Trump's Domestic Policy vs. Checks and Balances

President Trump has had a lot of trouble getting a legislative win, and he’s pressing Congress harder than ever to deliver one. The GOP has both the House and the Senate–what are the forces keeping them from getting things done?

So many show notes and sources! For those that enjoy digging in, have fun!

</ <h1>Sources:</h1> <h2 dir="ltr">Healthcare</h2> <ul> <li>Difference between Obamacare, House Bill and Senate Bill: <a href="http://www.cbsnews.com/news/how-the-senate-gop-health-bill-differs-from-the-house-bill-and-obamacare/">http://www.cbsnews.com/news/how-the-senate-gop-health-bill-differs-from-the-house-bill-and-obamacare/</a> <ul> <li>Fact checks of lots of Trump’s statements: <a href="http://www.npr.org/2017/07/20/538171317/fact-check-trumps-confusing-remarks-to-senate-republicans-on-health-care">http://www.npr.org/2017/07/20/538171317/fact-check-trumps-confusing-remarks-to-senate-republicans-on-health-care</a></li> <li>Pence statements and different ways to compare healthcare costs: <a href="http://www.factcheck.org/2017/05/pence-misleads-premiums/">http://www.factcheck.org/2017/05/pence-misleads-premiums/</a></li> <li>Lot’s of detail on what would change: <a href="https://www.thebalance.com/how-could-trump-change-health-care-in-america-4111422">https://www.thebalance.com/how-could-trump-change-health-care-in-america-4111422</a></li> <li><a href="https://www.wsj.com/articles/gop-senate-leader-mcconnell-abandons-health-care-bill-1500348064">https://www.wsj.com/articles/gop-senate-leader-mcconnell-abandons-health-care-bill-1500348064</a></li> <li><a href="https://www.washingtonpost.com/business/gop-health-care-divisions-multiply-as-trump-pressures-senate/2017/07/10/84491b68-65d8-11e7-94ab-5b1f0ff459df_story.html?utm_term=.3f2f8dd11812">https://www.washingtonpost.com/business/gop-health-care-divisions-multiply-as-trump-pressures-senate/2017/07/10/84491b68-65d8-11e7-94ab-5b1f0ff459df_story.html?utm_term=.3f2f8dd11812</a></li> <li><a href="https://www.reuters.com/article/us-usa-healthcare-idUSKBN1A40UX">https://www.reuters.com/article/us-usa-healthcare-idUSKBN1A40UX</a></li> <li><a href="https://www.wsj.com/articles/while-health-care-divides-the-party-republicans-hope-tax-cuts-will-unite-1500304631">https://www.wsj.com/articles/while-health-care-divides-the-party-republicans-hope-tax-cuts-will-unite-1500304631</a></li> <li><a href="https://www.washingtonpost.com/news/powerpost/paloma/the-health-202/2017/06/22/the-health-202-here-s-what-s-in-the-senate-health-care-bill/594aa367e9b69b2fb981dde9/?utm_term=.4ecce940d294">https://www.washingtonpost.com/news/powerpost/paloma/the-health-202/2017/06/22/the-health-202-here-s-what-s-in-the-senate-health-care-bill/594aa367e9b69b2fb981dde9/?utm_term=.4ecce940d294</a></li> <li><a href="https://www.washingtonpost.com/news/wonk/wp/2017/07/20/dont-blame-trump-for-the-republican-health-care-disaster/?utm_term=.100d5d2b3d7e&wpisrc=nl_wonk&wpmm=1">https://www.washingtonpost.com/news/wonk/wp/2017/07/20/dont-blame-trump-for-the-republican-health-care-disaster/?utm_term=.100d5d2b3d7e&wpisrc=nl_wonk&wpmm=1</a></li> <li>Lots of detail on Byrd Rule: <a href="https://www.vox.com/policy-and-politics/2017/5/22/15629974/senate-byrd-rule-obamacare-repeal">https://www.vox.com/policy-and-politics/2017/5/22/15629974/senate-byrd-rule-obamacare-repeal</a> </li> <li> <h2>Budget reconciliation and CBO:</h2> <ul> <li><a href="http://www.cnbc.com/2017/05/24/why-the-congressional-budget-office-score-on-gop-health-care-bill-is-so-critical-to-markets.html">http://www.cnbc.com/2017/05/24/why-the-congressional-budget-office-score-on-gop-health-care-bill-is-so-critical-to-markets.html</a></li> <li><a href="https://www.cbo.gov/publication/52849">https://www.cbo.gov/publication/52849</a></li> <li><a href="https://www.cbo.gov/publication/52941">https://www.cbo.gov/publication/52941</a></li> </ul> </li> <li><a href="https://www.nytimes.com/2017/07/17/us/politics/health-care-overhaul-collapses-as-two-republican-senators-defect.html?mcubz=0">https://www.nytimes.com/2017/07/17/us/politics/health-care-overhaul-collapses-as-two-republican-senators-defect.html?mcubz=0</a> </li> </ul> </li> <li> <h2>Tax</h2> <ul> <li>Trump’s September 2016 tax plan: <ul> <li><a href="https://taxfoundation.org/details-analysis-donald-trump-tax-plan-2016/">https://taxfoundation.org/details-analysis-donald-trump-tax-plan-2016/</a> </li> </ul> </li> <li>Trump’s April 2017 tax plan, different than the 2016 one <ul> <li><a href="https://taxfoundation.org/trump-administration-tax-proposal/">https://taxfoundation.org/trump-administration-tax-proposal/</a> </li> </ul> </li> <li>Other trump plan: <ul> <li><a href="https://assets.donaldjtrump.com/trump-tax-reform.pdf">https://assets.donaldjtrump.com/trump-tax-reform.pdf</a></li> </ul> </li> <li>What is the AMT?: <a href="http://www.taxpolicycenter.org/briefing-book/what-amt">http://www.taxpolicycenter.org/briefing-book/what-amt</a></li> <li>Budget reconciliation, revenue neutrality, which policies would reduce and which would raise revenue <ul> <li><a href="http://jamiedupree.blog.palmbeachpost.com/2017/07/22/republican-tax-reform-plan-may-be-limited-by-gop-budget/">http://jamiedupree.blog.palmbeachpost.com/2017/07/22/republican-tax-reform-plan-may-be-limited-by-gop-budget/</a></li> </ul> </li> <li>Trump rally: <a href="http://money.cnn.com/2017/07/21/investing/wall-street-donald-trump-tax-reform-stocks/index.html">http://money.cnn.com/2017/07/21/investing/wall-street-donald-trump-tax-reform-stocks/index.html</a></li> <li><a href="https://taxfoundation.org/trump-administration-tax-proposal/">https://taxfoundation.org/trump-administration-tax-proposal/</a></li> <li>Tax Policy Center analysis of Trump’s plans, with lots of filler-in assumptions (summary): <a href="http://www.taxpolicycenter.org/taxvox/tax-plan-consistent-trumps-april-outline-could-cut-revenue-78-trillion">http://www.taxpolicycenter.org/taxvox/tax-plan-consistent-trumps-april-outline-could-cut-revenue-78-trillion</a></li> <li><a href="http://www.cnbc.com/2017/04/27/how-trumps-new-tax-reform-proposal-may-affect-every-income-bracket.html">http://www.cnbc.com/2017/04/27/how-trumps-new-tax-reform-proposal-may-affect-every-income-bracket.html</a></li> <li>Border adjustable tax: <a href="http://www.wsj.com/graphics/border-tax/">http://www.wsj.com/graphics/border-tax/</a></li> <li><a href="http://money.cnn.com/2017/02/27/news/economy/border-adjustment-tax-trump-trump-congress/">http://money.cnn.com/2017/02/27/news/economy/border-adjustment-tax-trump-trump-congress/</a> <ul> <li><a href="http://money.cnn.com/2017/02/24/news/economy/federal-reserve-house-border-adjustment-tax/index.html?iid=EL">http://money.cnn.com/2017/02/24/news/economy/federal-reserve-house-border-adjustment-tax/index.html?iid=EL</a></li> </ul> </li> </ul> </li> <li> <h2>Polling</h2> <ul> <li><a href="http://www.cnn.com/2017/07/16/politics/trump-poll-abc-wapo-approval/index.html">http://www.cnn.com/2017/07/16/politics/trump-poll-abc-wapo-approval/index.html</a> </li> <li><a href="https://fivethirtyeight.com/features/six-months-in-trump-is-historically-unpopular/">https://fivethirtyeight.com/features/six-months-in-trump-is-historically-unpopular/</a> </li> </ul> </li> </ul> <a href="https://www.aol.com/article/news/2017/07/24/new-poll-americans-are-equally-divided-trump-impeachment/23046116/">https://www.aol.com/article/news/2017/07/24/new-poll-americans-are-equally-divided-trump-impeachment/23046116/</a> <h1>Transcript!