Washington Insider: New Agenda Issue is Harvey’s Costs

The month of August saw solution of none of the main issues the administration faces and a new concern that likely will rearrange the government’s priorities. This could affect the debt ceiling fight, the budget battle, the administration’s tax cut agenda as well as other issues. It is the enormous clean-up costs of hurricane Harvey, Bloomberg says this week.Before President Donald Trump launched his latest call for major tax cuts, he took a moment to offer support to Texas and Louisiana in the wake of Hurricane Harvey. “We are here with you today, we are with you tomorrow and we will be with you every single day after, to restore, to recover and to rebuild,” the President pledged during a speech at a Springfield, Missouri, manufacturing plant Wednesday.That moment revealed how the storm, which has claimed more than 30 lives and caused as much as $90 billion in damage, may add new limits to Trump’s goal of delivering “historic” tax cuts.Republicans in Congress, who were already tentatively planning to combine a debt-ceiling increase with a short-term spending bill to keep the government open, may now feel urgency to add Harvey-relief provisions into that mix.“That has everything you want except Republican fiscal responsibility,” said Representative Dave Brat, R-Va., a spending hawk. “We’ve got to help the victims of Harvey, we’ve got to raise the debt ceiling, but where is the responsibility for not leaving a fiscal mess to our children and grandchildren? That bill could come from Democrats.”GOP leaders had already said that any tax plan would have to pay for its cuts with new revenue. “It will have to be revenue-neutral,” Senate Majority Leader Mitch McConnell, R-Ky., said in May. “We have a $21 trillion debt.”Representative Peter Roskam, R-Ill., who chairs the House Ways and Means Committee’s panel on tax policy, stuck to that line on Wednesday, although he added that it’s an “open question” as to whether Congress will adhere to revenue neutrality in tax legislation.The question is not just academic. Republicans, who have a slim 52-seat majority in the Senate, plan to pass a tax bill under a budget procedure that would allow them to bypass Democrats’ opposition. But that procedure, known as “reconciliation,” also requires that any tax cuts that add to the nation’s long-term deficit would have to be temporary.In general, the administration has tended to downplay potential budgetary effects while promising “the biggest tax cut and the largest tax reform in the history of our country.” On Wednesday, in a speech the White House billed as the first of several aimed at campaigning for a tax overhaul, Trump avoided repeating the superlatives, but stuck to similar themes.While his remarks included few specifics, he repeated his desire to slash the corporate income tax rate to 15% from 35%. He also called for an unspecified middle class tax cut—possibly, by doubling of the standard deduction, which would benefit working-class taxpayers. Together, the two provisions would cost an estimated $3.7 trillion in revenue over 10 years, according to the nonpartisan Committee for a Responsible Federal Budget.“Congress shouldn’t be debating a deficit-increasing tax cut because our debt is at record levels,” said Maya MacGuineas, the CRFB’s president. Also, she said, the need to pay for Hurricane Harvey relief “is a reminder of why it is so important to have our fiscal house in order.”As Congress returns from a month-long recess next week, the bill for Hurricane Harvey’s damage will make it more fiscally irresponsible than ever for lawmakers to consider tax cuts that aren’t paid for, said Bob Bixby of The Concord Coalition, a deficit-watchdog group.“What needs to happen when Congress returns is a budget deal acknowledging that things need to be paid for and that tax cuts don’t pay for themselves,” Bixby said in an email. “It makes sense to borrow for an emergency like a hurricane but not for a tax cut that will contribute to an already unsustainable fiscal path.”So, it seems that all the old fights remain, while new ones are being added. This means, among other things, that the search for funds can be expected to look for offsets from programs long thought too important or popular to cut. And, it clearly raises the stakes on each of the debates now underway, which producers should watch closely as they proceed, Washington Insider believes.