Ben Roback is a Senior Account Executive at Cicero Group and a member of the US Embassy’s Young Leader’s UK programme.
After Conservatives on the right of the party in the House of Representatives torpedoed the American Healthcare Act, the White House is turning its attention to an ambitious program of tax reform. Team Trump is optimistic: Steve Mnuchin, the Treasury Secretary, boasted last week that tax reform is “a lot simpler” than healthcare reform.
Donald Trump, the White House and Paul Ryan will all be desperately hoping that Mnuchin is correct – united by a shared goal of avoiding a second political catastrophe in weeks. While looking ahead to tax reform as an opportunity to recover the President’s tainted image as a unique fixer and the dealmaker in chief, a more pressing issue awaits – funding the government.
Exposed by a lack of political support on the ideological right of the party, the Freedom Caucus could repeat their obstruction on tax reform and legislation required to keep the government open. The economic impact would be felt globally, leading to more than just lost political capital and red Republican faces in Washington.
Land of the freedom caucus, home of the brave
The House Freedom Caucus showed their importance to the legislative agenda in the 115th Congress, displaying political clout that far outweighs their number. Comprised of around 30 Republicans from the more conservative wing of the party, the group has become public enemy number one in the White House. Stung by their obstruction on healthcare, the president tweeted: “The Republican House Freedom Caucus was able to snatch defeat from the jaws of victory. After so many bad years they were ready for a win!”
Buoyed by their newfound importance, the confident Freedom Caucus could soon strike again on two fronts: tax reform and legislation to fund the government. Whereas their dissent over healthcare gave the White House a political bloody nose – American political culture obsesses over a president’s performance in his first 100 days – obstructing legislation to keep the government open would result in reverberations felt globally.
Washington’s inability to pass a budget makes it dependent on continuing resolutions (CRs) to keep the government functioning. Federal funding gaps are not new, with 18 occurring since 1976. The current CR expires on April 28th, after which the government will shut down unless a new CR is passed. The same small handful of lawmakers who threw Trump’s first flagship policy off course could now choose to turn their attention to defunding the US government, should they insist that the new CR withdraws federal funding from Planned Parenthood, the organisation that is responsible for reproductive healthcare and abortion treatment.
The optics of a self-inflicted government shutdown would be dire for the President, Speaker Ryan and the Republican party. The joint need for self-preservation is the main reason to be optimistic that a solution will be found, avoiding an unnecessary act of political self-sacrifice. Nevertheless, conservative intransigence means the possibility of a shutdown is very real.
Trouble whichever way Trump turns
Having reportedly been cajoled by Ryan to turn its attention in the first instance to repealing and replacing Obamacare, the Trump White House now wants to pursue its own legislative direction. Tax reform, as Steven Mnuchin believes, will be an easy sell to Republicans in Congress and the American public, with a quick win desperately needed before the CR problem arises.
But their calculation displays political naivety, since there is clear disagreement between Trump and the Republican ‘Better Way Plan’ over the border adjustment tax (BAT) and corporate tax reduction. Although suggestions are being mooted that tax reform and an infrastructure bill could be packaged together, neither will be easy to write in a way that pacifies the moderate and conservative wings of the Republican party.
If – a big if – a CR can be passed that keeps the government open, Washington will move on to considering Trump’s next political priority. Instead of trying to appease the Freedom Caucus, a more accurate calculation for the White House might be to consider how to beat or circumvent them entirely.
The Republican leadership could try to pass tax reform or a big infrastructure bill by evading the firebrand wing of the Republican party and targeting moderate Democrats whose districts backed Trump in 2016.
But whilst numerically sound in terms of replacing the 30 Freedom Caucus members with moderate Democrats, shifting left would also spell political trouble for Trump. For members of the Democratic opposition, there is little incentive to contribute to White House wins, and no evidence of their willingness to do so. They are looking at a White House on the brink of chaos, fighting internal partisan battles and ongoing external wars against the judiciary, press and the intelligence community.
A failure to bring the right of the Republican party on board, plus blanket opposition from the Democrats, could lead to a White House continually held hostage during the legislative process, rendering only a slim chance of major reforms being passed. Facing a political and reputational crisis of confidence, the president would then seek to pivot towards tax reform and seize the agenda that propelled him to the White House. In the long term, he will need to bring the Freedom Caucus on board. The more pressing priority will be keeping the government funded and open.