The following article by Jim Tankersley and Alan Rappeport was posted on the New York Times website December 19, 2017:
WASHINGTON — The sting of failure on health care still lingered in the Senate on Aug. 3, when Mitch McConnell, the majority leader, summoned the Republican members of the Budget Committee to his office. We need to pass a tax bill this fall, Mr. McConnell told his colleagues, and we need a budget that allows us to do that.
There was no dissent.
Within two months, party leaders had hammered out a budget that steamrolled their previous concerns over adding to the federal budget deficit, in order to pave the way for $1.5 trillion in tax cuts. In rapid order, the budget passed the Senate, then the House, putting Republicans on track to deliver a tax bill at breakneck speed to President Trump’s desk by Christmas.
The $1.5 trillion bill represents the most sweeping overhaul of the United States tax code in decades, delivering deep and permanent cuts to corporations and temporary tax cuts to individuals. Early Wednesday morning, Republicans claimed victory as the Senate voted 51-48 to pass the bill, which the House passed on Tuesday 227 to 203.
But in many ways, the bill represents a political and economic gamble for Republicans. A majority of Americans oppose it, and relatively few believe they will benefit personally from it, polls show. Economic analyses predict it will add more than $1 trillion to budget deficits over the next decade, an amount that would betray the party’s longstanding messaging that mounting federal debt will sap economic growth.
Republicans spurned those concerns, rallying around what has been the animating ideology of their party since the Reagan era: that tax cuts will drive faster growth and national prosperity. More immediately, they followed an overwhelming desire to notch a legislative “win” for the president, their donors, the restless voters of their party base and for their own political fortunes.
There were crucial steps that ensured passage, including a deficit bargain struck between Senators Patrick J. Toomey and Bob Corker in September, pressure from Mr. Trump on a controversial push to tweak retirement savings in the bill and, in the Senate, an early and crucial endorsement from John McCain of Arizona, the Republican wild card whose late defection killed the health care bill.
“There was never a moment where I thought, ‘Oh, my gosh, we’re going to fail at this,’” Mr. Toomey said in an interview. “There were many moments I thought, ‘This is still an open question.’”
What there never was, in the minds of Republican leaders, was doubt the bill would pass — not even in the scattered moments over the past several weeks when individual senators held it up to demand changes.
“At the end of the day,” Mr. McConnell said in an interview, “I didn’t have a single person say, ‘If you don’t do this, I’m going to vote no.’”
The House approved the final version of the bill on Tuesday afternoon over the opposition of 12 Republicans and every Democrat who cast a vote. Because of a procedural issue, the House will have to vote again on Wednesday, but the bill is expected to land on Mr. Trump’s desk within days.
On the House floor, Speaker Paul D. Ryan’s voice cracked as he signaled victory.
“My colleagues, this is a day I’ve been looking forward to for a long time,” Mr. Ryan, Republican of Wisconsin, said Tuesday, in teeing up a vote he had worked toward his entire career. “Today, we are giving the people of this country their money back.”
To get to that moment, Republicans walled themselves off from criticism, convincing one another that unfavorable economic analyses of their bill were wrong, and that its poor poll numbers would improve once the cuts worked their way into Americans’ paychecks.
The schedule minimized time back home for members, allowing them to largely avoid the contentious town hall meetings that helped sink their efforts to repeal and replace the Affordable Care Act. They caught a break when Democrats reached a deal with Mr. Trump to keep the government open in early fall, freeing up valuable legislative time to push the tax bill forward.
Mr. Trump pushed party leaders again and again to deliver a bill quickly, and for the most part, he let them write it, intervening only to push for a low corporate rate and to nix an idea to meddle with tax-advantaged 401(k) plans. At times, the president would briefly derail the process with stray and unexpected Twitter posts that sent lawmakers and his own staff scrambling to reconsider major parts of the plan.
In the end, the bill met nearly every deadline in an “optimistic” timeline party leaders prepared in early October. That timeline called for House and Senate votes on a conference committee bill to occur Dec. 18. It was off by a day.
The failure of health care gave life to the tax bill
Mr. Ryan and other Republican leaders have laid the groundwork for a large tax bill for years, but their efforts stalled in the early months of the Trump administration, as the party engaged in a high-visibility effort to dismantle President Barack Obama’s signature health law. That effort crashed to the ground in the early hours of July 28, when Mr. McCain and Senators Lisa Murkowski of Alaska and Susan Collins of Maine broke from their Republican colleagues in a dramatic late-night defeat for party leaders.
