An article I read recently suggested that President Donald Trump’s tax plan was based on his understanding of the Laffer Curve.  At the risk of boring some of you I decided it was worth the effort to explain what this means since tax reform is high on the GOP agenda in September.

Dr. Arthur Laffer holds a PhD in economics and was the chief economist in President Nixon’s Office of Management and Budget from 1970 to 1972.  As the story goes, Laffer was having dinner with President Gerald Ford’s top advisors, Dick Cheney and Don Rumsfeld, in 1974 when the U.S. economy was in recession.  At the time the top income tax rate was 70 percent.  Laffer was counseling Cheney and Rumsfeld that the top federal tax rates were too high and that high taxes were stifling economic growth.  To emphasize his point, he drew a crude graph on a napkin that I believe looked something like graph from the Laffer Center depicted here.

Laffer’s purpose was to show that as the top tax rate goes up it initially increases revenue but at the tip of the curve economic growth is stifled and revenues begin to go down.  At a 100 percent tax rate no revenue would be collected because there would be no incentive to work.  This is obviously false since the top tax rate during 1952 and 1953 was 92 percent and lots of people were still working and paying taxes, even the very rich who were subject to that rate.

The key question was — and still is — at what top tax rate is revenue maximized without discouraging productivity and investment?  As far as I know Laffer did not suggest what the optimum tax rate would be at the time, although his symmetrical curve would seem to indicate that revenues would be maximized at a top tax rate of around 50%.  Today the top rate is 39.6 percent.

Devotees of the Laffer Curve use it to show that tax cuts stimulate economic growth and tax increases suppress economic growth.  The Laffer Curve has even been used to support a theory that tax cuts actually pay for themselves by creating strong economic growth.   In fact Treasury Secretary Steve Mnuchin claimed that Trump’s plan would do that.

In 1981 Dr. Laffer became a member of President Ronald Reagan’s Economic Policy Advisory Board and remained in that position for eight years.  It was during Reagan’s tenure that “supply-side economics” became the prevailing economic theory in the Reagan administration.  And Laffer was its champion.

No doubt Laffer influenced Reagan’s first big tax cut in 1981 that reduced the top rate from 70 percent to 50 percent. Then Reagan’s 1986 tax reform brought the top rate down to 28 percent in 1988.  This reform was designed to be revenue neutral so it collected the same amount of revenue as when the top tax rate was 50 percent.  Although rates came down significantly, this reform is not considered to have been a tax cut.

Dr. Laffer now runs Arduin, Laffer & Moore Econometrics (ALME), an organization that does consulting and studies for mostly Republican led states like Kansas and North Carolina.  Typically these studies suggest that if a state eliminates its personal and corporate income tax systems and replaces them with a much higher consumption (sales) tax, the state’s economy will boom.  Of course, a sales tax puts the greatest burden on middle to lower income wage earners and the elderly on fixed incomes.

The study that ALME did for North Carolina in 2012 was entitled, “More Jobs, Bigger Paychecks,” It recommended a consumption tax based system.  In January 2013 the Institute on Taxation and Economic Policy published a report that concluded the ALME study for North Carolina “relies on an economic analysis that is fundamentally flawed to the point of making it entirely useless.”

Kansas Republican Governor Sam Brownback relied heavily on Dr. Laffer’s advice when he and the Republican controlled legislature passed a massive tax cut in 2012.  But instead of stimulating strong growth, tax revenues plummeted and huge spending cuts became necessary.  To this day the Kansas economy has not kept pace with its neighboring states.  In short, the Kansas tax cuts were a disaster.

Here are a couple of other data points on tax cuts:  President John Kennedy reduced the top tax rate from 90 percent down to 70 percent (enacted in 1964 after his death).  This tax cut was by some measurements larger than Reagan’s 1981 cut but Kennedy is rarely mentioned as a tax cutter, nor is his tax cut touted as having spurred economic growth.

President George W. Bush engineered large tax cuts in 2001 and 2003 that were also larger than Reagan’s in some respects.  But his eight years in office ended in the Great Recession and he had the worst job creation record, on record, according to the Wall Street Journal.

