GOP Divide Threatens 2018 Budget -- and Tax Overhaul

GOP Divide Threatens 2018 Budget -- and Tax Overhaul
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The House Budget Committee passed its fiscal blueprint for next year Wednesday evening with unanimous GOP support, but intra-party divisions threaten to derail the measure in the full House, jeopardizing plans to pass an overhaul of the tax code, a key legislative priority of President Trump and congressional Republicans.

It’s a familiar position for the party: Hard-line conservatives in the House Freedom Caucus are frustrated that the conference isn’t pushing further to curb spending; moderates are wary that they’re pushing too far; and those supportive of the budget are concerned that detractors are letting the perfect be the enemy of the good.

The budget committee passed the GOP’s fiscal year 2018 budget along party lines late Wednesday evening after a marathon committee markup that lasted nearly 12 hours.

Committee Chairman Diane Black said she is proud of the work done by the committee and that the budget is "a plan that the entire House Republican conference can support and will form the cornerstone of our legislative agenda" in this Congress.

But conservatives insist it doesn’t have the support to pass on the House floor next week before members depart for the annual August recess.  Unless negotiations bear fruit by the end of next week, the odds of significant action on tax reform – already an extremely difficult legislative task to complete before the end of the year – will dim even further.

With efforts to repeal and replace the Affordable Care Act flagging in the Senate, many Republicans turned their eyes toward tax reform as the party’s best chance for a major legislative win this year. Those efforts are underway, with both the Senate Finance Committee and House Ways and Means Committee holding preliminary hearings this week on comprehensive tax reform.

But Republicans are using the same budget reconciliation process for tax reform that they used for health care, which allows them to bypass a filibuster in the Senate and pass a plan without Democratic support. Failing to pass a budget to create the vehicle for tax reform would mean any tax legislation would need Democratic votes to pass.  

“People need to remember that reconciliation is a train car, and you’re just voting to have a train car. Tax reform is what you vote to put on that train car,” Rep. Bill Flores, a Texas Republican, told RealClearPolitics. “I don’t think you can connect the votes today and say I’m not going to vote for the train car, because all that does is make absolutely sure that you don’t have tax reform.”

Conservatives, however, disagree. They feel frustrated by the seven-month process on health care, which was jump-started by a vote on a budget in January despite few agreed-upon details on the Obamacare repeal plan. They want assurances on elements of the tax overhaul before they agree to back a budget that would allow it to move forward, including expected tax rates and a guarantee that a controversial border adjustment tax backed by Speaker Paul Ryan – a 20 percent levy on imported goods but not exports, which has many detractors – would not be part of the package.

“We’ve seen how this plays out before, when you vote for a budget thinking it’s going to be one thing, on health care reform, and it’s something different,” said Rep. Jim Jordan, the former Freedom Caucus chairman. “We’re not making that same mistake twice.”

Republican leaders, as well as other tax reform and budget advocates, argue that it’s impossible to make guarantees about tax reform before hearings are held and legislation is written and debated in committee, and any promises they make now could be held against them when legislation moves to the full chamber.

“My preference is that they would vote in favor of the budget resolution as a prelude to tax reform and that we would negotiate tax reform at the time of tax reform,” said Rep. Peter Roskam, chairman of a key tax subcommittee.

“They would have the votes to take down a tax reform bill anyway, so they don’t need to hold the budget hostage,” added Rep. Tom Cole, a budget committee member.

But conservatives are confident they can do just that. Rep. Mark Meadows, the Freedom Caucus chair, said earlier this week he’s “100 percent” certain the budget didn’t have enough Republican votes to pass.

While they want details on the tax reform package, they’re also frustrated by the budget itself. After lengthy negotiations with key committee chairmen, Black wrote the budget to cut $203 billion in mandatory spending over the next decade, including through work requirements for certain welfare programs. Conservatives want deeper spending cuts – Rep. Warren Davidson called $203 billion “pretty soft” – but some moderates don’t support using reconciliation under this budget to cut mandatory spending at all.  

The puzzle didn’t prevent the committee from passing its blueprint Wednesday, but leaders are unlikely to bring it to the floor next week unless they feel secure it has the votes to pass. Davidson said if they can’t pass it next week, it gives conservatives an opportunity to negotiate a budget more aligned with their priorities.

But delaying the budget while a tax package is negotiated puts the entire process on unsteady ground.

“It’s going to be another difficult exercise, but the votes may be there,” said Rep. Tom Reed, a moderate from New York. “Until it’s done, it’s always concerning.”

James Arkin is a congressional reporter for RealClearPolitics. He can be reached at jarkin@realclearpolitics.com. Follow him on Twitter @JamesArkin.

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