</h1> Xander: So welcome to Reconsider, where we don’t do the thinking for you, and today we’re going to talk about a couple of things that have really been hot and heavy in the news over the course of the last week, well, actually over the course of the last six months. One of them is going to be healthcare, and the next is going to be tax reform. Erik: And before we jump in, real quick, we haven’t plugged Patreon in a while, so we just want to do that. We have a Patreon page, patreon.com/reconsider, where if you’re interested you can join us in the Dan Carlin model in which you give us a buck a show. We don’t ask anything more to help us keep the podcast going and get you more great content. If you want to give more there are plenty of opportunities to give more in exchange for some sweet perks. Xander: What kind of perks Erik? Erik: Well, you can get my book called Wedged. You can get a show just for you. You can even join our illustrious Cabinet who we just met with yesterday and it was a wonderful time, and we learned a ton from them. It’s just amazing having them on board. If you’re one of the kind of people who believes in the mission and really wants to actually get more deeply involved, Cabinet could be ready for you. Xander: Also, when you have a minute, please do leave us a review on iTunes or whatever pod catcher you happen to be using. Every review we get moves us up the Apple or Google algorithmic rank and gets our message out to more people. Erik: We’re gonna start by talking about healthcare, because hoo boy has it been a busy week about healthcare, and Mr. Trump needs a win, as do the Republics, after how many years, nine years of talking down Obama Care. They’ve been trying to repeal it and have not been successful so far, but how did we get here? Xander: Yeah, to understand what’s currently going on with the healthcare bills, plural, we kind of need to walk through a bit of a timeline. It’s not the most straightforward process, but to really put all of these events in context we need to go back a little bit, and we’ll do our best to make this as clearly as possible. As always, if there’s any point where you feel like you need or want to dig a little bit deeper, our show notes provide all the sources that we use and there is a bunch of them for this episode. And if you just go to reconsidermedia.com/podcast, click on the episode, and you will find all of them there. In 2009 Obama’s core policy proposal was passed in the US Congress. It’s referred to by many as Obamacare, but it’s officially called the Affordable Care Act. Now, Republicans opposed the Affordable Care Act, or ACA, almost immediately, and then stayed opposed to it for basically the next eight years. They had legitimate criticisms, both of things that Democrats denied would happen, but did end up happening, like premiums going up and people being forced to change their insurance plans when they were promised they wouldn’t have to. Erik: And new taxes that were promised not to happen. Xander: Right. In addition to those legitimate criticisms, Republicans also effectively used what we call wedging rhetoric to establish a long term opposition campaign to the ACA, so attaching words and descriptors like socialism, and death panels, so that people associated those phrases with the bill. And they knew that their tribe would instantly reject anything that uses these descriptors, when in reality, one of their own tribe had recently proposed a very similar policy to Obamacare that actually generally received some positive reception, and this was Mitt Romney in Massachusetts. Erik: Yeah, and the core of that was the health insurance mandate. If you’re not going to have the government cover everyone, one of the ways to potentially save cost is to force everyone to get health insurance rather than deal with the people who aren’t insured when they end up coming in when they’re really, really sick. That’s the idea behind it, and actually in the 90s it was the republican counter proposal to the Universal Healthcare Plan proposed by Hillary Clinton, so how times change. Xander: Now Erik, before we get too much further into the timeline, I use this phrase wedging rhetoric, which I pulled from your book Wedged. Do you want to just give a quick overview of what wedging rhetoric is? Erik: Yes. So wedging rhetoric is designed to actually solidify your party’s opposition to something, or support of something, by using really emotionally resonate terms that don’t necessarily have meaning, and actually create an enemy tribe. Contrary to intuition where you’d think that politicians win by getting the biggest coalition possible, politicians win by getting the most votes, and one of the important factors in getting the most votes is turnout. And one of the best ways to get turnout is to make people really, really angry. People, it turns out, vote a lot more when they’re afraid and they believe that there’s an enemy that must be stopped and destroyed. Whatever tribe your part of, you can probably recognize those times where you hear words like anti-choice, or pro baby murder, or waging a war on women, such like that. That gets you to come out and vote and be really active when you otherwise might not be as excited. That’s the kind of rhetoric we’re talking about here. It’s now a very well-established part of modern politics. Xander: There’s a page in your book that is very evocative of this concept where you represent the distribution of how most people think, or their positions on a particular issue, and for some of these things it really looks more like a normal curve. There’s actually a lot more agreement that people think there are, but then