Republican senators should thank their House counterparts for their hard work on the "Tax Cuts and Jobs Act" — and then pretty much ignore the plan.
Indeed, there are already signs that will likely happen to a large extent. Not long after the much-awaited proposal was released on Thursday, Sen. Mike Lee (R-Utah) and Sen. Marco Rubio (R-Fla.) released a statement saying that while they "appreciate the hard work" of their colleagues, they want a larger expansion of the child tax credit. And other senators might want additional things: Some might push for deeper tax cuts for small business. Others might reject new limits on the mortgage deduction and the state and local tax deduction.
The problem here is that all these potential changes would only make the plan even more costly, beyond its current $1.5 trillion price tag (not counting interest on that added debt). And Senate budget rules mean the plan cannot add to deficits outside the next decade. Indeed, according to the Committee for a Responsible Federal Budget, the potential debt increase from the plan would result in the total U.S. federal debt reaching the size of the economy by 2028 and then quickly exceeding its post-World War II record.
That's a massive and existential problem for the GOP.
The government's budget scorekeepers have determined that the debt caused by the House plan will worsen by decade's end. To be clear: The plan President Trump called a "big, beautiful Christmas present" doesn't really deliver without big changes to its fiscal math.
So say goodbye to the centerpiece of the entire package: the huge cut in the corporate tax rate to 20 percent from 35 percent. That's the main feature, according to Team Trump, that is supposed to help permanently raise the U.S. economy's growth rate. But assuming there is eventually a final bill for the president to sign, that rate cut may well be temporary, which greatly diminishes its pro-growth impact. When Republicans abandoned their plan for a border adjustment tax over the summer, they also de facto abandoned deep corporate rate cuts.
The plan's growth potential is also weakened by the fact that it worsens budget deficits, which over the longer-term crowd out private investment, boost interest rates, and reduce growth. As the consulting firm Capital Economics puts it, "Although we expect the eventual bill to provide a modest boost to growth next year, the only lasting impact will be a substantial increase in federal budget deficit."
So with their party controlling the White House and both houses of Congress, Republicans have managed to cook up a tax plan — something which is supposed to be their core competency — which is weighted toward wealthier Americans, worsens deficits, and doesn't provide much growth. And then there's the likely reality that for some middle-class Americans, the GOP plan works out to a deficit-financed middle-class tax hike.
Can the Senate fix this? On paper, sure. Completely eliminate the state and local tax deduction. Make even bigger changes to the mortgage interest deduction. Pay for a 20 percent rate with higher investment taxes. Cut payroll taxes for middle-class Americans. Expand the Earned Income Tax Credit.
But at this point, an attempt to overhaul the bill would likely result in its complete collapse.
Republicans feel they need to pass this plan for their political survival in the 2018 midterms. So the GOP priority will be to pass something, anything — even if it is temporary and really doesn't do much for the economy.