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time between his election and inauguration to prepare a lengthy list of Obama’s Executive Orders, which he could have repealed or modified on Day One.)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.