Republicans took fire from the party’s base, which had voted for Republicans in large part over health care concerns, from conservative donors and from the president himself. Congressional aides said that criticism galvanized lawmakers, almost immediately, to rally behind what at that point was still only the broad outlines of a tax plan — but which Mr. McConnell and others saw as the key to appeasing furious Republican voters.
A congressional aide said the health care failure united Republicans toward a single goal: tax cuts.
At the time of the health care collapse, Republicans had made little public progress toward a tax bill, and it appeared on the back burner. The White House had released a one-page memo in April outlining its priorities. The House Ways and Means Committee chairman, Kevin Brady of Texas, a low-key business advocate better known for his work on health care, had put forth a tax-reform framework. But conservative groups had spent months killing one of its core provisions, a so-called border adjustment that would have effectively taxed imports, raising an estimated $1 trillion over a decade to help offset the revenues lost from reducing tax rates.
When Mr. Brady and Mr. Ryan officially abandoned that provision in late July, Republicans faced a difficult question: How would they raise enough revenues in a tax bill to ensure they did not add further to the federal budget deficit, after complaining throughout the Obama administration that deficits and debt were choking the economy?
The answer was, they did not.
Deficit concerns were played down
This was the first critical decision Republicans made to keep on their accelerated timeline: They embraced a budget that allowed for much higher deficits, on the assumption that their tax cuts would generate enough new growth and revenues to pay for themselves.
A few senators voiced concerns about the possibility of adding more to the debt. They included Mr. Corker of Tennessee, a member of the Budget Committee, who announced this year he was not going to run for re-election and got into a public Twitter fight with Mr. Trump.
Mr. Corker was one of the committee members who gathered in Mr. McConnell’s office in August and were charged with writing a budget document that would accelerate passage of the tax bill. Congressional leaders and administration officials had already agreed to utilize the budget reconciliation process, which would allow them to bypass a Democratic filibuster in the Senate and approve a bill entirely on party lines. To do that, they needed a budget, which would include a limit on how much the tax cuts in the bill could add to the budget deficit over the next decade.
Many senators, led by Mr. Toomey, wanted a $2.5 trillion limit, which was less than Mr. Trump had proposed in his campaign tax plan but would all but ensure an immediate return to $1 trillion a year deficits.
At Mr. McConnell’s request, Mr. Toomey negotiated for weeks with Mr. Corker, and they eventually compromised on a $1.5 trillion limit. Mr. Toomey convinced many of his colleagues, including Mr. McConnell, that the bill could easily produce enough growth to offset those lost revenues — an estimate that no detailed economic analysis of the bill has yet supported.
“For some time there was a lot of talk from a lot of sources that tax reform had to score as revenue neutral,” Mr. Toomey said. “I was 100 percent certain we would never get it done if we held ourselves to that constraint, and furthermore that there was no need to hold ourselves to that constraint.”
Mr. Corker felt $1.5 trillion was the best deal he could get, and he worried that if he refused, party leaders would bypass his committee and allow a vote on a budget with a much larger tax-cut cap.
“Hindsight being 2020,” Mr. Corker said this week, “I wish we had attempted to limit even more on that front end.”
Key votes fall into place
A significant moment came in September, when Mr. Trump cut a deal with the Democratic leaders, Representative Nancy Pelosi of California and Senator Chuck Schumer of New York, to prevent a government shutdown and raise the federal debt limit. Republicans say the move averted a protracted fight in both chambers, and left Republican leaders optimistic that they could move quickly on a tax bill by fall.
In the Senate, groups of members and their staff met on an almost daily basis to work through individual provisions in the bill to come.
By the end of the month, top congressional Republicans and Mr. Trump had released a more detailed framework, identifying a 20 percent corporate tax rate, down from a high of 35 percent today.
But Mr. McConnell and Mr. Ryan pushed back on administration officials, including Steven Mnuchin, the Treasury secretary, when they attempted to release even more details, such as the break points for individual tax rates. That move, congressional staff said, gave House and Senate tax writers more freedom to craft their own bills and avoid getting boxed into proposals that could prove problematic.
The House and Senate approved Mr. Corker and Mr. Toomey’s budget compromise in October. House leaders introduced their bill at the start of November, and it sailed to passage two weeks later. Senators released their bill before Thanksgiving and quickly amended it in two controversial ways: To stay within the budget guidelines, they set individual tax cuts to expire at the end of 2025. And to free up more space for tax cuts, they eliminated the Affordable Care Act’s individual mandate for health insurance coverage.