under the situation of wedging rhetoric there’s like a big gaping hole in the middle, and two peaks on either end where you have a politician standing on top of, and that’s how it changes the political landscape. Erik: Exactly. It’s not representative of what people actually believe in their nuanced policy opinions. What happens is people get pulled to one side or the other, abandon their own particular nuanced positions, and support their tribe unilaterally lest they be accused of wrong think, or betrayal, or being soft on important key values and stuff like that. It means that the landscape we see and what we hear is highly polarized, but not representative of what’s going on in people’s more rational brains. Xander: Republicans used wedging rhetoric, they incorporated the repeal of Obamacare, and it’s replacement was something else into their core campaignment message for basically the majority of the time that Obama was in office. And that was an effective campaign, by the way. They won the executive and both houses of Congress in 2016. They didn’t, however, develop really a coherent concept of what an alternative that could actually replace Obamacare would look like, and how you can get that to square with the party’s contemporary values. It became a campaign of anti ACA rather than pro something. Individuals had some ideas in the republican party, but there wasn’t a coherent party concept of what these core health care policies should be and what a comprehensive alternative could look like. Erik: Yeah, and that’s been a big problem for the Republicans this whole time is they haven’t had a central thing that says, “Okay, this is what health care is going to look like.” All of their proposals over the past nine years, some of which were just symbolic, some of which are under serious consideration now, have been tweaks of various sorts that don’t actually represent a clear like, “Here’s what it’s going to look like,” which is actually very different from the rhetoric that, when we talked about Podemos and Trump, was very useful for getting trump elected, like the big wall. And then enter Trump. He comes into this scene where the Republicans have power but they don’t have a clear vision of what they’re going to do about Obamacare other than they’re against it and they’re going to get rid of it somehow. And Trump was very focused on healthcare. He’s been a critic of Obamacare for a long time, and it was his first domestic agenda, his top domestic agenda to push. Xander: In 2016 the Republicans from the presidency, House of Reps, Senate, although the majority in the Senate is narrow … There are 52 Republicans in the Senate out of a hundred senators, with the vice president able to cast a hundred and first vote in a tie breaker, and that’s all important for the health care discussion here. Remember that number. It’ll be important later. The Trump administration offered relatively little guidance on what the replacement to Obamacare should look like, and instead was more happy just delegating, and providing Congress with some sort of general ideological suggestions, and then leaving the rest up to them. Erik: People have criticized this move, saying that Trump just lacks policy expertise that would allow him to actually give real direction to Congress, and other people don’t see it as a problem, saying that the president’s job is not to be an expert in all things policy all at the same time. That’s what staffers do, think tankers, legislative aids, other hill rats and lifers. That’s what they do. But rather he should be a leader providing general, conceptual guidance, and strong delegation to a smart people who know a lot more than any one person would about everything to get the job done. You might think, for example, Woodrow Wilson on the really policy wonk side as a professor, and Teddy Roosevelt as the really big, grandiose general lead on the other. With this guidance, the house attempted to vote on the first version of this bill in March. Before they voted, the Congressional Budget Office, or the CBO, estimated that about 24 million more people would be left uninsured under the new plan. This made it politically unpalatable and the bill failed. As it turns out a lot of these Congress people have a lot of the people as constituents that would lose coverage. Because this bill was politically unpalatable the House spent the next two months making a whole bunch of amendments in an attempt to make something more politically palatable. They then proceeded to just go ahead and pass the bill by very slim margin in May, long before the CBO had time to analyze it and provide a score for the new version, which a lot of people were pretty rankled about. Xander: This new bill was sent to the Senate, however, as I mentioned there were only 52 republican Senators out of a hundred, compared to 240 Republicans in the House, which is about 55%, so a slightly larger majority than they have in the Senate. In the Senate they had a slimmer margin, and Republican Senators were basically uncomfortable with some of the parts of the House version of the bill. They set about to basically create their own version that would be more palatable to their own constituency. So there were several differences between the House bill and the Senate bill. For the ACA to be replaced, both the house and the Senate need to pass their own respective versions of the bill, and then find a way to reconcile the differences so they both agreed, and voted finally on the same version. Erik: Or optionally, if the Senate passed something that was different from the House, the House could just decide to take it without amendments, because with amendments they’d have to pass it back to the Senate and say, “You know what? This is good enough. We’re just gonna pass it. Great. We’re done. Let’s move on.” And we’ll post a link the show notes with an article that details the differences, so just go check those out. So the Senate also has some extra considerations. You noted that the House was able to just pass the bill by a very slim margin, but in the Senate, the filibuster still applies for legislative motions, and the Republicans feared that a democratic filibuster would come up if they tried to pass a new version of the health care bill, and so to overcome the filibuster they would need a 60 Senator vote. They need 60 Senators to say, “All right, stop the filibuster,” and then they can move but, but they only have 52, so one thing they could do is try to get eight Democrats on board, but that looks very unlikely. There’s this fast track process that’s one of the