Thursday, November 30, 2017

Vote-O-Rama day

"I have a feeling we're not in regular order any more." Teri Garr in Mel Brooks's Young Frankenstein, via Film Misery.

I've been wanting to write something about the tax bill—

But it's like the wrong end of an acid trip, where you're getting disenchanted and ready for a nap and grousing, "God damn it, everything's still melting." (A very long time ago for me, I should stress, but I still remember that.)

Mr. Corker [writes The Times], who has voiced the loudest concerns about the bill’s effect on the deficit, said on Tuesday that he received assurances that the final legislation would include a mechanism to avoid ballooning the debt, which has passed $20 trillion. While the exact details were not specified, the bill is expected to include some type of trigger that would require certain taxes to increase if the package does not generate as much revenue as projected.
“I think we’ve come to a pretty acceptable place, from my standpoint,” said Mr. Corker, who has stated that he would be unable to vote for the bill if it added to the federal deficit.
He could, and did, vote for a budget bill that allowed them to add $1.5 trillion to the federal deficit over the next 10 years, but he couldn't vote for one that actually did it.

Of course in Republican theory, there won't actually be any deficit at all, because these tax cuts will instantly spark 8% growth rates, or maybe it's 4% growth rates, or maybe something else, who knows when you're talking all these complicated numbers, but Republicans know it will be so much, making so much money for companies, that they will not only gladly raise everybody's wages and invest in splendid new productivity enhancers but also just be paying so much in taxes, even at the new lower rates, that there won't be any deficit at all! Though those communists at Fortune Magazine say that's not true and they're not the only ones.

So just in case they're wrong and Fortune and all the other communists are right, and just to calm Senator Corker's anxieties, Senators have invented a device, a "trigger", that will shoot the tax rate back up if the growth fails to materialize and fill the deficit up. Which is—assuming that that is a moment of economic downturn—exactly one of the things you most don't want to do, aggravating that downturn with a massive tax hike.

Or maybe not. There's also a proposal an alternative trigger that keeps the taxes the same and massively and automatically cuts spending instead. Although according to the Congressional Budget Office that's going to happen anyway:
The GOP tax bill could trigger automatic cuts worth $136 billion from mandatory spending in 2018, including $25 billion in Medicare cuts, if Congress doesn’t find another way to offset its deficit increases, according to the Congressional Budget Office (CBO). 
The tax bill would add an estimated $1.5 trillion to the deficit over a decade. Congressional “pay-as-you-go” rules, called pay-go, require that the White House Office of Management and Budget (OMB) automatically cut mandatory spending if legislation increases the deficit beyond a certain point.
Part-time OMB manager Mick Mulvaney (he's got to spend two or three days a week running the Consumer Protection Finance Bureau, in order to prevent that agency from doing anything, because President Trump doesn't like what it does) will do it automatically. Problem solved! Except for elderly people in need of chemotherapy, and anybody who needs
agricultural subsidies, some health funds linked to the Affordable Care Act, Customs and Border Patrol operations and funds in the Student Loan Administration, according to the Committee for a Responsible Federal Budget, a budgetary watchdog group.
And $20 or $25 billion that don't exist at all, in any department's budget (I think that means further cuts to Medicare, and Social Security too, or else tax hikes), a sequester to make the 2013 sequester drama look like a sitcom. Not sure if Senator Corker has heard about this.

Nor has anybody in the remarkable parade of Republicans NPR summoned this week to explain why they're voting for the bill (Cornyn and Toomey, Flake though the headline says he has "reservations"), to say nothing of Chris Buskirk of the American Greatness website founded by Publius Decius Mus, now unveiled as Michael Anton, author of the famous essay on "The Flight 93 Election" suggesting that the United States had been hijacked by something analogous to a band of Saudi terrorists and Trump voters were heroic passengers who were going to take over and crash our country in the woods, killing us all, to prevent um something that was evidently worse. Who's working in the White House now, in the national security team.