There is nothing simple about tax policy, either in theory or in practice.  But in my opinion the Laffer curve is entirely too simplistic to be useful.  It focuses on the top tax rate when in truth the top rate is just one factor in tax policy as Reagan’s 1986 tax reform demonstrates.  So I would not conclude that the Laffer curve is a joke; I just don’t think it has much relevance in today’s economy and Republicans shouldn’t claim that it does.

During the past eight years Republicans in Congress spent most of their time obstructing President Barack Obama’s agenda.   But they also focused on passing legislation that was popular with their base.  They tried to repeal Obamacare over 50 times.  They tried to defund Planned Parenthood and they did everything they could to eliminate or hobble climate change initiatives. The draconian concurrent budget resolutions they passed would roll back the social safety net and weaken the federal government.  And they promoted religious freedom laws that would protect individuals and businesses that use their religious beliefs as an excuse to discriminate.

Most of these bills simply slipped under the radar because everyone knew they would never be signed into law.  Republicans were overjoyed when they finally put a bill to repeal most of Obamacare on the Obama’s desk in 2015 but those who voted for it knew he would veto it.  Well, that very same bill failed miserably last week in the Senate as Majority Leader Mitch McConnell (R-Ky.) tried to pass something – anything — to weaken Obamacare.  His caucus wasn’t so enthusiastic when they knew their votes would have consequences.

The GOP quest to repeal Obama’s signature law is not over but the effort so far this year was stopped in its tracks due mainly to protests by concerned, involved citizens.  The Congressional Budget Office told them what Republicans were doing to their health care and they reacted loudly and forcefully.

Now Republican leaders are working on their second big priority, tax reform.   A robust infrastructure plan that would truly help boost the economy and aid American workers has fallen by the wayside.  Although a tax bill is thought to be an easier lift than health care, I am betting the public will be much more interested in the details of this legislation after the Obamacare repeal debacle.

Congress has abandoned Washington for a totally undeserved August vacation where they will no doubt get an ear full from constituents on their legislative failures during the past six months.  As they were departing President Trump was turning the White House into a carnival sideshow where no one seems to know what is going to happen next.  We can only pray that no crisis like 9/11 or hurricane Katrina occurs. 

Fortunately the news media has kept focused on the various investigations into Russian meddling in the 2016 election and I think most of the public is interested in this process too.  Trump didn’t help his cause by holding a two plus hour love-in with Russian President Vladimir Putin at the recent G-20 economic summit.  To me this meeting was an embarrassment to our nation and we have to wonder what Trump sees in the autocratic Putin who controls the media and eliminates his opponents.

Compared to most other members of the G-20 Russia is big “nothing burger.”  According to a chart published by the International Monetary Fund, Russia’s 2017 gross domestic product (GDP) will be $1.56 trillion.  That’s slightly less than Canada, slightly more than South Korea and only 63 percent of California’s GDP, the sixed largest in the world.  If not for the fact that Russia has around 4,000 nuclear missiles, most of which are probably aimed at the United States, the country would be of little significance in world affairs.  Putin wants to change that perception in any way he can.

So what does Russia have that makes it so important in Trump’s eyes.  Well, evidence indicates that Russian hackers helped him get elected.  No doubt he liked that.  Trump Jr. has disclosed that Russians are heavily invested in financing Trump’s businesses.  It’s hard to argue with that basis for friendship.  Or maybe, just maybe, Russia has some damning video or documents that could severely damage Trump. 

Some reporters are beginning to speculate that Putin was more interested in destabilizing our democratic processes than electing Trump.  Either way, he got so much more.   Trump is disrupting U.S. foreign policy and weakening American leadership around the world.  It seems obvious to me that Putin left tracks leading back to the Kremlin so the world would know that Russia could cyberattack the U.S. at will.  He thinks that makes Russia look like American’s equal.  But not even a savvy politician like Putin could have anticipated the chaos that is occurring in the Trump White House.