really weird rules about the United States Senate called budget reconciliation, and so they decided to try to pass the bill that way. Xander: Yeah, and all budget reconciliation really means aside from having different set of procedural rules through which the bills must go to be past is that the bill is really supposed to focus exclusively on revenue and expense issues, so issues that have to do with the government deficit. And obviously health care has a lot more to do that strictly finances. It was a bit controversial that this was being passed through that process. Erik: Yes. And there’s another interesting rule about the budget reconciliation process that was introduced in the 1980s, it’s called the bird rule. What it says is that any bill that gets the special budget reconciliation fast track, it cannot increase the federal deficit over a five or ten year period. So for the republicans, in order to get past the bird rule, they would have to create a health care bill that would not increase the budget deficit in the government at all. Xander: However, if you’re increasing your expenditure on a lot of new health care initiatives, and the bill needs to be revenue neutral, that means that you need to cut spending somewhere else. The plan called for a reduction of medicaid expansion that was basically planned and scheduled under Obamacare. The net result of this is the Congressional Budget Office, which is a non-partisan group, well, it’s a non-partisan part of the government that’s supposed to issue policy analysis. They issued a report claiming that the bill would increase the number of uninsured people by 22 million, and this wasn’t politically palatable to several Republicans, so they knew that the bill couldn’t be passed in that form. Erik: And it’s just worth noting for precision here that the CBO wasn’t predicting that these 22 million people would never get insurance. They would lose what they currently have, and then would have to on their own somehow try to get something else. I have no idea how many would succeed, but because it’s medicaid and the people covered under medicaid are poorer citizens of the United States, they’d have a much harder time going and just finding their own insurance than other people would. It’d probably be a lot left without it, but that’s speculation on my part. Xander: The fact that so many people would become uninsured left Senate Republicans with a few options, because they weren’t gonna be able to pass something that implemented that policy. The two options that they had were really one, going back to the drawing board and trying to come up with some sort of new political strategy to solve this problem, but since the core of the contemporary Republican platform is now centered around repealing Obamacare, that would basically be seen as a big legislative failure for the Republicans. The other option would be to repeal Obamacare without having a replacement to Obamacare ready to go. That move is being called repeal, versus repeal and replace. A just repeal move would give moderate Senate Republicans some concern because what a repeal only attempt would do would be to effectively be voting on something that doesn’t exist yet. Senate Republicans would have, or Republicans would have, maybe two years to work on a bill, but it would basically be voting for uncertainty and a lot of moderate Republicans don’t really like that. Erik: Yes, because if they don’t figure out something better … If they repeal it, and then don’t figure out something better before that next election cycle they might be in a lot of trouble. The repeal option had a lot of problems, and it actually just went up for vote and got 45 out of the necessary 50 votes to pass, so it also failed. And it seems the Senate Republicans don’t have much of a plan at the moment. There’s an interesting side observation here. One of the things we saw is that the CBO, which is a non-partisan analysis office, actually ended up fundamentally influencing both the form of a piece of legislation, and a legislative process, because not only was there estimates of an increased number of people uninsured, something that changed the outcome of a vote, but also because of the budget reconciliation process the Republicans depend on the CBO estimates to say that they would not increase the deficit in order to be able to use that process. The CBO actually, in this case, ends up being a lot more involved in how this partisan move goes than they’re originally intended to. Now, that’s not a criticism of the CBO, but they find themselves in a very interesting position. So real quick, what are the changes to Obamacare that were in the Repeal and Replace House Bill that passed the House but didn’t pass the Senate, just in case it passes sometime you’ll know. One of the things it would do is it would reduce the expansion of medicaid that was set to begin in 2021 and actually cut medicaid beginning in 2024. That would reduce the ACA or Obamacare tax credits. They’d eliminate caps on premiums on a percent of income. What this would mean is that a lot of people under the new legislation would be maxed out of the tax credit and still pay a lot. I, for example, don’t get a tax credit for the Obamacare plan that I pay for, and the number of people who wouldn’t get that tax credit would increase. It would also eliminate the tax penalty on those that don’t buy insurance, as well as removing the tax on companies that don’t impose penalties. It would actually take away the mandate part of Obamacare. Then it gives states options to offer other benefits. Obamacare states they have to offer 10 essential benefits, and set these national standards for what they would be. The new bill would change that, letting states decide which of those, or what those ten essential benefits are, and the idea would be to allow competition between states seeking less comprehensive plans. Finally, it would repeal many of the taxes that the Affordable Care Act imposed, particularly on what are called Cadillac Insurance plans. Xander: Trump’s in a position where he needs a win. The vote to pursue a repeal without replacement process in the Senate failed as of recording of this podcast, so that’s not a win for Trump. If the healthcare bill, which really again was the Trump administration’s … A big part of their platform was repealing Obamacare and finding something else. If Obamacare stays in place and is not threatened by any process that’s politically available to the Republicans, or the Trump administration along with Congressional Republicans, will have been seen as