Republicans have both an arithmetic and a messaging problem as they try to enact Donald Trump’s second-term agenda via a giant budget-reconciliation bill. The former involves finding a way to pay for the $4 trillion-plus tax cuts Trump has demanded, along with a half-trillion or so in border security and defense spending increases. And the latter flows from the necessity of hammering popular federal programs (especially Medicaid) to avoid boosting budget deficits that are already out of control from the perspective of conservatives. This sets up Democrats nicely to deplore the whole mess as a matter of “cutting Medicaid to pay for tax cuts for Trump’s billionaire friends,” a very effective message that has vulnerable House Republicans worried.
To interrupt this line of attack while making the overall agenda slightly more affordable, anonymous White House sources lofted a trial balloon earlier this month via a Fox News report:
“White House aides are quietly floating a proposal within the House GOP that would raise the tax rate for people making more than $1 million to 40%, two sources familiar with discussions told Fox News Digital, to offset the cost of eliminating taxes on overtime pay, tipped wages, and retirees’ Social Security.
“The sources stressed the discussions were only preliminary, and the plan is one of many being talked about as congressional Republicans work on advancing President Donald Trump’s agenda via the budget reconciliation process.
“Trump and his White House have not yet taken a position on the matter, but the idea is being looked at by his aides and staff on Capitol Hill.”
The idea wasn’t as shocking as it might seem. Trump’s 2017 tax cuts reduced the top income-tax rate from 39.6 percent to 37 percent, so just letting that provision expire would accomplish the near-40 percent rate without disturbing other goodies for rich people in the 2017 bill like corporate-tax cuts, estate-tax cuts, and a relaxed alternative minimum tax for both individuals and corporations. One House Republican, Pennsylvania’s Dan Meuser, suggested resetting the top individual tax rate at 38.6 percent, still a reduction from pre-2017 levels but a “tax increase on the rich” as compared to current policies.
Crafty as this approach might have been as a way of boosting claims that Trump had aligned the GOP with middle-class voters (the intended beneficiaries of his recent tax-cut proposals) rather than the very rich, the idea of backing any tax increase on the allegedly super-productive job creators at the top of the economic pyramid struck many Republicans as the worst imaginable heresy. You could plausibly argue that total opposition to higher taxes, or even to progressive taxes, was the holy grail for the party, more foundational than any other principle and one of the remaining links between pre-Trump and MAGA conservatism. At the very idea of fuzzing up the tax-cut gospel, old GOP warhorses like Newt Gingrich and Americans for Tax Reform’s Grover Norquist arose from their political rest homes to shout: unclean! Gingrich called it the worst potential betrayal of the Cause since George H.W. Bush cut a bipartisan deficit-reduction deal in 1990 that included a tax increase.
As it happens, it was all a mirage. In virtual unison, both Trump and House Speaker Mike Johnson have said a high-end tax cut won’t happen this year, as Politico reports:
“President Donald Trump and House Speaker Mike Johnson on Wednesday came out against a tax hike on the wealthiest Americans — likely putting the nail in the coffin of the idea.
“Trump told reporters in the Oval Office that he thought the idea would be ‘very disruptive’ because it would prompt wealthy people to leave the country. …
“Johnson separately knocked the idea earlier in the day, saying that he is ‘not in favor of raising the tax rates because our party is the group that stands against that traditionally.’”
Trump’s real fear may be that wealthy people would leave the GOP rather than the country. Many are already upset about Trump’s 19th-century protectionist tariff agenda and its effects on the investor class. Subordinating the tax-cut gospel to other MAGA goals might push some of them over the edge. As for Johnson, the Speaker is having to cope with the eternal grumbling of the House Freedom Caucus, where domestic budget cuts are considered a delightful thing in itself and the idea of boosting anyone’s taxes to succor the parasites receiving Medicaid benefits is horrifying.
If Trump’s “big, beautiful” reconciliation bill runs into trouble or if Democrats set the table for a big midterm comeback wielding the “cutting Medicaid to give billionaires a tax break” message, squashing the symbolic gesture of a small boost in federal income-tax rates for the wealthy may be viewed in retrospect as a lost opportunity for the GOP. For the time being, that party’s bond with America’s oligarchs and their would-be imitators stands intact.