I try to look for a silver lining in Trump’s election and I’ll admit it is elusive.  But now Republican policies will finally be subjected to full public scrutiny like they were with the Obamacare repeal.  Then voters may come to understand what Republicans are trying to do to them.  Perhaps they will realize that these conservatives don’t really care about ordinary people’s health care or financial wellbeing.  And it may become clear to the middleclass that the GOP tax reform is nothing more than a gift to the rich at their expense.

Some may call me naïve and maybe I am.  But I relied on the fairness of well-informed juries in huge litigation cases during my career without regret.  I have to believe that when Trump and the GOP leadership show a callous disregard for the public wellbeing in legislation — as they did last week — the good people of this great country will rise up and reject it.  We shall see.

Footnote:  For those who read my blog about a letter to a Republican congressman; he has not responded.

House Budget Committee Chairman Diane Black (R-Ten.) rolled out the GOP’s fiscal year 2018 budget resolution last week entitled “Building a Better America (BBA).”  This budget covers fiscal years 2018 through 2027 and claims to achieve $6.5 trillion in total deficit reductions compared to the Congressional Budget Office spending and revenue baseline for the same period.  

Needless to say, that is a lot of money and these deficit reductions have to come from somewhere.  Either revenues must be increased or spending must be decreased or some combination of the two must occur.  Ms. Black claims that the BBA will produce a balanced budget with a $9 billion surplus in 2027.  That’s a pretty tall order since the CBO baseline projects a $1.4 trillion deficit for that year. 

So how will the BBA accomplish this magic?  As usual Republicans mostly want to cut social welfare programs and taxes.  The bullet points are quotes from their documents:

• This budget addresses Obamacare by incorporating the House-passed American Health Care Act and all of its savings.

Oh, it assumes the AHCA will become law.  This bill barely passed in the House and it was roundly rejected by Senate Republicans.  Even the milder Senate Obamacare replacement legislation may fail.  Clearly the savings anticipated here are questionable.

• Reforms Medicaid to ensure the program works best for the most vulnerable and gives states more power to tailor their Medicaid programs to meet the unique needs of their populations.

The Republican’s AHCA would reduce Medicaid funding by $800 billion over the next decade.   Perhaps they should have added:  “Prevents the need for painful medical procedures by eliminating your health care insurance.”  Congressional Republicans can’t sell the Medicaid proposals to their own members let alone the voters.

• Saves and strengthens Medicare by moving to a premium support system that gives seniors more control of their health care. 

Yep!  This budget transitions Medicare to a system that provides beneficiaries a voucher with which to buy health care policies from insurance companies.  Supposedly there will be an “option” to retain traditional Medicare, but I suspect it will be too expensive for most seniors to afford.  When the public focuses on this proposal, all hell will break loose.

• Border wall funding is also included in this budget through various Department of Homeland Security construction accounts.

Although this funding is not certain to survive amendments, did anyone doubt Republicans would try to fund the border wall even though it is widely believed to be a waste of money? 

• This budget gives reconciliation instructions to 11 House committees to achieve at least $203 billion in mandatory savings and reforms (over 10 years). 

Here they are mainly talking about food stamps, housing assistance and other so-called entitlements.  Reductions to these programs will be difficult to achieve, but the House Freedom Caucus wants to cut double this amount. 

• The resolution also instructs the Ways & Means Committee to produce deficit-neutral (revenue-neutral) tax reform legislation that will reduce tax rates and simplify the tax code to boost economic growth. 

What Republicans are actually talking about is a tax cut for the wealthy, which they always claim will jump start economic growth and create jobs.  But it doesn’t actually work that way.  President George W. Bush cut taxes significantly in 2001 and 2003 and he ended his eight years in office with the Great Recession and the worst job creation record, on record, according to the Wall Street Journal. 

But never mind the facts.  Tax reform is the real purpose of the BBA budget resolution.   It’s the vehicle by which tax legislation can be passed without fear of a Democratic filibuster in the Senate.  Unfortunately for the GOP leadership, this legislation faces tough sledding in the House.  The Freedom Caucus has already signaled that their support requires significantly more spending cuts and funding for the border wall.  They prevented passage of the GOP’s FY 2017 budget resolution in 2016.