really failing at their first major legislative attempt. Trump is gonna be looking for a win, and one of the other big parts of his campaign was tax reform. Trump’s probably gonna pursue some version of tax reform next, in the next period of his administration, and the political landscape there is very different than the one that really blocks and inhibits healthcare. Erik: And what are the two things that we can always depend on in life Xander? Xander: Death and taxes? Erik: You, cake or death? Xander: Ah, yes. Cake please. Erik: Very well. Give him cake. And what about you? Cake, or death? Xander: Uh, I’ll take the death. Wait, wait, wait, no. I meant cake. Erik: Ah, ah, you said death first. You get death. Xander: Well, I meant cake. Erik: Well, all right. It’s a good thing this is Reconsider. For those of you who don’t know, that’s Eddie Izzard, and he’s amazing. Now, republicans have long favored tax reform. It’s a big part of their agenda for a very long time, and the difference in how they look at tax reform versus stuff like health care is that instead of focusing on the short term political strategy of using opposition rhetoric to win, the Republicans have begun to offer a number of big competing ideas that have a unified theory behind them that have a vision, that they’re very interested in making a major change on. These ideas never got voiced because there was a lack of immediate political capital to conduct massive reform. However, right now there appears to be some degree of consensus within the Republican Party that tax reform is needed, and there are several ideas that have already been suggested and studied that they will be able to pick from. Xander: I think this is just sort of an interesting observation that in times, the greater abundance of political ideas or policy ideas seem to be provided when the system’s just gridlocked over time. They accumulate in a way that perhaps in necessary for major historical changes, right? Erik: Right. The Republicans have thrown out over time all sorts of stuff from a flat tax, where everyone pays something like 20% and there are no deductions for the rich, so they actually pay something close to the 20%. There’s been a consumption only tax. There’s been reform to the various tax brackets. There’s been repealing corporate taxes entirely. I mean, there’s been all sorts of different stuff that had been different concepts for the major tax reform that Republicans could take. But Trump’s the man, and his plan is gonna get a lot of sway in what the Republicans take on next. Now, as with health care, there’s no single very well defined Trump plan. He’s proposed several in 2015, 2016, and 2017. Now, these lack a lot of detail. Trump’s administration has said that there will be a detailed tax plan but it won’t be unveiled until September. Now if you guys recall, the Budget Reconciliation Process, in order to pass a bill using the Budget Reconciliation Process, you need to make sure that you’re not increasing the deficit. Any place they cut taxes they’re going to have to find revenue from somewhere else, and because they’re unlikely to get any of the Democrats on board to pass it, they’re gonna have to go with this route. What can we expect? Xander: There’s lots of different, creative ways to change taxes. It’s not just income taxes. If there’s one thing that the government’s created that is finding new ways to take money from it’s citizens, they always find new, not often anticipated ideas for raising tax revenue. Some of the more common, well known ones include eliminating itemized deductions except for certain carve outs. First off, itemized deductions are when you go line by line and expense everything that you’re deducting from your taxes, and you can either do this or take a standard deduction where you just get a fixed amount. None of this counts as tax advice by the way. It’s just a very quick layout of how deductions work. Now Trump would plan to eliminate itemized deductions except for interest rate on mortgages, which is basically a benefit you get when you buy a house. Erik: What’s really interesting about this is that you might be thinking, “Okay, well what are the implications of eliminating itemized deductions?” The thing is, you take itemized deductions, typically when you can itemize deductions over the standard deduction. Those of you who file taxes, if you don’t make a whole lot of money you’re probably using the standard deduction. If you make a whole lot of money you’re probably itemizing. And it therefore turns out that the people who itemized deductions are the ones who make a whole lot of money, If you make less than 25,000, only 5% of people are itemizing deductions, and most of these people are self-employed, or contractors in some way, where they have a lot of itemizable deductions for work. But 93% of people who make over 200,000 take itemized deductions. This is not too surprising. They spend a lot more money, but it also happens to be the case that even a lot of Republicans believe that many of the itemized deductions are designed to benefit the wealthy and allow them to pay substantially less in tax than their nominal rate. Xander: Yeah, I think it’s important to note that, even though it’s 5% for people under 25,000 and 93% for people making over 200,000, it’s not an exponential chart. It steps up gradually from bucket to bucket … Erik: Yeah. Xander: … so in the two middle categories you have people making 50 to 75,000, 39% of those people itemize their deductions, and from 75 to 100,000 is 56%, so there’s a lot in the center there too. Erik: The other really interesting thing about the trump proposal is that it would actually double the standard deduction. What that means is that if you’re making say 25 to $50,000 and you’re just eking over the standardized deduction and therefore itemizing a bunch of stuff, when the standard deduction doubles you don’t need to anymore. You’re actually still getting a substantial amount of tax free revenue. In fact, for a family it goes up to about $24,000, and so that means that first $24,000 that a married couple makes is completely untaxed. Taxes only start to apply after that. This is being billed as something that it’s actually very good for working class people and working class families because they’re going to actually get a bigger deduction, whereas people making over 200,000, their $24,000 standardized deduction isn’t going to go as far as what many of them are able to do with itemized deductions in this case that part is designed to be a tax break for people who make less money and a tax