Tuesday, February 21, 2017

How To Repeal And Replace Obamacare And Pass Tax Cuts/Tax Reform By April 15, 2017

The first law of Congressional dynamics states that Congress will delay action on any important policy as long as possible until it’s too late to pass legislation in any given two-year Congressional session.  As an illustration, the last overhaul of the federal income tax was President Reagan’s Tax Reform Act of 1986, 31 years ago.

Republican members of Congress have discussed repealing and replacing Obamacare for the past six years, but have been (seemingly) unable (unwilling) to design its replacement.

What’s needed is a good, swift White House kick in the a** to force Republicans in Congress to act, NOW!

There is a model to achieve that goal.  Recall that a major financial crisis, which erupted in 2008, was threatening to shut down the U.S. banking system.  (Details are described in a NYT article by Mark Landler and Eric Dash entitled “Drama Behind a $250 Billion Banking Deal,” dated October 14, 2008.)

On Sunday, October 12, 2008, Treasury Secretary Henry M. Paulson, Jr. called the heads of the nine largest banks in the United States, inviting them to a meeting at the Treasury to be held at 3:00 p.m. on Monday October 13, 2017.  Joining them were Paulson, Federal Reserve Chairman Ben Bernanke, and president of the Federal Reserve Bank of New York, Timothy F. Geithner.

The nine banking heads were presented with an ultimatum to accept a $700 billion bailout package, supplemented with a government guarantee of $1.5 billion in new senior bank issued debt, and government insurance for $500 billion in non-interest bearing deposit accounts held by the banks.  They were told these confidence measures were necessary to sustain bank lending.

The meeting was contentious, but by 6:30 p.m. the nine bank executives signed the agreement.

Back to Congress, which will return from a weeklong break on February 28, 2017.  The White House should issue an (mandatory) invitation to the chairmen and one or two other key members of the House Ways and Means and Senate Finance committees and the House and Senate Leadership (Speaker, House Majority Leader, Senate Majority Leader) to meet with top administration officials (Treasury Secretary, Chairman of the National Economic Council).  A few number-crunching and legislative drafting aides as required would be included.

President Trump would inform these men that, like a jury, they would be sequestered in a room until they agreed unanimously to specific legislation for tax cuts/tax reform and to repeal and replace Obamacare.  Each person would also be required to sign a pledge to support this agreed-upon legislation.  They would be provided with food, cots, clothing, an hour of outdoor exercise per day in a fenced area, and other necessities.  They would be permitted to retain their mobile phones to communicate with family at specific times of the day.  But like a jury, they would not be permitted to go home or discuss their deliberations with anyone until they reached a deal.

At that time, President Trump would join them at a press conference in which the signed agreements would be displayed.  Members of Congress would then return to their respective chambers and promptly proceed to pass the legislation to be delivered to the president for signing.  Any member who changed his mind would be placed in a stock for public humiliation and punishment, which would be part of the overall agreement.

Desperate times require desperate measures.  Congress must not be allowed to dilly-dally.

Monday, February 13, 2017

Tax Cuts For Trump Are Equivalent To D-Day’s Breakout At Omaha Beach

The allied invasion at Normandy on D-Day, June 6, 1944, is a model for Trump’s invasion of Washington, D.C.

D-Day consisted of America, Canadian, and British troops landing on five beaches codenamed Juno, Gold, Utah, Sword, and Omaha. The landings at the first four were relatively successful.  In marked contrast, things were going so badly at Omaha Beach that Supreme Allied Commander Eisenhower at one point considered retreat.

After large losses in men and material, U.S. forces finally broke through German defenses and seized higher ground.  However the objectives sought for D-Day required three more days for consolidation.  If Omaha Beach had not been secured, it is likely the invasion would have failed.  I leave it to historians to contemplate the counter-factual.

The Trump administration is working to change policy on a number of fronts.  The White House website lists several issues on the Trump agenda, but jobs, jobs, jobs tops them all.  The success of President Trump depends on higher economic growth and job creation.

Tax cuts and deregulation are the keys to growth.  Deregulation can be done piecemeal over time, but the effort to secure tax cuts needs an immediate, comprehensive, coordinated push on all fronts lest tax cuts get bogged down in hedgerows of interest group politics and conflicting personalities.  Each day that goes by without tax cuts, despite happy talk from Republican congressional leaders of a 200-day timetable, puts the objective of job-creating tax cuts at risk.

The White House and the House of Representatives agree on several features of tax cuts--lower rates on corporations (15-20%), small business (25%), individuals (top rate of 33%), and investment income (dividends, interest, capital gains). They agree on replacing multi-year depreciation with first-year write-off (expensing) of investment.  They agree on repealing the estate (death) tax.  They should wrap these measures up in a bill, with the tax cuts backdated to January 1, 2017, quickly move it through both houses of Congress, and send it to the president for his signature.

That would represent the equivalent of the breakthrough at Omaha Beach.  Thereafter, if it wishes, Congress can debate other aspects of taxation.  But if Congress gets bogged down with such peripheral issues as revenue neutrality and border adjustability, the overriding objective of tax cuts risks being trapped on Omaha Beach facing withering fire from artillery and machine guns.  Failure on tax cuts likely means failure on growth, jobs, and President Trump.