I am truly loving the politics right now on the health care issue, and even more on the tax reform fight, where Paul Ryan’s weird and unworkable Border Adjustment Tax is going to turn into a windfall for Democrats.
March 2, 2017

In my three decades in national politics, there have been three different times before last year when one party has swept the trifecta in terms of winning the presidency, the Senate, and the House at the same time: 1992, 2004, and 2008. (I don’t count 2000 because it was way too messy- a disputed presidential election and a 50-50 tie in the Senate that soon became 51-49 D when Sen Jeffords switched causes.) In each of those cases, disaster awaited he party in power in the next election cycle, with the off-year elections resulting in massive electoral losses. So what happened? In each case, there were two parts to the equation: the first was that the minority party’s base got fired up; the second was that there was a big economic issue that the party in power just flat out messed up the politics on. As a Democratic strategist, I am thrilled to say that history may be about to repeat itself. There are multiple reasons for this- no one is better than Trump at firing up the Democratic base- but I am truly loving the politics right now on the health care issue, and even more on the tax reform fight, where Paul Ryan’s weird and unworkable Border Adjustment Tax is going to turn into a windfall for Democrats.

In 1993-94, us Democrats blew it on health care reform. I was an original member of Hillary’s health care team, so I had a first hand eye witness account of how badly we messed up those politics. We had high hopes initially but kept delaying the bill, and because the legislation was so complicated and theoretical, we never came particularly close to putting together a working majority in either house of Congress. After 18 painful months, we gave up, and the long drawn out disaster was a central factor in the Republican sweep that engulfed us in 1994. The loss on the issue, and our lack of a compelling message as to why people should be for it, deflated the Democratic base vote badly, while the Republican base was motivated by our loss and pumped up about beating back the successfully demonized “Hillarycare”.

12 years later, Republicans were feeling pretty cocky. Karl Rove was talking confidently about a permanent Republican majority. But when the Republicans made a big push around privatizing Social Security, both middle class swing voters and Democratic base voters got engaged in the fight to stop the bill, and Republicans were on the run. Democrats used that Social Security issue to batter Republicans for the entire election cycle, and in combination with Bush’s incompetence on Hurricane Katrina and the war, we exceeded all expectations and won back control of both the House and the Senate, setting up our election sweep in 2008.

In 2009-10, Democrats were determined to do big things. We took on health care reform again, and this time scored a big legislative victory, but it took such a long time, and the final bill was so complicated and compromised that not even the Democratic base was excited we had finally passed health care reform. Meanwhile, we tried and failed to pass a stunningly complicated piece of climate change legislation called Cap and Trade that had so many compromises in it by the time it passed the House that environmentalists weren’t sure whether to be for it or not. There was nowhere near the votes needed in the Senate so the bill never even made it to the floor. The consequences of these 2 long, ugly, complicated fights in the 2010 election were predictable: a depressed Democratic base vote and a fired up Republican base vote creating another Republican tsunami.  

So what are the Republicans, fresh off their narrow and surprising upset win in the 2016 election, planning to do? Big, complicated, theoretical “reform” plans that are going to take a long time to work on in Congress, and may well never pass. As a Democratic consultant, I am jumping for joy.

And for 2018 electoral purposes, I’m not even mainly focused on the health care mess which Republicans walked into and is now creating all kinds of confusion and angst for them. In spite of Trump being shocked at how complicated the health care issue is, as a veteran of the two Democratic health reform efforts described above, I could have told him how incredibly complicated and messy all that would be for the Republicans. And if they ever get their act together and actually pass some kind of cobbled together “replacement” plan, their policy ideas on health care will end up being really awful for exactly the people that voted for them last year, and there will be hell to pay politically.

But for the sake of argument, let’s say the Republicans somehow make it through the health care policy debate without completely embarrassing themselves. Maybe they come up with a more modest bill that makes some small adjustments in the ACA and rolls back some things without completely destroying insurance markets and throwing millions of people off their health plans. Even if all that miraculously comes to pass, they are looking at even bigger mess of an issue that will hurt them with their base and take a long time to resolve: the Paul Ryan tax reform bill. Ryan wanted to cut taxes massively for the wealthy and big corporations (hey, that’s what Republicans live for), but that creates a massive hole- more than a trillion dollars- in the budget. He might have tried to make up for that by making huge cuts in Social Security, Medicare, and Medicaid, but he has a president who has said he didn’t want to do that, and a whole lot of Republican members of Congress who don’t want to run into the political buzzsaw that would create. So Ryan came up with this wholly theoretical idea of a 20% “Border Adjustment Tax” which would essentially operate like a national sales tax on all imported products.

Ryan predicts that the proposal will generate more than $100 billion each year, but thanks to some remarkably economic razzle dazzle, no one will be forced to pay more. Well if you’re skeptical, so am I. In fact, no economist I have talked to thinks it would work well at all in real life. Instead, the border adjustable tax will simply be a consumer tax, a hidden national sales tax paid by major importers, like retailers, and passed along to consumers in the form of higher prices. But that’s not the worst of it. While importers and consumers will be paying more, major exporters will pay nothing. See, Ryan’s proposal allows corporations to pay no tax on the revenue earned through exports. So, if you’re keeping up, the border adjustment tax will force consumers to pay more, while corporations like, GE, who’s sordid history of tax avoidance is well known, will likely pay no taxes ever again.

This deeply regressive tax would hurt lower income folks worst of all, which is enough to make a progressive Democrat like me strongly oppose it. Republicans are divided on this plan, and the business community is split right down the middle on it, making things even more of a political mess, and increasing the likelihood of a long drawn out fight that will be very bloody. If House Republicans actually pass this, it will be through the sheer will of Paul Ryan whose commitment to this terrible idea clearly exceeds his interest in remaining Speaker of the House. If he somehow passes this Border Adjustment Tax, he will have given Democrats a remarkable political gift when all those small town and suburban working class voters on a tight budget who voted Republican in 2016 discover that House Republicans are the reason that they’re paying 20% for their family essentials so GE can pay nothing. Speaker Ryan, for the sake of what’s good policy, I am hoping you lose on this issue, but as a Democratic consultant, I am looking forward to the ads I can run against you on this new 20% tax.

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