hike for people who make more. Xander: All of that is just to explain that one thing would be eliminating itemized deductions. Another would be eliminating what’s called the alternative minimum tax, or ANT. The idea behind this is if you make over a certain threshold money you have to calculate your tax liability to the government in two separate ways, and then you would owe whichever one is greater. The idea for the AMT was born a while ago when it was … I forget what period it was, but it was supposed to be like this big hubbub about how nine extraordinarily wealthy people making hundreds of millions, or something like that, or being worth that much back in the day when that was really a lot of money, more than it is today anyways … They were getting away with not paying taxes and the people said, “This is a scandal. This is unfair. They need to pay some amount of taxes.” It was a really small group of people that led this to get kicked off, and now, while generally people who pay the AMT are still earning more than average, it’s a much larger category of the American population. It’s down to the people who make hundreds of thousands are now forced to do their AMT calculations as well. The idea is, this isn’t really how it was meant to work. The circumstances have changed, so we’re thinking about repealing your obligation to perform that calculation twice and then potentially pay more. Erik: And what’s interesting is that it would become less relevant anyway, because if people can’t take itemized deductions, then their ability to scale back using that calculation on what they would need to pay would go down, and therefore fewer people would be subject to the AMT anyway. I think the most interesting change that I saw is that this plan would eliminate deductions for state and local taxes. Currently, the amount of tax you pay at the local and state level is actually deducted entirely, so you don’t get, quote, taxed twice on the same income. Eliminating that would mean that people’s, sort of everyone’s tax obligations to the federal government would go up, but what’s particularly interesting about it is, this is something that pits high income tax states against low income tax states. The reason for this is that low income tax states, say they tax 3%, or 0%, they just get that amount of money, and their people don’t get as much of a deduction, whereas high income tax states, people can deduct the … Say California which is like 9 or something, they can deduct away the large amount of money that they’re paying to the state of California. From some perspectives the state income tax deduction is actually a transfer of wealth from low income tax states to high income tax states, and so Republicans have wanted to get rid of it. The other really interesting tax thing that Trump is looking at, and he’s changed his mind on this from being against it to be open to it, is what’s called a border adjustment tax, which some Republicans have been talking about for a while. The border adjustment tax would kind of, but not quite, be like a tax on companies that import goods they use to create their own final product. American companies that are importing a lot of stuff and assembling it, or reselling it in the united states, would face a penalty, and companies that use exclusively American made parts would get a benefit from it. Right now companies can deduct the cost of goods that they sell regardless of where they came from. With the border adjustment tax, the cost of goods sold that are imports are no longer tax deductible. Xander: An interesting aspect of the Border Adjustment Tax Proposal is that the republicans, ideologically, or at least many republicans, see their party as one of the party of free markets, and the encouragement of entrepreneurship, and now that party is proposing protectionist trade parties including Trump. It just goes to show you that rhetoric is very frequently not reality, and that doesn’t necessarily mean that the idea is a bad one either, but it’s just an opportunity to point out that a party’s rhetoric often conflicts with the ideology that they claim to hold, and it takes more investigation to figure that out. Erik: Yeah, and the reason that this is a protectionist measure is that it’s designed to incentivize manufacturers who work in the United States to use parts that are made in the United States rather than just import or assemble here. The idea would be that more stuff would be built in the United States because they’d be comparatively more expensive to import that stuff. It would bring manufacturing home. It would bring jobs home. However, the story is actually much more complicated than that. You can check out the show notes if you want to learn more. One of the complicating parts of that is that this would probably drive up prices for American consumers, so what would that mean for spending power, and aggregate demand, and now we need to call an economist because I’m now way in over my head in how all this stuff works, but it’s a very interesting proposal that’s on the table that’s not getting as much attention, as much emotion, and as much wedging rhetoric as health care. Therefore, it’s playing out in the political process very, very differently. So this tax plan looks more interesting and a little bit more nuanced than healthcare. It seems to be a little bit more thought through. It’s less about, “We need to repeal Obamacare and replace it with whatever’s politically palatable,” and more, “Okay, we have an opportunity to make a change that we’ve been interested in changing. What are the changes that we’re going to make, and how do we want the taxes to look going forward?” Xander: This bill also really needs to be budget neutral because it faces the same political landscape in the Senate with 52 Republicans of the health care faced. Because it will likely be attempted to be pushed through budget reconciliation again the CBO comes back into play and says, “Okay, based on the design of this bill it needs to be revenue neutral.” How can something be revenue neutral? There’s basically three ways. Either you can increase taxes on enough people to pay for it, which means that your expenditures. You can add spending cuts to the bill to reduce expenditures in other areas in order to provide for new ones, or you can hope and pray that the CBO says that somehow your policy is going to cause the economy to grow faster and therefore it actually increases your tax revenues and let you spend more, which is like every politician’s dream. Erik: Where this has a little bit of less pomp and bombast as