• We estimate that the pro-growth policies of health care reform, tax reform, welfare reform, and deficit reduction assumed in our budget will yield economic growth of 2.6 percent on average over the 10-year budget window, resulting in $1.5 trillion in deficit reduction.

Many economists would say that the BBA depends on a “pie in the sky” growth estimate.  The CBO believes economic growth will be much more modest over the next decade.  Just look at 2017.  Unemployment is low, corporations are quite profitable and still economic growth is less than two percent.

Don’t get me wrong; we need to reduce deficits and control the national debt.  But it must be done by controlling spending AND increasing revenues.  I am confident that Social Security, Medicare and Medicaid costs, which are by far the largest parts of the federal budget, can be much better controlled.  And I believe revenue can be increased while lowering the top tax rates, eliminating deductions and simplifying the tax code.  Both will require focused, bipartisan legislation.

Bipartisan, however, hasn’t been in the GOP lexicon for the past eight years. It’s the same problem they had with health care reform; major legislation must be passed with only Republican votes.  But even radical bills like the AHCA and the BBA fail to meet the far-right standards of Tea Party conservatives.  They haven’t changed since 2010 and neither have the budgets produced by Republicans since they took control of the House in 2011.

Eight years ago newly elected President Barack Obama initiated a complex process to make a paradigm shift in the U.S. health care system.  The objective was to provide health insurance for more people.  In other words Democrats wanted to solve a health care problem.

After numerous hearings, debates and amendments Congress passed the Affordable Care Act known as Obamacare and it was signed into law in 2010.  Not one Republican voted for it.  This was probably due to Senate Minority Leader Mitch McConnell (R-Ky,) who didn’t want to give Democrats any chance to call this legislation bipartisan.

The narrative that Republicans spread was that the law was “crammed down our throats.”  They claimed that the GOP was shut out of the process and had no opportunity to participate in crafting the law’s provisions.  They also characterized Obamacare as a government takeover of health care.  All of this was mostly false but with the help of the right-wing media and wealthy conservative backers, their misinformation prevailed.

The whole idea of insurance is spreading the risk over large populations.  This is true for homeowners insurance, auto insurance and so on.  For example, I have never filed a claim on my homeowners insurance in over 40 years yet my premiums have paid for a lot of claims by others.  The same is basically true for my auto insurance, which I am required to maintain by state law.

I have always thought of Obamacare as a health insurance regulation rather than a government program like Medicare.  But the law is so complicated that very few pundits or politicians have a clear understanding of how it works and neither do those who benefit from it.

One of the simplest and best explanations of Obamacare was provided by Paul Krugman in a recent New York Times article entitled “Three Legs Good, No Legs Bad.”  In this article Krugman explained that Obamacare is like a stool with the following three legs:

1.      Insurers must offer the same plans to everyone at the same prices, even those with pre-existing conditions.

2.      Everyone is required to have health insurance or pay a penalty (the individual mandate) and all policies must cover 10 essential health benefits, including hospitalization.

3.      Government provides subsidies to help those with lower incomes purchase plans and those with really low incomes are provided insurance through an expanded Medicaid program mostly funded by the federal government.

Leg one spreads the cost of medical care across those who are healthy and those with pre-existing conditions, which adds stability to the insurance markets.  Let’s face it, insurers don’t care if everyone has health insurance, their main objective is making a profit.  They need more healthy people paying premiums to offset the cost of medical expenses for those who aren’t healthy in order to do that.  For them it is just that simple.

Leg two is designed to make sure more healthy people buy health care policies and that those policies are not skimpy plans that really aren’t much better than no insurance at all.  Leg three provides resources so that those with lower incomes can afford to buy plans and insures that those who could not afford plans even with subsidies will have health insurance.

Needless to say, if one leg of a three legged stool is removed it will collapse.  The same is true of the Obamacare legs.   Conservative Republicans understood this so they attempted to remove these legs via strategic legal attacks.  Their most serious challenge was to the individual mandate that required everyone to have health insurance.  It narrowly failed in the Supreme Court.

Today, after seven years of failed attempts to defeat Obamacare, conservatives are about down to the last chance they will have this year to get the job done.  Their vehicle is the Senate’s Better Care Reconciliation Act (BCRA).