Steve Inskeep seemed genuinely startled to learn that Flake doesn't in fact have any reservations at all:
INSKEEP: So wait a minute. You're - this is a bill that would increase the deficit by I think $1.5 trillion over a decade, so you don't like that. You would like to change tax policy so that it grows the economy. Do you not think this would do that?
FLAKE: I do think it would do that. And we - in the budget that we passed a few months ago, we said that we would allow $1.5 trillion as part of this plan scored statically, but if it were scored dynamically - if we assume economic growth - in fact, only about 0.4 percent economic growth over 10 years would make up for that 1.5 trillion. And I do think that we can achieve that. We've got to have a more realistic and more competitive corporate tax rate, in particular. I think that's recognized by both sides of the aisle.
INSKEEP: Wait a minute. You sound like you like this.
Well, it has been scored dynamically, though not by the Treasury Department whose job it is to do it, apparently because, as Yglesias says,
the last time we had a Republican administration and its Treasury Department tried to do a rigorous dynamic analysis, they found that they couldn’t make it work. The growth-boosting impact of lower marginal tax rates was largely offset by the growth-slowing impact of more government borrowing. To generate a scenario in which tax cutting boosted growth, the George W. Bush Treasury had to invoke the idea of a tax plan that was offset by large, unspecified spending cuts.
Who's done the dynamic modeling is the Penn Wharton Budget Model, which finds that the budget deficit just keeps increasing, for the same reasons, out beyond 2027, failing the test of the Byrd rule—and considerably worse if you count the cost of debt service under rising interest rates, which the Penn Wharton team didn't do; the Committee for a Responsible Budget claims this raises the total cost of the tax plan to over $2 trillion.

While, as you know, the Congress's Joint Committee on Taxation finds that almost all the income increases over the ten-year period go to households with incomes over $500,000 and none at all for those earning less than $75,000.

(This calculation doesn't seem to include the end of state and local tax deductions; which will make the in-the-red side much worse for residents not just of New York and California but also Minnesota and Iowa, Maine and Wisconsin, Arkansas and South Carolina, and more.) The JCT was supposed to issue a "dynamic score" for the Senate bill "as early as" last night, but it hasn't happened so far.

There's no guarantee that whatever the Senate ends up voting on in tonight's Vote-O-Rama is going to even resemble what the JCT is scoring, as the authors keep chasing after those six or so Senators still at the bargaining stage and the amendments proliferate.

And hatred for the bill continues to grow, for good reason. A big and important piece by Peter S. Goodman and Patricia Cohen for the The New York Times offers some explanation:

“When you put all these pieces together, what you’re left with is we are squandering a giant sum of money,” said Edward D. Kleinbard, a former chief of staff at the Congressional Joint Committee on Taxation who teaches law at the University of Southern California. “It’s not aimed at growth. It is not aimed at the middle class. It is at every turn carefully engineered to deliver a kiss to the donor class.”...
In 2004, Congress invited American corporations to bring home overseas earnings at a sharply reduced rate, pitching it as a means of bolstering investment. But the corporations spent as much as 90 percent of their windfall buying back their shares, according to Bureau of Economic Analysis research.
If Congress bestows fresh relief on major businesses, signs suggest a similar result. Many companies are enjoying record profits. Those in the Fortune 500 had $2.6 trillion salted away overseas as of last year.
“In our boardroom, the number-one thing we’re talking about is not taxes,” said Jeremy Stoppelman, chief executive of Yelp, the online review platform. “Having a strong middle class out there spending money is what’s most important for our business.”
There's nothing in the bill that will do anything like that last, and I think there's still a good chance the Senate won't be able to pass it, on the same kind of dynamic as the Repeal 'n' Replace fiasco; between the deficit fanatics and the Senators that have to worry as much about voters and donors, where any lollipop given to one side alienates the other. But we'll see.

Update: Why Treasury won't release its dynamic analysis.

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