As a former White House chief of staff, I know from firsthand experience that economic policy cannot be entirely separated from political concerns. I served under my friend and fellow Arkansan Bill Clinton at the beginning of his first term, where one of my highest priorities was to shepherd the president's economic plan through Congress. When we did so--after months of difficult negotiation and deliberation--we were proud to have scored a legislative win for President Clinton and his party.
For this reason, I can empathize with my Republican friends who are speeding to overhaul the nation's tax code before Christmas. Just two weeks after the House of Representatives unveiled its tax plan, it passed the lower chamber without a single Democratic vote. According to the timeline laid out by leaders in the Senate, the upper chamber will now have a few more weeks at most to pass its own version of the bill. After early setbacks--most notably the failure to repeal the Affordable Care Act--it's hardly surprising the Republican Congress is tempted by the prospect of a big "win" to end the year.
But this would be shortsighted, both economically and politically. For a major piece of economic legislation to be a true victory, not just a short-term political one, it must make America more prosperous and more competitive. If President Trump and congressional leaders hope to secure a triumph, they must prioritize doing tax reform right over doing it quickly.
First, Congress must listen to economic experts, who are currently sounding the alarm that the current tax plan will hurt rather than help the economy over the long term. A recent column in Forbes--a traditional bastion of conservative economics--warned that, "if it's enacted, the GOP tax cut now working its way through Congress will be the start of an economic policy disaster unlike any that has occurred in American history." While this assessment may be overstated, it is certainly worth noting given the source.
And this is not an isolated occurrence. The University of Chicago--a school known for its conservative free-market economic stance--asked 42 top economists whether the current tax plan would help the economy. Exactly one said it would. (In a separate answer, 37 of 38 economists agreed the tax plan would add to the debt. The 38th later explained he had misread the question.)
I understand that many liberals are unlikely to embrace any kind of tax reform a Republican Congress proposes. But when a conservative magazine is warning that an economic crisis could result from this bill, and a panel convened by a school known for its support of free-market economics can find almost no expert to support it, this is no longer a matter of conservative versus liberal. It's a matter of sound versus unsound policy. Congress should adjust its tax plan so that economists from at least one side of the political spectrum can support it. If that means waiting until after Christmas until passing the bill, then Congress should wait.
Second, Republican leaders in the House and Senate should heed their own warnings when it comes to the deficit. When I served in the White House, conservative lawmakers regularly made the case against borrowing money we didn't have. During the Obama years, leaders such as Paul Ryan identified growing debt as one of the greatest threats our nation faced. Yet in order to pay for tax cuts, the current plan being considered in Congress would add approximately $1.5 trillion to the national debt.
Like many pro-business Democrats, I strongly believe the tax code should be streamlined and the high corporate tax rate brought down. But I do not believe that borrowing well over $1 trillion from China is the way to pay for it.
As Pete Peterson, a leading crusader for fiscal responsibility, has written, "Tax reform should grow the economy. Not the debt." If we do tax reform right, we can hand down to our children and grandchildren an even more prosperous America than the one we knew. If we do tax reform quickly, using huge sums of borrowed money, we'll be spending money for ourselves while sticking future generations with the bill.
Tax reform should not be muddied with unrelated objectives. In order to raise additional funds, the current plan in the Senate would eliminate the Affordable Care Act's requirement that individuals purchase health coverage. According to estimates from the non-partisan Congressional Budget Office, this would cause 13 million Americans to lose health insurance and cause premiums to spike for millions more. While tax reform is in theory a good idea, surely we can figure out how to pay for it without raising the cost of Americans' health insurance. It's worth taking the time to come up with a better alternative.
This brings me back to President Clinton's 1993 economic plan. The bill was considered controversial when we passed it. Yet today it is almost universally recognized as a success. It laid a foundation for years of extraordinary prosperity: a balanced budget, millions of new jobs, millions more Americans lifted out of poverty.
Back then, during the grueling process that led to the bill's passage, there were times when I wished we could get the whole thing over with as soon as possible. But looking back at the end result, and the economic benefits for families regardless of party or ideology, I'm very glad we took the time to get it right. The bill we passed was about more than politics. We made America stronger, and Americans more secure.
That's the standard by which all leaders, regardless or era, are judged. Only if Congress meets that standard with tax reform will they truly score a win.
Mack McLarty was White House Chief of Staff to President Bill Clinton and is now the chairman of McLarty Companies and McLarty Associates.
Editorial on 12/03/2017
Print Headline: Do tax reform right, rather than quickly