Although this bill will not fully repeal Obama’s law, it will do serious damage to it.  Opponents who have a flair for the dramatic might say that those with pre-existing conditions, many older adults and the poor are standing on Obamacare’s three legged stool with a noose around their necks.  These detractors believe that the BCRA will kick the stool out from under them.

Their fears are probably well founded.  The BCRA includes an amendment by Sen Ted Cruz (R-Texas) that would allow insurers to offer bare-bones policies so long as they offer one Obamacare qualifying plan.  This would eliminate leg one and the part of leg two that requires plans to cover essential benefits.  Other parts of this Act repeal the individual mandate of leg two, lower the subsidies of leg three and cut $772 billion over 10 years from its Medicaid funding.

We must wait for the Congressional Budget Office score next week to more fully assess the damage the BCRA will cause to the U.S. health care system but I think it will be extensive.

Congressional Republicans promised to have Obamacare repealed and replaced within weeks after Trump was inaugurated.  Yet the process has dragged on for almost six months.  There are good reasons for the difficulties.  Republicans are not trying to solve a health care problem; far from it.  They are trying to solve a political problem with their supporters and eliminate the Medicaid program as it currently exists.

I think this tells us all we need to know about the BCRA.

Ten years ago while vacationing with the family I met a freshman Republican congressman whose family was on the same tour.  Since we belonged to the same party and had a mutual friend in the U.S. House we connected.  Almost immediately I liked this young guy.  He was down to earth, level headed and thoughtful.

Over the years I followed his career and the positions he was taking in Congress.  While we haven’t agreed on many policies, my positive opinion has never changed regarding his character, his dedication to his constituents and his love of country.

Recently I decided to express my concern about the administration of President Donald Trump in a letter to my vacation friend.  This is the substance of that letter:

____________

Over the years I have watched the GOP move further and further to the right.  Fox News, dozens of right-wing radio talk-show hosts, the National Rifle Association and funding from conservative and libertarian billionaires like the Koch brothers have been pushing the Party toward a no compromise mindset that I think threatens our Republic and our democratic processes. These conservatives have fomented hatred of all those who do not agree with them.

The media, those who protest and “the Left” are demonized as dangerous or unfit to govern.  The logical conclusion is that those on the left should not be allowed in government.  A recent NRA video appeared to be a call for violence against progressives.  The NRA represents hundreds of well-armed militia groups that are eager to comply.

The election of Donald Trump has exacerbated the dangers.  I strongly believe that Steve Bannon, Stephen Miller and other members of the Trump administration, along with some factions within the Party, now believe it is their mission and duty to decimate the federal administration and take complete control of the government.  If they can fill the federal benches and the Supreme Court with enough like-minded jurists they just might be able to do it.

These coming months could make all the difference for the future of the United States.  If the investigations of Russia’s involvement in the 2016 election and related activities by the Trump campaign and Trump’s associates are terminated without full disclosure and without prosecution of guilty parties I believe our nation will be severely and permanently damaged.

It is my fervent hope that you will help prevent these calamities.

____________

This letter might seem too pessimistic for some folks and some might scoff at the suggestion that an American political party would seek to totally eliminate its opposition.  They may counter by highlighting the separation of powers in the Constitution and claim that the Supreme Court would never allow that to happen.   I hope they are right.  But just consider what Republicans have been doing in state legislatures, in the Congress and now in Trump’s administration.

In 2010 Republicans took control of many state houses and elected GOP governors.  In 2013 many of these states enacted strict voter ID laws after the conservative majority on the Supreme Court struck down Section 4 of the Voting Rights Act.  Federal courts have held that several of these laws were designed to make voting more difficult for minorities and others who typically vote for Democrats.  Some of these states also conducted purges of the voter rolls that resulted in the elimination of properly registered voters, particularly minorities.

In Congress Minority Leader Mitch McConnell (R-Ky.) embarked on a policy of total obstruction of President Obama’s agenda in 2009.  His efforts resulted in over 100 vacancies on federal courts at the end of Obama’s second term and a vacancy on the Supreme Court.  It was as if McConnell believes that only Republicans should be allowed to appoint federal judges.

