Before President-elect Donald Trump has fully fleshed out his policy agenda, House Republicans are already planning to slam through Congress their own program of repealing Obamacare, repealing regulations Barack Obama issued in the last 60 legislative days of his administration, and enacting substantial tax cuts.
This agenda has some parallel with the president-elect’s stated agenda during his campaign. But Mr. Trump spent more time on the trail to the White House advocating the trashing of what he called bad trade deals, building a border wall and deporting illegal immigrants, and questioning excessive U.S. military interventionism overseas and outdated alliances in which the United States protects wealthy allies. Mr. Trump has already qualified his repeal of Obamacare, saying he will require insurance for people with pre-existing medical conditions and allow parents to keep their children on their insurance policies up to the age of 26. Also, he has softened his stance on withdrawing from U.S. alliances.
Repealing Obamacare (officially the Affordable Care Act) will be more difficult than Republicans imagine, because it is politically difficult to take away government programs from constituency groups that already receive them. Thus, it is better to not give them out in the first place, especially with what former Republican Congressional Budget Committee staffer Mike Lofgren, in his book “The Deep State: The Fall of the Constitution and the Rise of a Shadow Government,” correctly called “a costly and convoluted way to insure more people.” There is already talk of what to put replace Obamacare with to ensure that the 20 million people who got new coverage under the law would be able to retain it.
Repealing Mr. Obama’s most recent regulations is also a good idea. For example, one of them requires companies to provide time-and-a-half pay for overtime work to workers who make $47,000 or less annually. Although this might seem like a just reward, whether the federal government should be conducting inefficient meddling in labor markets is really the issue.
Certainly, Mr. Trump and the House Republicans can agree on significant tax cuts. Tax cuts are wonderful, but the nation still has a massive budget deficit. Although Mr. Obama has substantially reduced the deficit by almost two-thirds from almost $1.5 trillion in fiscal year 2009 to about $500 billion in the current fiscal year of 2017, it is still significant and it is projected to go up in the future even without a large Republican tax cut.
In the pastfor example, during the Ronald Reagan and George W. Bush administrationsRepublicans won votes in elections by proposing huge tax cuts in the name of “small government,” but then failed to reduce government programs, because no one ever wins votes by taking candy away from key constituency groups. As a cover for this irresponsible electioneering, past “supply side” rhetoric has claimed that tax cuts will spur economic growth, thereby bringing in more revenue and (in the extreme version, which Reagan himself propounded) thus “paying for themselves.” However, as Mr. Lofgren notes, “Despite thirty years of empirical evidence that tax cuts neither pay for themselves nor have any measurable effect on economic growth, large numbers of our political leaders keep on proposing the same policy and hoping for a different result.” Mr. Lofgren is absolutely right but may be giving politicians credit for naivete rather than for coming up with a clever, if irresponsible, method of winning votes.
Such fake tax cutswithout a corresponding reduction in government spendingmay not be achieving economic growth because they generate yawning budget deficits, thus creating massive federal public debt (now almost $20 trillion) that drags on the economy. If government spending is not cut, someone needs to pay for the tax cuts sometime. Taxes need to be raised later, as Ronald Reagan did in six years of his eight-year presidency. In the meantime, the government needs to borrow money to fund the deficit, thus ratcheting up costs of interest paid. Finally, in some cases, to get buyers for its debt, the government prints moneythe worst optionthus leading to inflation and significant distortions in the economy.
As usual for Republicans, Mr. Trump, during his campaign, and congressional Republicans have talked a lot about tax cuts and large defense-spending increasesjust as Reagan did and George W. Bush did by running the first war in American history at the same time he promulgated a huge tax reductionbut have not spent much time advocating the slashing of federal spending. In fact, Mr. Trump has promised not to cut entitlementsby far the largest part of the federal budget. If these familiar policies are followed, the $500 billion deficit that Mr. Obama has left will balloonas deficits did during the Reagan and Bush administrations.
However, Mr. Trump, not being a usual politician, ran against the corrupt vote-buying gimmicks of both partiesand the voters responded. Instead of the Reagan-Bush model, Mr. Trump and the Republicans should adopt the Warren Harding-Calvin Coolidge route to tax cuts. Those presidents believed in robust, old-fashioned spending cuts, thus enabling them to also slash taxes while at the same time reducing the then-substantial national debt left over from World War I. “To make America great again,” Mr. Trump and the congressional Republicans should use the honest Harding-Coolidge approach rather than the usual irresponsible Ronald Reagan- and George W. Bush-style chicanery.