I agree completely with Neuhauser and Hapin. I would add two points. 1)Since many social and environmental needs are being neglected and even under the so-called “full employment” of the Clinton years, there weren’t enough jobs available, we need greatly increased federal funding for public-service jobs. 2) We need to reverse Clinton’s negation of federal responsibility for basic economic welfare.
The Third-Way’s new report is a far slicker coverage of their thesis than reviewed last summer. But it basically contains the fatal flaws pointed out by John Halpin in Truth-Telling, Populism and Inspirational Politics.
I think Third Way overstates and mischaracterizes what they call the neo-populist position when they make the case for its desrire to “recapture a bygone era” with outmoded solutions. However, that is to be expected since in order to the a “third” way, there must be two other, opposing camps to place yourself in opposition to. (Sort of a tiresome, academic literalness to it all, but not as badly done as the DLC which often resorts to distorted right-wing attacks on the left in order to create a “center” for itself.)
But the fundamental hook they hang their hat on for “de-bunking” the concerns of the “neopopulists” is the graph of the distribution of income by age class. While it does illuminate the age-diversity of income distribution hidden behind a single number of “All Households”, they assert that this very existence proves their point.
But that same distribution would have been true in the past as well.
The question is not just: Is there a spread in 2005? but it is rather: Is that curve significantly different than it was in the past? The curve has always been there, and prime-age earners have presumably always been better off than the average. Duh.
So, does this really tell us anything about their claim that “the middle class is just doing just fine, thanks!”? No.
The other argument they make is that, “Neopopulism feeds off of broad economic dissatisfaction and pessimism, but public opinion polls consistently show Americans to be optimistic about their personal finances.” Then they just ignore the “broad economic dissatisfaction and pessimism” because of the “personal optimism”. Futhermore, they ignore studies showing a much greater concern for whether people think their kids will be better off or not — and from personal anecdotes I can tell that concern has reached surprisingly high levels of the middle class.
I think they miss an important issue here — this is the same phenomenon with Congress (they’re terrible, but mine is ok) and schools (the system is bad, but mine is ok). According to Third Way’s methodology, Congress is doing great! Schools are doing great! The middle class is doing great! I’ve got a life jacket, so I don’t know what the dissatisfaction is with the Titanic — cruises are fun!
I don’t buy it and I think they do a disservice to ignore the broad dissatisfaction. There are important things underlying it.
What this Third Way sanguinity leads to is a set of policies that feel extremely incremental as it doesn’t recognize that we are in the midst of a great upheaval as important as the turn of the last century. There are three great global issues impacting everyone in America:
– globalized terrrorism
– global warming
– globalization’s commoditization of work
To be concerned about these issues as a concern for the future well-being of their children and grandchildren is not necessarily to be a Chicken Little. Nor does it require you to assume that the entire system must be chucked for some wild-eyed notion. Nor does it mean that “neopopulists” have no hope or optimism about the future — just that they think there is more to work on and bolder plans to lay.
When I looked at Third Ways solutions, they are basically:
More education
Retrain obsoleted workers
Tweak savings incentives
Give newborns a savings account
Tweak savings incentives some more
Be nicer to families with kids
Be nicer to families caring for their parents
Do more R&D
Have a more efficient healthcare industry
(One of the troubling aspect of the “nicer to family” solutions is that they are purely about more availability of services and tax (money), one the big issues are around time — it can take so much time to care for an older parent that you can’t work as much and so are earning less when your costs go up.)
All of these assume that people can afford to buy all the insurance and education and retraining and other things Third Way thinks they should and furthermore that they already pay enough in taxes to get back some meaningful amount in tax breaks to pay for them.
Which goes back to the core assumption of the Third Way: people make enough money, we just need to incentivize them to spend it more wisely.
But the reason 40M Americans don’t have healthcare isn’t because they they feel they aren’t getting a big enough tax break to justify buying healthcare insurance! The reason is they don’t have a spare $15,000/year to buy it on the open market themselves, no matter what tax incentives you give.
(I would note that this approach is the same thinking behind Bush’s health insurance “reform” pitched at the 2007 State of the Union.)
The reason this “agenda” sounds so paltry is that … it is!. And the reason for it goes back to the beginning — they think the status quo is basically fine, so clearly what is needed is an era of tweaking a few things to make them a little better.
Happy Days are already here!