These Senators Could Doom Tax Cuts (But Won't)
(Bloomberg View) -- The lure of tax cuts causes more than a few Republicans to turn long-held principles into mush.
The $1.5 trillion, 10-year tax measure that Republicans are rushing to pass this week would balloon the federal deficit, creating pressure to pare back spending on Medicare, Social Security and national security. Most of the benefits would flow to businesses and wealthy individuals, few to working-class families. One provision has the potential to wreak havoc on the health insurance market.
Yet lawmakers who have declared one or more of these consequences to be unacceptable are expected to provide the cushion for victory. The measure needs the backing of 50 of the 52 Senate Republicans and so far the only opposition has come from Tennessee Senator Bob Corker, who opposes the measure due to his long-held opposition to increasing the national debt.
Four of Corker’s colleagues raised objections to important features of the plan before voting for the bill that cleared the Senate on Dec. 2. They’re all considered probable supporters of whatever version comes from a conference committee now trying to resolve differences between House and Senate tax cut bills.
Opponents of the tax cuts are hoping for their support. Here’s why they’re likely to be disappointed.
Senator Susan Collins of Maine was welcomed as a hero at home after she helped doom the Republican plan to repeal and replace Obamacare in September. Nevertheless, she voted for the Senate's version of the tax bill, which would repeal the Affordable Health Care Act's tax penalty for people who refuse to purchase health insurance. It also would exert pressure for future cuts in Medicare to cover some of the expanding budget shortfall.
Collins says she has commitments from party leaders that the Medicare cuts never would be enacted, along with support for separate legislation that would address problems like insurance-premium increases caused by the mandate repeal. Last weekend she cited a study by a respected consulting firm, Avalere, which she said concluded that these legislative fixes "will more than offset the repeal of the individual mandate."
There are several problems with these reassurances. Nobody can promise now that a future Congress won’t cut Medicare. Nor is there any guarantee that the House of Representatives would go along with the separate measures to help the insurance market. The Avalere study does say that the Collins-backed measures would lower health-insurance premiums. But it cautions that "these stabilization effects could be overshadowed by the consequences of repealing the Affordable Care Act's individual mandate." Also, the Senate's repeal provision would be permanent while the offsetting proposals, if enacted, might only be temporary.
There is no more passionate advocate of a robust national security posture than Senator John McCain of Arizona, the straight-talking chairman of the Armed Services Committee.
Yet military experts have warned that if the tax cuts pass and deficits consequently soar, national security is likely to suffer.
"The burden of increased future debt will fall — as it always does — on the discretionary accounts of the federal budget, with the largest being defense and national security," former Defense Secretaries Leon Panetta, Ash Carter and Chuck Hagel warned in a letter to Congress in November.
Arizona’s other senator, Jeff Flake, is characteristically candid and a longtime deficit hawk. He’s also announced his retirement from the Senate and therefore needn't be fearful about antagonizing Republican voters. Like many fiscal conservatives, he has expressed concern about the "staggering impact" tax cuts could have on future deficits.
Still, a few cosmetic changes were enough to win Flake’s vote. That’s despite an analysis by congressional tax experts who concluded that the bill would add $1 trillion to the deficit over the next decade even if it generated rapid economic growth.
Senator Marco Rubio of Florida tried to make the tax cuts more favorable to middle- and working-class families through a proposed increase in a tax credit for children.
Under the Senate bill, a family making $500,000 with two kids, who now wouldn’t qualify for a credit, would get $4,000. A mother of two earning the minimum wage, about $14,500 a year, would get just a $75 boost from her current credit of $1,725.
Rubio and his Utah colleague Mike Lee proposed instead an additional $419 benefit for the low-earning taxpayer paid for with a slightly smaller reduction in the corporate tax. Republican leaders said no.
They’re confident that Rubio won't make this a litmus test. That only seems to happen when a senator insists on more for wealthier taxpayers. Wisconsin Senator Ron Johnson said that his support depended on giving a better tax break to non-corporate businesses or partnerships where the benefits accrue disproportionately to the well-to-do. He got his demand and delivered his vote.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Albert R. Hunt is a Bloomberg View columnist. He was the executive editor of Bloomberg News, before which he was a reporter, bureau chief and executive Washington editor at the Wall Street Journal.
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