Republicans may have already bungled tax reform

Republicans planned for two big successes in the 115th session of Congress: ObamaCare repeal and comprehensive tax reform. The GOP would stuff both down the throats of Democrats and hand easy victories to President Trump in the first year of Republican single-party control of Washington, and set the tone for governance in the new administration.

Things didn't exactly pan out that way. Instead, the tone Republicans set with ObamaCare turned out to be disunity and failure. Seven years of promises evaporated when Senate Majority Leader Mitch McConnell couldn't get 50 Republicans to agree on a repeal-and-replace bill, or even a shell bill to keep the issue alive. Now, the same problems that killed the ObamaCare repeal may also put an end to dreams of broad reform of the corporate and individual tax codes.

The first hurdle Republicans would have to clear is passing a budget resolution, a task usually completed by early spring. Instead, the House Budget Committee finally got around to passing one in mid-July. Rather than take it up immediately to prepare the way for budget negotiations after the August recess, it stalled while lawmakers headed home to their districts. That presents a big problem for tax reform under reconciliation, which requires an approved budget resolution to enable the path to a simple majority vote in the Senate.

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What gives? Are Republicans stymied on the budget resolution because of their narrow Senate majority? Not quite. Budget resolutions are not subject to filibusters in the Senate, which means that Republican leadership just need simple majorities to pass identical measures in each chamber. In fact, budget resolutions don't even require a presidential signature. So why has it taken this long to produce one? Maybe because Republican lawmakers would rather do almost anything but pass this bill, which just a few short years ago they demanded as a key to responsible governance.

As with the ObamaCare repeal, it now appears it's easier to pass resolutions and bills when there is little chance that it will make any difference. Now that Republicans control all of the levers of power, House Speaker Paul Ryan's team seems unable to agree on a budget plan, or even whether it needs to come ahead of the tax-reform plan it will enable. In fact, it looks like the budget resolution will face the exact same divisions that plagued the ObamaCare repeal effort.

The Atlantic's Russell Berman writes that fiscal conservatives in the House, still smarting from having to vote for an ObamaCare repeal-and-replace bill they disliked, do not trust Ryan on tax reform enough to sign off on the budget. At the same time, the so-called Tuesday Group of House Republican moderates oppose the cuts to entitlement spending that will allow for the tax-reform package to pass under reconciliation, which requires a significant reduction in deficit spending in order to qualify for simple-majority passage.

Rep. Tom Reed (R-N.Y.), a Trump ally, tells Berman he's willing to sign off on the budget. But he's not optimistic that it will matter. "We have an eternal conflict within ourselves," Reed explains. "I think that's going to be very difficult to get done."

The budget resolution isn't the only obstacle to tax reform. Congress has to pass 12 appropriations bills by the end of next month to avoid a government shutdown, plus pass a debt limit hike to cover the borrowing necessary in the current budget as well as the next one. Those will all require 60 votes in the Senate, which means that Ryan and McConnell will have to cut deals with Democrats to get those passed. That will limit the amount of money Republicans can cut from spending, which will also make tax reform under reconciliation even more difficult, even if Republicans found a package that would unite them in support. Thanks to the August recess, Congress will have less than a month to accomplish all these tasks.

In short, the window may have already closed on the GOP's other major agenda item this year, thanks to the long delay in passing a budget resolution. Steve Forbes told CNBC on Monday that Republicans have "botched" tax reform, which is a fair interpretation. The best Republicans can do now, Forbes argues, is to cut tax rates, make them retroactive to the beginning of the year, and push off any ideas of comprehensive reform until the next session of Congress.

"The prospect of a political disaster next year is going to get these guys to do what they should have done months ago," Forbes predicted. "They will make change on the corporate side, get it down to 20 percent or so. On the individual side, I think you'll see 10 percent to 15 percent across the board rates, tax rates like we did in the early '80s and save the heavy lifting on cleaning up the code after next year's election."

It sounds like a pretty good plan, with one key flaw: It assumes Republicans remain in control of both chambers of Congress after the midterm elections in 2018. After the sorry and chaotic start to the 115th session, voters might look for a change in the 116th.