stuff like the wall or the repeal, it seems to have a lot more policy wonks on it, and a little bit more direct focus from Trump. You can notice that the proposal that he outlined is a lot more directed than, “Okay, I just need you to repeal and replace Obamacare. Go figure it out.” Some of the reason for that is that this stuff is very complicated, and it might also just be because Trump is more interested in that stuff. Since health care has failed again, it’s not clear to us of course whether the Republicans are going to take it back up and hope to slam something out before the recess, but if they end up walking away from healthcare without making a change, you can probably expect that the win that they’re going to be going for is going to be with tax reform. Suddenly, it’s going to come into the front page news even though you haven’t seen it yet. Since you’ve actually learned a little bit about some of the facts before you’ve seen the headlines about it, this is a great opportunity to prime yourself to be ready for the wedging. Whatever happens. Whatever tribe’s megaphone you’re listening to, you’re going to have a messaging war that kills the nuance that we’ve just talked about, cherry pick certain stuff, goes for broad brush strokes rather than detail. So we have a few questions that you can ask yourself for when the mayhem arises. First, what does this do for government revenues and what does it do for different people’s pocket books? Second, how might it be designed to help the economy and the United States as a whole? What kind of economists, people with, you know, full education on this, are arguing for or against that intent and design, and for or against the efficacy of that intent and design? Go look for people who are educated on this that are disagreeing on it to learn a little bit more about what’s going on. Then, based on that, you can think about, “How would a reasonable person argue in favor of each point and against each point,” because what you’re going to hear is that, depending on where you hear from, either people who support it or oppose it are monsters, and terrible people that hate America somehow, or some subset of America. But how might a reasonable person like these economists argue for that? This is gonna be a great practice in being able to see through the fog that wedging lays down over our entire political discourse and therefore are thinking. Xander: There’s an interesting observations that you can make about different properties of the US Government as it goes through this process, as it prepares to push a new major policy proposal, and these properties are being showcased quite a bit in the Trump Administration’s first year. We’re not going to try to call which of these outcomes would be the most positive. We’re just making these observations, right? One of them, one of these properties, at least in the US system, is that a populist president can be elected, but to govern effectively they also must be a popular one. Now, Trump is a type of populist. He correctly identified and exploited the anxiety, or fears of one group of people or a mashup of multiple groups of people in a new and novel way of different struggling Americans for political aims, but he’s not a popular one. His polling right now is about at 36%, which is a record low for the last six months. Erik: Sad (laughing). Xander: A popular president, on the other hand, is one with much broader support, both in terms of spectrum … There’s a group of people with a wide range of different political perspectives, or like moderates, and people further on the right and left, so a spectrum. But he also depends on the quality of support from his constituents. Even though Trump lost the popular vote last year, many of the people who voted for Trump still did so because they saw him as only slightly less intolerable, slightly more stomachable than Hillary Clinton. That means his core constituency, so people who really believe and support him and didn’t just vote for him because in their eyes he was the lesser of two evils, that core constituency is much smaller than the group that actually elected him in 2016. Erik: And one of the ways we can measure that core constituency, other than just speculating that, “Oh, it’s white people. It’s alt righters. It’s poor white people that live in blah, blah, blah,” if we break down the demographics what we can do is we can actually see which demographic groups have seen their support for him plummet, and which have not. The ones where the support has not plummeted are going to be that core constituency, right, the ones that by their nature are less likely or slower to let him go. And there’s only one. Interestingly it is Republicans. Republicans support Donald Trump at 81%. If we compare this to the group that probably gets the most attention and love as a socio-demographic group, white men, their support for him has actually fallen to 49%. Still higher than the average, but that support is eroding, whereas with Republicans it is not. You might think, “Well, that’s half the country. That’s still pretty big.” Ah, it turns out that Republicans only make up 24% of the electorate. This isn’t people who happened to vote Republican. This is people who are registered Republican. Right now what you see is people who are part of the party sticking with their guy, whereas people outside of the party are losing support for him pretty quickly. If we look back to white men, of which has 49% support, non-Hispanic white mean are about 31% of the country so only slightly larger, really, from a demographic perspective, the rest of the country is pretty heavily against him. He is very unpopular and definitely does not have a broad base of support. We can compare this to other people who have tried to be major reformers in the past, right? Not every president really wants to shake up the system, but some of them have, and we can only look really as far back as after World War II for these polling numbers, but three of the presidents that come to mind as big popular reformers are Ronald Reagan, John F. Kennedy, and Lyndon B. Johnson. At six months in, which is the same time that Trump got his 36% number Reagan was at 58%, John F. Kennedy was at 72%, and Lyndon B. Johnson was at 75%. You might note that all three of these guys made some very major important changes to the United States. Lyndon B. Johnson for example championed and ushered through civil rights, which was just not a thing before him. Their ability to be able to make this stuff happen was due in large part to their popularity, because a truly