To the surprise of their aides, senators embraced both changes.
Mr. Trump beat a public drum for the tax bill throughout the process, but he engaged selectively on policy details, often over Twitter, sometimes backed with phone calls. He urged lawmakers to eliminate the mandate, and he scuttled a proposal in the House that would have raised revenue by shifting the tax treatment of some popular retirement contributions.
On a long trip to Asia, Mr. Trump often called Mr. Brady to discuss the bills. Mr. Trump’s daughter Ivanka Trump stayed behind to lobby senators, and she helped push for an expansion of the child tax credit that was added in the Senate Finance Committee.
In late November, Mr. Trump flew to the St. Louis suburbs to rally for the tax bill on a stage decorated for the holidays. It was there that he unveiled what would become his tagline for the closing presidential push on the bill, promising Americans a tax cut for Christmas.
Back in the Senate, key votes were falling into place. Mr. McCain, satisfied that the bill was moving through proper Senate channels, turned to an old friend to assess its effect on the economy. That was Douglas Holtz-Eakin, a conservative economist who had overseen economic policy on Mr. McCain’s failed 2008 presidential campaign, who gave Mr. McCain a frame for considering the bill.
“‘This is first and foremost about giving better opportunity to workers,’” Mr. Holtz-Eakin recalled Mr. McCain saying. “I said, ‘It’s going to create some debt. It’s going to have some deficits, no matter what you hear. So your question is, is it worth it?’”
Mr. McCain concluded it was. He announced his support for the bill before the Senate vote.
That was a crucial moment, Mr. McConnell said. “John was not there for us on Obamacare, and he was getting urged by everybody center-left,” Mr. McConnell said, “to do it to us one more time.” Mr. McCain will ultimately not vote on the bill, having returned to Arizona for medical treatment.
Ms. Collins also announced her support, after conversations with business owners in her state and with Mr. Holtz-Eakin, though she came away with the impression that the bill would pay for itself. Other wavering senators signed on — all but Mr. Corker, who was alone in being rattled by a Joint Committee on Taxation analysis that showed the bill would add $1 trillion to deficits even after accounting for additional growth. His lone no was not enough to stop the bill, even when coupled with every Democrat in the chamber, though it gave Republicans a slim margin for error. Mr. Corker later reversed course and said he would support the final version.
Choosing to negotiate with Republicans
As the bill raced through Congress, it sank in the eyes of the public. Majorities of Americans told pollsters they opposed it, and that they expected it would raise, not lower, their tax bills. Republicans told each other those polls would flip — that the country would come to love the bill when it saw its benefits.
Democrats fanned the dissatisfaction, with constant complaints about the bill and its process. Mr. Schumer and Ms. Pelosi thundered on the Senate and House floor that the bill would hurt middle-class Americans, clearly setting up a campaign theme for Democrats to embrace in the midterm elections.
Senator Ron Wyden of Oregon, the ranking Democrat on the Finance Committee, said he started the year with a sense of cautious optimism about tax policy but found Republicans unwilling to engage in a serious way.
Mr. Wyden described a visit from Gary D. Cohn, the director of the National Economic Council, as a “show and tell” and said that Mr. Mnuchin, the Treasury secretary, never followed up on a promise to look into ways to make the tax plan more populist.
Mr. McConnell and Mr. Toomey lamented that the bill was not bipartisan and thus was less likely to be enduring. Mr. Toomey said that Republican leaders talked seriously about working across the aisle, but that when Democratic senators sent a letter last summer with strict conditions for working with them, it was clear that Republicans would have to proceed on their own.
The final negotiations this month were entirely between Republicans. The Senate version of the bill largely won out, but House leaders pushed, successfully, for an immediate cut of the corporate rate, which was raised slightly to 21 percent from 20 percent, and for a reduction in the top individual tax rate to 37 percent.
Negotiations completed, Republicans congratulated each other for what they remain convinced will be seen as a landmark legislative victory. On Tuesday, a few hours before the final Senate vote on the bill, Mr. McConnell acknowledged that Democrats believe the bill will spark a backlash that could determine control of Congress.
“They must believe it must be a political winner for them,” he said. “We believe it’s a political win for the country, and thus, it’s going to be good for us. So we’ll take it to the country and see what happens in 2018.”
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