Of course, Trump and Senate Republicans quickly filled the Supreme Court vacancy with a very conservative jurist, Neil Gorsuch.  Over time Trump may be able to appoint two or more additional Supreme Court justices and up to 38 percent of the federal judiciary according to one study.  No doubt he will politicize the courts with judges that will support his agenda.

Recently Trump appointed Kansas Secretary of State Kris Kobach as head of a newly created Election Integrity Commission.  The commission is supposedly investigating illegal voting in the 2016 election.  Trump believes voter fraud cost him the popular vote even though he has no credible evidence to prove that.  Regardless, Kobach has requested that all 50 states provide the commission with private information from their voter rolls, including how people voted back to 2006.  Kobach is a well-known champion of voter suppression and I believe he will use this information for that purpose.

Trump’s attacks on the media are continuous, unprecedented and vicious.  He even called the media the enemy of the people.  This week he lauded Poland where the press is controlled by the government and he said it was an “honor” to meet Russian President Vladimir Putin who likely ordered a cyberattack on our 2016 election and who also controls the media.

Trump seems to have no appreciation for the rule of law and he talks like a would-be dictator who would eliminate freedom of the press if he could.

Yes, some may read my letter and ask why I’m so concerned for our Republic and its democratic processes.  My answer is:  All of the above and a lot more.

Speaker of the House Paul Ryan (R-Wis.) is desperate to pass tax reform legislation.  His objective is to replace President Ronald Reagan’s 1986 tax reform with a “revenue neutral” plan that would not alter the current Congressional Budget Office 10 year revenue projection of $43 trillion.

There are several reasons why Ryan is taking the reform route.  Under the 1974 budget act, legislation that increases deficits after 10 years must expire in 10 years.  This law caused President George W. Bush’s budget busting tax cuts of 2001 and 2003 to end on December 31, 2012.  (Remember the fiscal cliff?)  Tax legislation that is revenue neutral becomes permanent and is much more difficult for a future administration to change.

Ryan’s plan proposes a border adjustment tax of 20 percent to be levied on imports.  This tax would collect $1 trillion over 10 years.  Needless to say Walmart and numerous other retailers and importers are strongly opposed to it.  So why does Ryan want this unpopular tax increase?  Well, the added revenues will allow him to give greater tax cuts to the wealthy and still keep his tax plan revenue neutral.

The GOP’s Better Care Reconciliation Act (BCRA ) being argued in the Senate also figures in Ryan’s tax planning.  The BCRA repeals the Obamacare taxes, which would reduce federal revenues by around $1 trillion over 10 years.  Consequently Ryan’s plan could be revenue neutral by collecting $42 trillion instead of currently projected revenues of $43 trillion — and he could give even greater tax cuts to the wealthy.

Still, how do Republicans cut tax rates without decreasing revenues?  It’s really quite simple; they shift the tax burden to those who aren’t so wealthy and even to some who are.  Tax experts call it broadening the tax base.  One way to do this is by eliminating deductions and loop holes.  For example, the mortgage interest deduction is a huge benefit to millions of homeowners.  Placing limits on the amount of interest that can be deducted or limiting the deduction to one home would add billions to government coffers.

Another important itemized deduction is that for state and local taxes.  Ryan’s plan would eliminate it.   Of course, taxpayers in high income tax states like California, New York and other typically Democratic controlled states would likely suffer the most if they can’t take this deduction, particularly the wealthy.

Can tax reform be passed quickly by partisan politicians?  Not likely.  The effort on Reagan’s tax reform began in November 1984.  By the time it was signed in October 1986 it was a bipartisan bill supported by prominent Democrats.  Republicans liked it because it lowered the top rate to 28 percent.  Democrats liked it because it closed loop holes and raised the capital gains rate from 20 percent to 28 percent.  Even though Reagan lowered the top tax rate from 50 percent to 28 percent, taxes increased for some higher income taxpayers and for corporations.

That’s the way tax reform is done; it benefits some and burdens others.  Therefore it is difficult to achieve and takes a long time to accomplish.  For Reagan it took around two years.  Ryan and the GOP are trying to accomplish this feat in a couple of months and without support from Democrats.