popular president has a lot of real leverage over the Congress people in their party. If they’re popular, if the president is popular, Congress people seen voting against this president’s policy proposals will have to very carefully and cautiously explain their decision to their constituents come the next election. On the other hand, staying in lock step with a very unpopular president is going to be equally dangerous back home in your constituency where you have to run for re-election. Xander: Another somewhat related property of government that’s been emerging over the last couple of months is that a president can’t force his legislation on the American public. They can greatly influence the process using the bully pulpit, which is just this concept of using the president’s own national recognition to sway American option. But that’s only effective if that president is popular enough to have the degree and type of national recognition that he needs to influence policy outcomes. Otherwise, any speech they give on the metaphorical bully pulpit will just be less well received. Erik: Interestingly, this puts Trump in a very difficult position. Trump hasn’t had any major legislative wins in his first six months in office, when he had promised people that he was gonna get a whole lot done in his first one hundred days. Most of it just hasn’t happened. Now, those of us who have been around the block a few times and are a little bit cynical recognize that this is frequently the case. People come in with these grandiose ideas about everything they’re going to change and then they run up against reality, but Trump’s lack of wins compared to the image of someone who’s being decisive, a deal maker, someone who could drain the swamp, get things done, fix D.C., all that stuff, that dichotomy is starting to seriously hurt him. Trump needs some policy wins to show that he can actually get things done and deliver on his promises. The problem is, because he’s a populist style president, he needs to rely on popularity to get it done. And so in order to become more popular Trump needs some wins, but he needs that popularity in the first place in order to get the wins. He seems like he’s in a very politically difficult position right now. Xander: A third property of government that I think has been interesting to witness has been the fact that obscure procedural rules that, until that particular moment no one or very few people in the public had ever heard of or cared about, they really muck up and slow down the legislative process, but that’s a feature and not a flaw of the system. We’re not passing judgment on whether or not the health care bill should pass whenever it gets into some final form, but the fact that it’s giving every Congressional Republican a migraine trying to strike some sort of political balance, that’s not necessarily a bad thing. And we would expect and hope that the Democrats ran into a similar process if they were trying to pass any big deal as well. Erik: Yeah, the slowness with which the government can implement new laws and issue reversals is designed to prevent any single group of individuals from changing the relationship between the citizens and the government too quickly. Where we’ve seen presidents be able to make rapid changes is by using Executive Orders, which some would argue have become too powerful. But what a lot of Democrats have learned the hard way is that when a president relies on executive orders to further their policy, it turns out the next guy who doesn’t like them can just come use a pen to get rid of them. For lasting change in the United States Government, you need to go through this very painful process of following all the rules and developing enough broad support to be able to make it happen, and it’s just as hard to reverse it. The tension between The House and The Senate is, again, deliberately based on the different kinds of constituencies that they’re facing. Congress people represent a very small constituency that may be very reliable. Senators have to represent entire states that often far less reliable because they represent a wider swath of people. That tension is deliberate, as is the fact that the senate has different rules than the house. The whole point of the house is to send up new ideas. The whole point of the Senate is to check to make sure that they’re a really good idea that people agree with before they’re able to go forward. So seeing the political strategy of choosing a budget reconciliation to get a fast pass, but then, oops, being blocked by some 35 year old obscure rule that most people haven’t heard of, these are all examples of the system working exactly as it was intended to. Of course, anyone that’s cheering, “Yeah,” right now, should keep this in mind the next time that the Democrats have majority in the House and the Senate, and if you’re thinking, “Aw, man. These damn Republicans are just so obstructionist. If they just got out of the way it would be great. Let’s just bypass this rule now so we don’t have to deal with them,” just remember those rules are in place to make sure that you don’t get steamrolled when the Republicans are in charge. It always swings both ways, and it’s designed to. Xander: That was a lot of detail for one episode. I think probably more policy specifics and economics jargon that we’re used to, but I hope it provided a helpful overview of how the process both got to where it is now, how it might go forward, especially with tax reform. Some of the things that you can expect where you can look for for more information, and perhaps most importantly how to recognize when the truly extreme wedging rhetoric begins emerging and infiltrating every digital device that we have on us, that you’ll be able to pause and reconsider for a moment, right? Erik: And since this is a particularly detailed episode of ours we would love your feedback, so you can Tweet us at Reconsider Pod, leave a message on Facebook @ReconsiderPod, we’d love to know whether this level of detail is something that you find delicious, and wonderful, and exciting, or whether you find it boring, or frustrating, or overwhelming, something like that. Because we always want to make the kind of stuff that you’re enjoying the most and learning from the most. So Tweet us, Facebook us, whatever. We would love to hear from you. Xander: As always, remember to not let the pundits do the thinking for you. Pause, and reconsider. This is Xander signing off. Erik: And this is Eric signing off. I’ll see you guys next time.

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