Senate Approves Trump's Deal with Dems. Will the House Go Along?

Plus: Why shrinking the government is impossible. By Yuval Rosenberg and Michael Rainey Senate Approves Trump's Deal with Dems. Will the House Go Along? The Senate on Thursday voted to fund the government and increase the federal borrowing limit through December 8 as part of a deal that also included $15.25 billion in hurricane disaster relief funding and a short-term extension of the National Flood Insurance Program. The bill passed by a vote of 80-to-17, with only Republicans voting against the bill. The package now goes back to the House, where it likely faces more strenuous resistance. The Republican Study Committee, a conservative caucus with more than 155 members, on Thursday announced [it opposed the deal]( because it does not include spending cuts. Rep. Mark Walker, the group's chairman, sent a [letter]( to House Speaker Paul Ryan listing 19 policy changes to "address the growing debt burden" or "begin draining the swamp" that could win conservative support for raising the debt ceiling. Some Democrats may also [vote against the deal]( to signal their frustration with an agreement that they say weakened their hand in trying to protect undocumented immigrants who were brought into the country as children. [Share]( [Tweet]( [Forward]( Did Trump Destroy the Chances for Tax Reform? Why did President Trump do it? Republicans in particular were left scratching their heads — or [steaming mad]( — by the president’s agreement with Democrats Wednesday. "He wanted to have a bipartisan response and not a food fight on the timing of the debt limit attached to this bill," [Ryan said]( at a New York Times event Thursday morning. "That's what I believe his motivation was." The administration has also suggested that the deal would help get tax reform done this year. Mnuchin [told Fox Business]( that the short-term deal, which he reportedly opposed during Trump’s meeting with congressional leaders Wednesday, would do just that. “The best part about this,” he said, “is this clears out the next 90 days for us to focus on important things. So we have the funding for Harvey. We’re focused on tax reform. That’s going to be the big priority for the next 90 days.” But the agreement also means Congress will be juggling a lot of other balls in the final weeks of the year, including raising the debt ceiling again, averting a partial government shutdown, possible action on DACA and immigration, and further disaster relief for those devastated by Harvey and Irma. Congressional Democrats, emboldened by the deal, could threaten to withhold their votes on another debt ceiling hike unless Republicans give ground on DACA or the tax plan. And congressional Republicans who feel betrayed by Trump may see less reason to line up in support of a plan if they aren’t getting exactly what they want. "It doesn’t help our leadership to try to hold us Republicans together on anything when they know the president will chop them off at the knees,” one House Republican ally of Ryan’s [told Politico](. Rep. Mark Meadows, chairman of the House Freedom Caucus, suggested one way tax reform might still happen this year, according to [The Hill]( It needs to happen “by Thanksgiving.” If a tax bill does land in the middle of December, Meadows acknowledged, “it becomes more difficult.” [Share]( [Tweet]( [Forward]( Fiscal Flashes Trump and Schumer Will Try to Scrap the Debt Ceiling: The president and the Senate Democratic leader agreed to seek out a more permanent debt ceiling solution that would end the perpetual cycle of fiscal standoffs. “There are a lot of good reasons to do that, so certainly that’s something that will be discussed," Trump said Thursday. It might not be easy, though, as conservatives see the borrowing limit as a way to keep government spending in check. Paul Ryan said Thursday he opposes doing away with the debt ceiling. ([Washington Post]( Paul Ryan Says 15 Percent Corporate Tax Rate Won't Work: “The numbers are hard to make that work. [President Trump] obviously wants to push this as low as possible. I completely support doing that. But at the end of the day, we’ve got to make these numbers work. I think — our goal is to be at or below the industrial world average, and that’s 22.5.” ([New York Times]( An Obamacare Fix Taking Shape? Senators on the Committee on Health, Education, Labor and Pensions heard from governors Thursday in the second of four scheduled hearings on stabilizing Obamacare. The common theme emerging from the testimony was flexibility: "Returning control to the states is prudent policy but also prudent politics," said Utah Gov. Gary Herbert, a Republican. He was joined by Democrat John Hickenlooper of Colorado, who said that states need room to innovate and learn from their mistakes. Much of what the governors said was in line with what the Senate panel is already considering, including the continuation of cost-sharing subsidies to