President Trump has a tax proposal too.  It differs somewhat Ryan’s plan and it doesn’t attempt to achieve revenue neutrality by cutting some taxes and raising others.  According to Treasury Secretary Steve Mnuchin Trump’s plan will “pay for itself” with enhanced economic growth.  Ryan knows that won’t happen and so do many Republicans.  Just last month they watched the “pay for itself” tax cut plan of Tea Party Kansas Gov. Sam Brownback go down in flames after it caused four years of fiscal agony for Kansas.

The BCRA has apparently backed up everything in Congress and Republicans can’t seem to find the right laxative.  Lawmakers haven’t started to deal with raising the debt limit; and they haven’t produced the 12 appropriations bills for FY 2018 that starts October 1.  Congress is scheduled to recess the entire month of August, and as the song says, “the days grow short when you reach September.”

Perhaps Speaker Ryan and Senate Majority Leader Mitch McConnell will try to pass a health care bill and a debt limit increase in July.  They may also cancel the August recess so Republicans can work on tax legislation and the appropriation bills. Obviously they are running out of options.

I think the only thing Republicans can do with taxes this year is cut the rates for higher income taxpayers and fiddle with some other provisions of the 1986 law.  Lowering rates will no doubt increase the federal deficits that are already projected to add $9.5 trillion to the national debt by 2027 according to the CBO.

Still, there is a chance that none of this legislation will come to fruition by late September.  Then Congress will have to pass another “kick the can down the road” continuing resolution to temporarily fund the government and increase the debt limit.

The Republican legislative fiascos so far this year clearly show how an incompetent president and a divided GOP handle domestic issues – very poorly.

When Republicans took control of the Senate in 2015 Majority Leader Mitch McConnell (R-Ky.) proclaimed that serious adults were now in charge.  Well, they sure haven’t proven it.  The Republican controlled Congress didn’t accomplish much in 2015 or 2016 and so far in 2017 they have accomplished even less.  I think their failures were caused by the reasons why the GOP can’t govern.

Reason one is because the party is unbelievably divided.  Although Senate Republicans are somewhat easier for McConnell to control, Senators like Ted Cruz (R-Tex.), Mike Lee (R-Utah) and Rand Paul (R-Ky.) are quite willing to advocate their extreme positions and disrupt party unity.

In the House the ultra-right Freedom Caucus and Republican Study Committee comprise more than 170 members, many of whom align with the Tea Party.  Their mission is to cut spending and reduce deficits.  They don’t want to appropriate federal funds for anything except defense.

The intransigence of right-wing House members was apparent in July 2011 when they almost succeeded in causing a catastrophic default on the nation’s debt.  They were also the main cause of the partial government shutdown in October 2013.  As a result of their radical positions on spending there has not been one normal federal budgeting process since Republicans took control of the House in 2011.  Finally they forced Speaker John Boehner’s (R-Ohio) to resign from Congress in 2015 because he negotiated with Democrats to pass critical government funding bills and debt limit increases that they opposed.

Now Republicans have President Donald Trump in the White House and majorities in both chambers of Congress.  Legislating should be smooth sailing, right?  Wrong!  In March the Freedom Caucus initially refused to support the GOP’s American Health Care Act (AHCA) because it wasn’t “mean” enough.  Eventually they found a way to make it meaner.

The Senate version of the AHCA may be somewhat softer, but Senators Paul, Cruz and Lee are objecting to the improvements.  More moderate Republican Senators think the Senate version “is not the answer.”  Even if the Senate passes a health care bill next week it will go back to the House where the conservative cabal has already said it won’t pass in its current form.  Is there a clear path to repealing and replacing the Affordable Care Act (Obamacare) this year?  I don’t think so.

Meanwhile tax reform is waiting in the wings.  This is every Republican’s favorite legislation and should be an easy lift.  But the White House and some conservatives are objecting to the border adjustment tax favored by Speaker Paul Ryan (R-Wis.), perhaps because it is a tax increase.  This brings me to the second reason the GOP can’t govern — Grover Norquist’s pledge to never raise taxes on anything.

