The Next Big Economic Issue The Republicans Are About To Screw Up

The health care fight showed once again that bad policy is almost always bad politics. This stinker of a bill had 17 percent support in the last poll taken before Ryan had scheduled a vote on it, and the only reason it was that high was that there is still 17 percent of the American public that will support whatever Trump says is okay. Which isn’t a very high number, but at least Trump still has that going for him...

I have been basking in the health care victory since Friday afternoon, happy that the Republicans screwed up so badly, but also more proud than I can say in the progressive movement that is fighting Trump and Ryan so effectively. Having been one of the first people involved in Hillary’s health care team at the White House in 1993, and one of the people who wrote the strategic plan for the Health Care for America Now coalition that helped Obama push the ACA over the finish line in 2009-10, I knew the Republicans had no clue of how complicated and full of land mines their mission to repeal and replace the ACA was.

But even I was surprised at the passion and fight progressives and Democrats showed in defending Obamacare, in working together and staying together every step of the way, in turning out to town halls and sending millions of messages to their members of Congress through calls, letters, emails, and petition signatures. It was glorious to see how it all came together, and how unglued the Trump/Ryan team became as their monstrosity of a bill came crashing down from its own unbearable weight.

It is important to celebrate victories, but we can’t sit back and enjoy ourselves very long. We are fighting a thousand-front war, with the Trump administration trying to hack away at our most important rights, liberties, and hopes. And on the big economic issues, prepare for more war. The very day the health care bill was going down, Speaker Ryan was already talking to Trump about the next piece of horrible legislation he wants to try and ram down our throats: tax “reform” ― although Ryan’s version of reform is just as bad as the Republican version of health care “reform.” In that case it was giving massive tax cuts to the wealthy and insurance company CEOs so they could deny health care coverage to at least 24 million people. In the case of tax policy, the idea is to ― you guessed it! ― give a huge tax cut to the wealthy and big business and create a what is essentially a sales tax on many consumer goods, amounting to about the same trillion bucks.

If you haven’t ever studied tax policy, you may not know that there is nothing more regressive in terms of taxes than sales taxes. Paying an extra penny per dollar on everything you purchase hurts you a hell of a lot more when you only make $20,000 a year than when you make $20 million, so poor people might end up paying 10 percent of their income on an 8 cent sales tax while millionaires end up paying less than 1 percent of their income. In this case, Ryan doesn’t just want to add a 1 percent or 2 percent sales tax, though: he wants to add a 20 percent sales tax. It takes a lot of regressive taxes on poor- and middle-income folks to make up for the massive tax cut they want to provide for rich people.

The tax Ryan is proposing is called a Border Adjustment Tax, appropriately called the BAT because it is like a vampire sucking blood out of regular folks. He dresses it up in populist language saying it will help our trade deficit, although it is extremely doubtful it will work that way. Such a tax would inflate the dollar against foreign currencies, hurting our manufacturing sector, plus probably drawing WTO penalties, which would punish us besides.

If you want good trade policy, you need to appoint pro-worker environmentalists as your heads of the US Trade Representative office and Treasury Department. (The pro-worker part is obvious, but the environmentalist part may not be so. American companies face stricter constraints on their ability to pollute air and water than in most countries we compete with for jobs, making operating abroad cheaper.) You also need a strong ‘Made in the USA’ provision in your procurement and contracting rules.

In spite of his rhetoric, there is no evidence that Trump actually wants to do those kinds of things. But for Ryan, substituting any kind of a regressive sales tax for income taxes the affect rich people is a fantasy come true: he’d like to transition our entire federal tax system to these kinds of sales and excise taxes and fees on government services instead of having any kind of progressive income or corporate taxes.

This is going to be an incredibly important fight, just as important as, or maybe even more than health care in terms of who gets hurt and who gets helped. The Republicans apparently always want to benefit the wealthy at the expense of the regular working person. If they succeed at making this fundamental shift in our tax system from one with at least a little progressivity, to one where most taxes are paid by low- and middle-income folks, it will be a terrible day for the American economic system.

The good news is that, just like in the health care battle, there are a lot of business interests who are opposed to Ryan’s terrible ideas. A wide variety of other businesses hate this tax: from retailers who don’t want to have most of their products jacked up in price by a new form of sales tax, to the energy industry, which imports a high percentage of its product. If Democrats stay united in opposition, it will be very tough for Ryan to push the BAT idea through, and that creates a yawning trillion-dollar hole in his budget.

Politically, this fantasy policy of Ryan’s isn’t going to be very popular with the white, working-class voters Republicans are dependent upon to win elections. Can you imagine the Walmart shopper showing up at the store one day and discovering that everything they are buying is now 20 percent more expensive? When they find out why, Democrats aren’t going to have trouble winning over a whole lot of those voters: the Ryan tax plan will become less popular than the Ryan health care plan.

If the Speaker’s plan disintegrates, it will be major priority number two down the drain for the Republicans. That would be a beautiful thing for us Democrats. Defeating the Ryan health care plan and then defeating the Ryan tax plan would be an amazing political accomplishment.

Progressives need to celebrate our win on health care, but not rest on our laurels. We still have plenty of big battles to fight, including the Supreme Court, the Muslim ban, defunding Planned Parenthood, immigration, voting rights, and many more. But this tax fight will be Ryan and Trump’s next big economic priority. The policy stakes for poor- and middle-income people are enormous, so we must make it a priority to win on the tax issue just as decisively as we won on health care.