In the 30 years I have been a part of fiscal policymaking I don’t think I have ever seen a legislative push as impressive as the passage of President Trump’s big, dubious tax and policy bill.
Don’t get me wrong: The consequences for health insurance, poverty, climate change and macroeconomic stability, in roughly that order of importance, will be horrendous. The Medicaid and other health care changes would undo about three-quarters of the coverage expansion from President Barack Obama’s Affordable Care Act and Medicaid expansion. The law repeals much of what Joe Biden did for climate change in the Inflation Reduction Act. The tax provisions sustain most of the cuts from Mr. Trump’s first term and add in several others for good measure.
But before Democrats — and hopefully some Republicans — even try to fix the damage, they should learn the lessons of how the Republicans got all this done, working against tremendous odds on a much faster timetable than the major legislative accomplishments from Mr. Trump’s three predecessors.
The first lesson is that ideas really do matter. This legislation did not happen because the public or lobbyists were clamoring for it. Instead Donald Trump and congressional Republicans wanted it and were willing to overcome public disfavor and opposition from vested interests.
Sure, special interests were at play in ways big (preserving workarounds to limits on state and local tax deductions) and small (getting new tax breaks for Alaskan whaling captains). But no major lobbying groups were asking for the broad contours of this legislation. The health care industry, which is expected to lose about half a trillion dollars, and the energy industry, which is losing huge tax breaks and subsidies, put up a fight. Their opposition, like that of other industries, went nowhere. And neither did Elon Musk’s — further evidence that oligarchy is the wrong lens through which to view this political moment.
The second lesson is that while ideas matter, expert ideas do not necessarily matter. Past fiscal debates have divided economists and policy wonks. In President Trump’s first term, some economists would write opinion articles or go on TV news programs defending his tax cuts as adding to growth while other economists (including me) would write rebuttals.
This time around there was almost no debate: Wonks from across the political spectrum opposed the legislation. The right-leaning Tax Foundation pushed back against the administration’s claim that the legislation would not add to the deficit. The free-market American Enterprise Institute criticized key tax proposals and advanced a radically different alternative. Even some of the authors of Mr. Trump’s first-term tax cuts were critics of the budget number gimmicks that went into this new law. None of them changed the outcome.
The third lesson is that you can overcome opposition to a bill that delivers a direct loss to far more people — and a direct win for far fewer — than conventional wisdom would suggest is possible. President George W. Bush found it impossible to curtail food stamps when he was pushing a deficit reduction plan in 2006 or to cut much more than $26 billion in Medicaid funding, only about 5 percent of the total reduction in Mr. Trump’s new law after adjusting for inflation. In his first term, Mr. Trump failed (again and again) to repeal the Affordable Care Act.
This time around, according to the Penn-Wharton budget model, the Trump package’s Medicaid and nutrition cuts will reduce after-tax income for not just the very poor and vulnerable, but for the bottom 60 percent of U.S. households. And that doesn’t even count significantly higher premiums for many of the 24 million households that get health insurance through the Affordable Care Act marketplace (including families of four with incomes as high as $125,000), higher electricity prices because of the end of clean energy subsidies and higher mortgage rates because of increased federal borrowing — all on top of the higher prices consumers are paying as a result of Mr. Trump’s tariffs.
As for the people who stand to benefit from this legislation, they may not feel the thrill of victory. Not paying tax on tips is nice for those who earn them, but it’s not clear how many will end up taking the deduction. And the new business write-offs for investment expenses were never a high priority for the business lobby.
No wonder the legislation was so unpopular. But its unpopularity alone does not mean that Republicans made a mistake by passing it. Legislating requires hard choices and leadership. Mr. Obama overrode political advisers to pass the Affordable Care Act despite warnings from political advisers that it might hurt his party in the midterm election (which it did). Nothing gets done if we live by short-term polling.
Democrats and even some Republicans are already thinking about how to fix the problems this law is creating. It will not be easy. Unlike the Bush and Trump I tax cuts, the major provisions here are permanent, so there is no expiration date to provide leverage for opponents. Even worse, the few tax cuts that will expire — like no taxes on tips — seem to be just as popular with Democrats as with Republicans.
After Mr. Bush passed reckless tax cuts, and again when Mr. Trump did so in his first term, the opposition’s goal was to simply repeal them, restoring revenue that could then be used to fund new initiatives or close the deficit. This time around, things could be more difficult. Fixing the damage that the Trump bill will inflict on health care, poverty programs and clean energy will cost a lot of money: trillions of dollars that will have to be achieved through savings lest they add even more to the swelling debt.
That’s going to make the political hurdles even higher — and the lessons of this last round all that much more crucial. Don’t get bogged down in details; focus on the idea behind the details. Don’t be overly timid; not everyone is going to be a winner, and getting past this is going to require raising taxes on more than just the top 1 percent. And as much as I hate to say it, don’t be too beholden to the wonks, though some of us are really pretty nice.
Source images by Larysa Stepanechko, owngarden, and Vasyl Helevachuk/Getty Images.
Jason Furman, a contributing Opinion writer, was chairman of the White House Council of Economic Advisers from 2013 to 2017.
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