The Scoop
Senate Republican leaders are encountering early resistance to their preferred strategy for a permanent extension of President Donald Trump’s tax cuts.
At least two GOP senators are raising questions behind the scenes about tallying the cost of their new tax bill against “current policy” — essentially meaning that an extension of Trump’s 2017 cuts would not count as new spending, despite its high price tag. That maneuver, backed by Senate Republican leaders, would allow the party to more easily enact Trump’s tax priorities, and potentially help them avoid massive spending cuts in response.
But taking that path also runs the risk of increasing the debt under GOP rule, as well as putting off tough decisions on spending cuts. Sens. Bill Cassidy, R-La., and Todd Young, R-Ind., are both still unsure about it, according to people familiar with the matter; both have talked in recent months about the party’s opportunity to make big changes to government programs.
Cassidy told Semafor he’s not a firm no on the “current policy” approach but that he wants to tame interest rates, which could get harder with growing debt. He said he wants to make the choice that’s “most likely to keep 30-year mortgage rates down, keep car note rates down.”
“I am just trying to get to a place where we’re going to have economic prosperity and we keep the American Dream alive,” Cassidy said. “There’s different ways to get there, though, so I’m very much not saying it has to be one way or the other. I just want long-term interest rates to be low.”
A spokesman for Young said he is “pushing for the most fiscally responsible approach to ensure sustained economic growth.” Both senators sit on the tax-writing Finance panel that discussed the matter this week. Republicans are hoping to make a final decision soon and do not view the two senators as unpersuadable, as long as the tax plan still includes significant spending cuts.
The debate sounds esoteric but is hugely consequential. Without starting from “current policy,” Senate Republican leaders see it as borderline-unfeasible to both permanently preserve trillions of dollars in expiring tax cuts and add Trump’s new proposals to eliminate taxes on tips, overtime and Social Security.
House Republicans are still open to going along — with a caveat.
Ways and Means Chair Jason Smith, R-Mo., said on Wednesday at the American Enterprise Institute that some House Republicans see the Senate’s plan as a “budget gimmick” but could accept it if the Senate can “hold the line on the spending cuts we sent over.”
Trump, importantly, has made clear he wants permanent tax cuts. Yet with only a one-seat edge on the Senate Finance Committee, senior Republicans say everyone needs to be on the same page in order to move forward.
“I don’t know whether we’re completely unified on it yet,” Sen. Chuck Grassley, R-Iowa, told Semafor. “I personally support [using] current policy. But, yeah, if two people don’t like it? We’ve got to be united.”
In this article:
Know More
Senate Finance Chair Mike Crapo, R-Idaho, spent much of the past few months lobbying fellow Republicans to accept the idea that extending current tax policy shouldn’t count as new spending. In a statement after Trump’s address to Congress on Tuesday night, Crapo referred to making the tax cuts permanent three separate times.
Even fiscally hawkish Sen. Rand Paul, R-Ky., says he’d support using that approach, provided the GOP doesn’t shy away from spending cuts.
“I’m for smaller government, less taxes. I’m also for less spending. I don’t think they’re on the exact same ledger,” Paul told Semafor. “You have to be for both.”
Crapo and other Senate Republicans are still trying to convince holdouts that the GOP can still seek as many spending cuts as it wants as part of a tax deal.
Yet it’s unclear whether 50 or more Senate Republicans are prepared to accept the minimum of $1.5 trillion in cuts the House budget envisions; the GOP has already faced major blowback for signaling future cuts to Medicaid.
That could be followed by more painful social program cuts, if Republicans try to pay for all of the projected new debt that a big tax bill could create.
The View From Lindsey Graham
All of the drama about the tax bill — combined with Trump’s public call on Tuesday night for more border money ASAP — is also reviving a debate about whether to go back to the Senate’s initial insistence on two party-line bills, one focused on the border and the other on taxes.
The Senate shelved that approach after the House passed its budget, but Budget Chair Lindsey Graham told Semafor he’s still not convinced tackling taxes right away is the best choice.
“The tax debate is going to be complicated. I believe the need for border security is not complicated, and we should do it now, “ the South Carolina Republican said. “I don’t mind the one big bill, as long as it works. And right now, I’m concerned that it’s not working and won’t work.”
Smith reiterated Wednesday that the two-bill strategy can’t pass the House.
Notable
- The Senate parliamentarian will play a key role in the “current policy’ debate, the Washington Examiner reports.
- House conservatives aren’t totally sold on the plan either, according to Reuters.
Eleanor Mueller contributed to this report.