The Political Problems Facing Trump's Economic Plan

The president outlined a three-part agenda in his Tuesday address that divides Republicans and disadvantages his voter base.

Jim Lo Scalzo / Reuters

In his first address to a joint session of Congress, President Trump outlined a three-part economic plan. First, he called for an increase in military spending—his budget would reportedly raise it by about 10 percent, or $54 billion, while cutting similar amounts from agencies including the State Department and the Environmental Protection Agency. Second, he called on Congress to repeal and replace the Affordable Care Act. Third, he reiterated his support for tax reform, which, if it follows his previous proposals, would cut taxes by almost $10 trillion, with the benefits largely accruing to corporations and the rich.

Together, these three proposals would represent a dramatic shift away from the policies of the Obama administration: from diplomacy to weaponry, from environmental protection to national-border protection, from public-health spending to private health spending, from eight years of favoring redistribution to a period of falling taxes on the rich, and from a term of falling deficits to the re-emergence of large deficits.

On paper, Trump’s economic policy looks like a profound re-imagination of the government’s role in American life. But in political terms, each leg of this three-legged stool is wobbly.

First, the cuts to agencies like the State Department have riled Republicans; Senator Lindsay Graham has called the White House budget “dead on arrival.” Second, repealing Obamacare sounds easy, but Republicans have struggled to settle on any plan to replace the ACA, or find the votes to repeal it without an immediate replacement.

Third, passing major tax reform is like permanently deleting social media or eating just one potato chip—easy to talk about, nearly impossible to accomplish. An easier lift would be a straightforward tax cut, akin to the ones that George W. Bush signed.

But even Bush-style tax cuts will be awkward politics without any budget cuts to accompany them, since they will immediately expand the deficit. Tea Party Republicans, who stormed into office on promises to reduce the debt, may have to cast their first major vote under Trump for a tax cut that would do the opposite. (The Trump administration may “dynamically” score the plan to be revenue-neutral, relying on optimistic projections of growth to balance things out; the Congressional Budget Office has already signaled that it’s unlikely to go along with that.)

The upshot is that governance is hard, even when your party controls everything. Republican leaders like Senator John Thune and House Speaker Paul Ryan want entitlement reform, which Trump has no interest in signing. Trump wants to eviscerate the State Department and foreign aid, which Republican senators have no interest in doing. Republicans say they want cheaper health care and broader insurance coverage, but repealing Obamacare would make insurance more expensive and less available for many middle- and working-class families.

As a result, Republicans stand divided in unified government.

So, what could happen, besides nothing? A plausible path forward would include a modest tax cut combined with modest budget cuts outside of defense, Medicare, and Social Security. That leaves other safety-net programs vulnerable, like housing assistance and refundable tax credits for the poor; science and medical research; and diplomacy and foreign aid.

Several years ago, Ezra Klein quipped that the federal government is an insurance company with a standing army. It was an illuminating summary of an institution whose spending is concentrated on health insurance, retirement insurance, and military spending. But the metaphor was never supposed to be taken as prescriptive. The most plausible path forward for the White House and the Republican Congress, though, would leave little room for the federal government to do anything except provide health and retirement insurance to senior citizens and oversee an ever-growing military.

It would amount to a reshuffling of post-tax income from households near the poverty line to households above the millionaire line. Medicaid, CHIP, ACA subsidies, and other safety-net programs to protect lower-income Americans would be sacrificed in favor  of “individual freedom” and “national security” to pay for a tax cut that disproportionately benefits the richest 1 percent. And that’s if they manage to pass anything at all.