President Donald Trump marked the final week of his first 100 days in office with a whirlwind of activity designed to pile up accomplishments, unveiling an ambitious tax-reform proposal and signing a flurry of executive orders. Trump imposed a tariff on softwood lumber imports from Canada (see Business News); signed executive orders to lift offshore drilling regulations and rescind national monument designations; and was reportedly close to announcing that he would withdraw the U.S. from NAFTA. In his dramatic overhaul of the tax code, the president proposed slashing the corporate tax rate from 35 percent to 15 percent, a rate that would also apply to small businesses that file their returns under the individual tax code. The plan would also reduce the number of individual income tax brackets from seven to three—10 percent, 25 percent, and 35 percent—and roughly double the standard deduction for individuals, essentially eliminating taxes on the first $24,000 of a couple’s earnings. Treasury Secretary Steven Mnuchin called it “the biggest tax cut and the largest tax reform in the history of our country.” The massive reduction in revenues from all the cuts, however, would add more than $3 trillion to the deficit over 10 years; Mnuchin said that by stimulating economic growth, the cuts would mostly pay for themselves.
In Congress, lawmakers were trying to agree on a budget deal in order to prevent a government shutdown as The Week went to press. Trump demanded last week that the appropriations bills include $1.4 billion for his proposed wall along the Mexican border, offering Democrats money for Obamacare subsidies in exchange. But when Democrats refused, insisting they would block any bill that funded the border wall, Trump backed down. Republicans were also taking another shot at repealing and replacing the Affordable Care Act. The conservative House Freedom Caucus, which helped scuttle the ill-fated American Health Care Act in March, gave its blessing this week to an amendment to the bill that would allow states to opt out of key Obamacare rules, including a requirement that insurers cover preexisting conditions. The focus will now shift to moderate Republican lawmakers who fear a constituent backlash over cuts in subsidies and protections.
President Trump is right to aim for a tax system with “lower rates, fewer loopholes, and a simpler code,” said The Washington Post. But the old conservative canard that tax cuts can pay for themselves through increased economic growth remains “magical thinking”— especially when the business cuts deprive the Treasury of more than $2.4 trillion over a decade. “Experience shows
that tax cuts are almost never self-financing,” and Mnuchin’s dishonest math would require almost unprecedented levels of GDP growth. After eight years of “mercilessly” attacking President Obama for doing too little to cut the deficit, are Republicans really going to “approve a budgetbusting tax cut?”
Trump was wise to “climb down” from his border wall for now, said the Chicago Tribune. Democrats
were hoping his demands for immediate funding “would lead to a shutdown and a widespread verdict of incompetence.” Instead, the president backed away, while securing funding for other much-needed improvements to border security. Indeed, that may have been his plan all along. And with illegal border crossings from Mexico already way down since his inauguration, Trump can portray this negotiation “as a victory.”
“There are many unanswered questions” about Trump’s tax plan, particularly how it would affect the deficit, said Michael Tanner in NationalReview.com. But lower corporate tax rates “should draw broad bipartisan support”—they’ll stimulate growth, hiring, and raises, and thus help workers far more than trade wars or minimum-wage laws. Cutting taxes would be immensely popular, said Ford O’Connell in the Washington Examiner, but Trump better get the legislation through Congress by the end of the year. After that, members of Congress will start focusing on their reelection campaigns for the 2018 midterms, and little will get done. Trump craves some big “wins,” but his tax-reform plan may suffer the same fate as the Obamacare replacement, said Ben White and Nancy Cook in Politico.com. Sources close to House Speaker Paul Ryan say Trump’s unfunded trillions in cuts are “a magic unicorn” that will never get past the House’s deficit hawks. Democrats, meanwhile, will be able to blast Trump for wanting to explode the deficit and give his own businesses and children a massive tax break. In the end, even Republicans are already quietly saying “Trump’s current approach to the tax issue simply won’t work.”
Trump still has time to learn from his mistakes, said Jonathan Tobin in NationalReview.com. A poll last week found that an astonishing 96 percent of people who voted for the president “would do so again.” If Trump hasn’t lost his supporters after three months of high-profile gaffes, embarrassing
blunders, and nearly constant headlines about Russian interference in the election, “the tipping point may never happen.” Loyal support from a critical mass of Republican voters may give the president several years to push through the major items on his agenda.
The brief standoff over the border wall was “simply an appetizer for much bigger fights to come,” said Stephen Collinson in CNN.com. The spending bill funds the government only through September, at which point President Trump will almost certainly push harder on what was one of his signature campaign pledges. There is also the issue of the debt ceiling. Mnuchin has said Congress will need to pass a bill raising the government’s federal borrowing limit sometime in the fall, to avoid the U.S. defaulting on its debt. In ordinary times that would be a given—but with the Democrats refusing to yield to Trump’s threats, and “the tenuous control of GOP leaders over the party on Capitol Hill, there are no guarantees.”