insurance companies. ([CBS News]( [Axios]( Strategy or Spin? In his interview with Maria Bartiromo, Mnuchin also said that a one-year deal had been on the table for both the debt ceiling and a continuing resolution to fund the government, but the president’s didn’t want to wait to get additional funding for the military. “The president’s priority is to refund the military and get additional funding, and he didn’t want to give that up,” Mnuchin said. ([Fox Business]( Republicans Did This to Themselves: The Wall Street Journal’s conservative editorial board says congressional Republicans bear some of the blame for Trump’s siding with Democrats on the debt ceiling hike. “The smart GOP play was to attach a long-term debt increase to some other must-pass legislation and get it over with. One and done. In familiar self-defeating fashion, the usual House suspects refused, insisting that the debt ceiling get a stand-alone vote. … Yet most of these same Members won’t vote to raise the borrowing limit no matter what they’re offered. They find the actual work of governance beneath their dignity. Their mutiny means that Mr. Ryan lacked a GOP majority to raise the debt ceiling, which meant he had to go hat in hand to Mrs. Pelosi for Democratic votes.” ([WSJ]( Why We Can’t Shrink the Government — and Need Higher Taxes Reducing the size of government has long been a goal for conservatives, but it’s been a tough promise to keep even when Republicans are in full control of Congress and the White House. And a new analysis by the liberal Center on Budget and Policy Priorities (CBPP) makes the case that federal spending and revenues will have to grow in the coming decades. “This is not a statement of political values; it’s a reflection of basic realities — the aging of America’s population, health care costs that rise faster than the economy grows (especially as medical advances continue), potential national security threats, and current and emerging domestic challenges such as large infrastructure needs that cannot be deferred indefinitely,” [the report]( argues. CBPP also cites the growing cost of the national debt as potential problem calling for higher revenues. Speaking at an event hosted by CBPP Wednesday, former Treasury Secretary Larry Summers said the government will have to be larger the future in order to maintain “traditional American values.” Summers cited four unavoidable economic trends that will make it very difficult to reduce government spending in the coming years. Albert Hunt of Bloomberg View [listed]( four key drivers Summers spoke about: - The aging population - The unsustainable, dramatic rise in inequality - Changes in structural pricing that disproportionately affect government - Rising national security costs. The federal government is heavily involved in each of these areas, and each is creating a need for higher government spending and thus higher tax revenues. The biggest trend is demographic: The U.S. has an aging population, which means more money will be needed for Medicare, Medicaid and Social Security. The government’s heavy involvement in medicine is particularly important, since it’s one of the economic spheres subject to [Baumol’s cost disease]( – the ever-increasing price of labor in professions with limited productivity growth. The increase in economic inequality has profound effects for federal spending as well, since the government has long played a role in ameliorating poverty and providing services for the less well-off. And it’s hard to see how the U.S. can spend less on its military, especially in light of increased spending among its primary adversaries, including China and Russia. While federal spending as a percentage of GDP has [leveled off]( in the 20 percent range in recent years – in 2016, federal net outlays were 20.68 percent of GDP; in 1980, the figure was 20.64 percent – CBPP sees spending rising to 23.5 percent of GDP by 2035. CBPP argues that the need for higher spending and revenues isn’t really a partisan issue. Any country facing the demographic changes that are store for the U.S. needs to think seriously about how to pay for services that that population has come to expect. CBPP also reminds us that the U.S. is a low-tax country when compared to its peers around the world. In their view, there’s little choice but to raise taxes. The only question is how to do that in ways that don’t harm the economy’s long-term growth. 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Bradford DeLong, Project Syndicate - [Musicians Have More Listeners Than Ever, Which Is Why They’re Making Less Money]( – Quartz - [Trump Said He Would Turn the GOP Into the Party 'of the American Worker.' How's That Going?]( – Los Angeles Times Copyright © 2017 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com. Our mailing address is: The Fiscal Times 712 Fifth AvenueNew York, NY 10019 [Add us to your address book]( Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](