Trump Pushes for More Tax Cuts Ahead of 2020 Election

Plus, Senate passes spending package, but border wall stalemate persists By Yuval Rosenberg and Michael Rainey Trump Pushes for More Tax Cuts Ahead of 2020 Election: Report With one eye on the upcoming election and other on a decelerating economy, President Trump is pushing administration officials and Republican lawmakers to come up with a new package of tax cuts, according to a [report]( in Thursday’s Washington Post. White House National Economic Council Director Larry Kudlow is reportedly leading the effort, which is still in the preliminary stages and is expected to include a variety of proposals aimed at boosting the economy. “The early-stage discussions reflect Trump’s desire to refocus the economic narrative amid some signs of a slowing economy, and after the major Republican tax cut package of 2017 failed to produce enduring economic benefits or political gains for the GOP,” say the Post’s Erica Werner, Josh Dawsey and Jeff Stein. Rep. Kevin Brady (R-TX), one of the architects of the Tax Cuts and Jobs Act, tells the Post that he’s focused on new tax cuts for the middle class and hopes to make permanent some of the 2017 tax law’s temporary provisions. A political message: Although there’s a growing consensus that the GOP tax cuts have been [something of a bust]( in terms of economic growth and wage gains, Republicans want to emphasize their role as dedicated tax cutters, in contrast to Democratic candidates who are proposing substantial tax hikes, especially on corporations and the wealthy. No word on offsetting costs: Many of the individual provisions in the 2017 tax cut are scheduled to expire in 2026, and Republicans have been expected to push to make them permanent. Doing so, however, would cost billions more in lost revenue, above and beyond the $1.9 trillion over 10 years lost by the 2017 legislation. New middle-class tax cuts would only add to that tally. We’ve heard this before: In the runup to the 2018 congressional elections, Trump talked about a new 10% tax cut for the middle class, though little was heard about that proposal once the voting was over. More recently, White House officials have discussed a possible new round of tax cuts for 2020. "We’ll be looking at tax cuts 2.0, something that will be something we’ll consider next year,” Treasury Secretary Steven Mnuchin said in September. Don’t expect legislation before the election: Democrats are unlikely to take up new tax cuts in the House, and some dismiss the idea as mere political posturing intended to help a president facing an increasingly difficult political environment. “I would expect this would just be another distraction from the fact that he’s about to be impeached,” said Rep. Lloyd Doggett (D-TX), who sits on the Ways and Means Committee. Senate Passes 4 Spending Bills, but Stalemate Over Border Wall Persists It’s progress, sort of. The Senate on Thursday passed its first spending bills for fiscal 2020, which started at the beginning of this month. The bundle of four bills covers funding for the departments of Agriculture, Interior, Commerce, Justice, Transportation and Housing and Urban Development. The bundle still must be reconciled in conference talks with the House — and there’s still a border wall, and other obstacles, standing in the way of real progress on passing the required 12 annual spending bills. Negotiations between the House and Senate on how to divvy up the budget lawmakers agreed to in July have gotten bogged down by partisan fighting over President Trump’s use of military funding to construct barriers on the border with Mexico. Those talks resumed on Tuesday, with congressional aides and White House officials trying to find a path forward. That meeting resulted in little consensus as to whether progress had been made. “Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell want to get all 12 spending bills passed by the end of this year, but a standoff over President Donald Trump’s border wall remains the biggest obstacle in bipartisan talks to avoid another government shutdown,” Politico [reported]( Wednesday. Democrats block defense bill: Underscoring the ongoing divide, Senate Democrats on Thursday blocked a defense spending bill for the second time, a move Republicans slammed. “Washington Democrats have talked up a storm in recent days, criticizing the Trump administration’s approach to Syria and the Middle East. Lots of talk," Senate Majority Leader Mitch McConnell said on the Senate floor, according to [Military Times](. “But apparently, they are not concerned enough about the Middle East and fighting ISIS to actually vote for the funding that keeps those missions going.” Democrats oppose taking up the defense bill before lawmakers reach an agreement on topline spending allocations, and they object to backfilling $3.6 billion the Trump administration diverted from military projects to border barrier construction under the president’s declaration of a national emergency. “The Republican leader has been accusing Democrats of threatening to block military funding. Now, that is an absurd statement if there ever was one. We’re simply trying to stop Republicans from stealing money from our military and putting it into the wall,” Senate Minority Leader Charles Schumer said. Another stopgap spending measure: With no chance of getting appropriations bills passed into law before stopgap funding expires on November 21, lawmakers will need to pass another short-term spending bill, called a continuing resolution, to keep the government from shutting down. House Appropriations Committee Chairwoman Nita Lowey (D-NY) said Thursday that Congress will need to extend funding past the end of the year, likely into February or March, according to [The Hill]( though congressional leaders reportedly have indicated that any short-term measure shouldn’t extend into next year. Chart of the Day The Hutchins Center at the Brookings Institution has updated its “Fiscal Impact Measure” to include data from the third quarter of 2019. “Local, state, and federal spending and tax policies boosted growth in inflation-adjusted Gross Domestic Product (GDP) 0.5 percentage point relative to its longer-run potential in the third quarter of 2019,” Hutchins said. Federal spending and tax and transfer policies made positive contributions to the pace of economic growth, while state and local government activity had a slightly negative effect. [Click here]( to review the dynamic chart on the Hutchins site. Happy Halloween! And congrats to the Nats! Send your tips and feedback to yrosenberg@thefiscaltimes.com. Follow us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. And please tell your friends they can [sign up here]( for their own copy of this newsletter. 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