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Douthat: Living with the Republican tax plan

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Wednesday, Dec. 6, 2017 5:13 PM
Ross Douthat

Credit: Josh Haner/The New York Times

First, let me vent. The Republican tax reform, now extremely likely to become law pending certain events next week in Alabama, represents a remarkable missed opportunity for a party struggling through an identity crisis and a country reckoning with a social crisis.

After watching Trumpian populism overwhelm the dikes of ideology during the last primary campaign, Republican lawmakers could have learned something from the experience, and made the discontented working class voters who put Donald Trump in the White House the major beneficiaries of their tax reform.

Instead, with Trump’s enthusiastic blessing, they devised a bill that was more solicitous of their donors than their voters, and that only modestly addressed the central socioeconomic challenge of our time — the nexus of wage stagnation, family breakdown and falling birthrates, which will eventually undo conservatism if conservatives cannot take it as seriously as they do the animal spirits of the investor class.

What’s particularly frustrating is that it didn’t have to be this way. The bill’s basic architecture is compatible with better policy, and there is no great mystery about how it could have been improved: All it needed was to shrink the business tax cuts somewhat and push the extra money directly into the paychecks of the working class. But when a version of that improvement was attempted, when Sens. Marco Rubio and Mike Lee tried to use a small portion of the bill’s corporate tax cut to pay for family tax cuts, the Republican leadership decided to make the corporate cut nonnegotiable; the Democrats decided it was better not to improve a bill that they oppose; and the senators themselves declined to be the Bad Guys of their caucus in a good cause and simply swallowed their defeat.

So the result leaves a reforming conservatism as the neglected stepchild of the GOP, granted table scraps while the donors get the feast. It leaves Republicans with ownership of a bill that is neither populist nor popular, and Trump with ownership of an economic agenda that a reasonable voter should consider a betrayal of his promises. And it wastes an opportunity to turbocharge the recovery, because the bill’s corporate beneficiaries are already sitting on ample cash reserves and it’s the middle-class taxpayers who would have been more likely to spend extra money if they got it.

However, to repeat something I’ve said a few times in the Trump era, when the venting is done it’s important to acknowledge that <em>it could be worse</em>. The bill is badly designed but it does some good things, including some things that could be done only in the teeth of Democratic opposition. Its flaws are significant but also manageable, and they aren’t going to tip America into the dystopian nightmare invoked by a certain kind of liberal Twitter hysteric this past week.

And as is often the case with flawed proposals, the failings offer useful signposts to the opposition: The partial defeat of reform conservatism leaves good ideas lying around to be picked up, and Republican overreach creates opportunities for the Democrats to pursue them.

One good thing is that the bill’s stimulus, flawed as it is, still might give the economy a further short-term boost and undo more of the Great Recession’s damage. Another good thing is the child tax credit increase that Rubio and Lee did win, which is much too modest but still a step toward the family policy the United States needs. A third good thing is the bill’s willingness to raise taxes on the not-quite-rich upper-middle class, a constituency whose influence is often bad for the country and whose liberal drift and blue-state concentration has left Democrats leery of any confrontation.

Meanwhile, the thing that the bill’s centrist critics are most incensed about, the fiscal irresponsibility of cutting taxes without offsets, just doesn’t look like that big a deal in the context of continued low interest rates and bond market unconcern.

Like many people, I accepted the arguments of fiscal hawks in the early Obama years, but few-to-none of their predictions have come to pass. I don’t think Republicans have really learned from this experience and become less alarmist about deficits; they’re mostly just being opportunists and hypocrites. But the experience is still real, and the lesson that the deficit is not, in fact, our major near-term problem seems convincing.

Then there are the fixable problems. The bill’s repeal of the individual mandate will create additional challenges for the struggling Obamacare exchanges. But the mandate has never worked as its creators intended, it remains more unpopular than Obamacare as a whole, and it penalizes a narrow class of middle-class individual market buyers instead of spreading the burden of the system’s costs more widely. In the long run any universal health insurance system will be on a firmer political footing if it finds a way to work without requiring people to buy a product they don’t want.

The corporate tax cut, meanwhile, is too deep, but a lower corporate rate than the present one remains a good idea, and it’s not implausible to imagine these deep cuts being rolled back to a happy medium. Likewise, the bill’s budgetary legerdemain, which has the individual tax cuts expiring early and threatening a middle-class tax hike, sets up a plausible path to a negotiated settlement, in which Democrats who want to protect the middle class can seek a variation on the Obama-era deal that kept most of the Bush tax cuts in exchange for higher rates on the rich.

Or, should they be victorious in 2018 and 2020, Democrats can pursue broader ambitions, relying on this tax reform’s overreach for funding rather than simply engaging in deficit-busting of their own. “Repeal some of the Trump tax cuts to pay for Liberal Ambition X or Y!” will be a natural rallying cry for their party in 2020, and the fact that the Trump tax cuts are so tilted toward corporations and businessmen and wealthy heirs means that the cry will have much more political appeal than it might have otherwise.

The question is what those liberal ambitions should be. The bipartisan (if insufficient) support for Rubio and Lee’s child tax credit amendment points to one possibility: Democrats could take up the work-and-family agenda that reform conservatism has fitfully advanced, making something like Sens. Sherrod Brown and Michael Bennet’s child tax credit proposal or Rep. Ro Khanna and Brown’s bigger earned-income tax credit idea the centerpiece of their 2020 agenda.

The problem for the Democrats is that a lot of their activists’ hopes are invested with far inferior ideas, like the lure of free college and the political fantasy of single-payer.

But there is room here for liberalism to take advantage of the Trump Republicans’ retreat from populism, and to advance a left-wing version of the politics of work and family that the blinkered GOP should champion but refuses to embrace. In which case this bill’s best elements could survive when the wheel of power turns, and its flaws and missed opportunities could still be good for the country in the end.

Ross Douthat is a columnist for The New York Times. Reach him c/o The New York Times, Editorial Department, 620 8th Ave., New York, NY 10018. © 2017 New York Times News Service

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