lost for all of 2017. Firms that promised to invest and expand in
the United States are likely to rethink their plans if Trump fails to cut tax
rates to 20% or less.
New stories appear almost every day about Mark Cuban
becoming the Democrat nominee for president, and how he could do a better job
than Trump. This story will get louder
as Trump gets bogged down in the quicksand of RRO. He must also allow time to modify the federal
budget for the rest of the current fiscal year and prepare the fiscal year
2017-18 federal budget (October 1, 2017, through September 30, 2018).
As the time rolls by, President Trump will become
increasingly occupied with foreign policy and national security. He will be holding many one-on-one meetings
with foreign leaders and attend numerous multinational gatherings of global
leaders (G-7, G-20, United Nations, etc.). And there are always unexpected events or
crises that consume the president’s time.
Tempus fugit. Ryan
will have the House in session only 8 days in April. Before you can say “supercalifragilisticexpealidocious,”
May, June, and July will be here and gone.
The solution is obvious to those of us who support Trump’s
growth agenda. Let Members of Congress
squabble behind closed doors over RRO.
Move tax cuts/tax reform to the front burner and raise the setting to
the hottest number. Speak out to voters. Ask them to pressure their elected
representatives stay in town to work like the rest of us do. Whoever heard of an eight-day work month?
Trump must insist that Congress enact tax cuts before the
August recess, backdating them to take effect on January 1, 2017. He must sweep away burdensome regulations (he
promised to eliminate 75% of regulations). He must prune unnecessary and wasteful
programs. Then congress can resume
deliberations over RRO.
If Trump can accomplish his agenda, the economy and new jobs
will boom, and Mark Cuban will be waiting until 2024.