The vast majority of congressional Republicans have signed Grover’s pledge.  It’s not just some aspirational promise; it is a blood oath that Norquist enforces with ample funding from his Americans for Tax Reform organization.  Republicans who want to avoid a primary challenger in the next election must vote against any type of tax increase.

Consequently there is almost no spending program Republicans will support if it involves increasing taxes or deficits.  Infrastructure is a prime example.  Our roads, bridges, water systems and airports are in desperate need of upgrade and repair.  All citizens should recognize this and be willing to pay a little more in taxes, particularly the wealthy.  Instead, Republicans want to give them a tax cut.

The third reason is the GOP’s reluctance to compromise on issues unless absolutely necessary.   Hounded by conservative media commentators on Fox News and by radio talk show hosts like Rush Limbaugh most Republicans in Congress fear taking a moderate position on legislation or making a deal with Democrats.  The AHCA and tax reform are prime examples.

In 2010 Minority leader McConnell railed against the Democrats’ use of budget reconciliation to pass Obamacare with only Democratic votes.  But now he plans on passing both the Obamacare replacement and tax reform with the same process. Unfortunately for McConnell, reconciliation can only be used twice this year.  It is hard to see how Congress will get any other major legislation passed without dreaded compromises.

Last, but certainly not least, are the GOP’s core policies.   Republicans are anti-gun control, anti-abortion, anti-gay, anti-immigration, anti-climate change, anti-Muslim and some say anti-women.  Republican controlled states have pushed some of these policies but most have not gained traction in Congress.  Trump’s base of mostly older, white supporters may love the GOP agenda but these folks are only around 35 percent of the voting population.

Thankfully the majority of younger and many older Americans do not hold the same views. Poll after poll shows that they favor stricter gun controls and environmental regulations; they agree that climate change is an important issue; they aren’t strongly against abortions; and they are much more accepting of gays, immigrants and Muslims.  Chances are that most voters will push back hard against Republican attempts to legislate their far-right policies like the AHCA.

This legislation clearly shows that Republicans are not trying to solve a health care problem by replacing Obamacare; their objectives are to cut taxes on the wealthy and pay for it by permanently rolling back the Medicaid insurance program that covers nearly one in five Americans.

No political party can govern by robbing from the poor to benefit the rich.

The Crawford Counties of the nation are a big reason why Donald Trump won the 2016 election and probably why Republicans control the majority of state houses.  I think the votes in these mostly rural areas reflect dissatisfaction with Washington and Congress.  And perhaps even white voters were listening when Trump encouraged African-American citizens to vote for him by saying, “What the hell do you have to lose?”

Crawford County borders the Mississippi River in Southwestern Wisconsin.  It is one of the state’s poorest with a 2014 population of 16,392.  Recently Associated Press reporter Claire Galofaro wrote an interesting article on this area entitled, “Voters await economic revival in a part of pro-Trump America.”

Crawford is a small, predominately white, Midwestern county where most of the ambitious young people leave for college or a better job and they don’t come back.  Those who stay carry on the business or the farming that sustained their parents or work in one of the area’s small shops.  Only 15 percent of the residents have a college education.  This area of Wisconsin  appears to be fairly representative of Middle America.

The local 3-M plant and a Cabela’s distribution center employ hundreds of workers.  But jobs that pay above $12 per hour are hard to find and the $44,000 median household income is $9,000 below the state average.  Even couples who are both employed find it difficult to make ends meet.

Of the people Ms. Galofaro interviewed many had voted for Barack Obama.  So why then would they cast their lot with Donald Trump?

Well, one 50+ year-old woman who is working in a small factory sewing sports uniforms for $10.50 per hour switched.  Although she still admires President Obama; she can’t afford health insurance.  A dairy farmer whose profits have been plummeting thinks Trump is a jerk but was willing to take a chance with him.  These and others in the area see low wages that aren’t rising and health care costs that are.  They have an uneasy feeling that their situation will not get better while the fortunes of others – perhaps the elite Trump railed against — are improving.

Further east in another depressed area is McDowell County, West Virginia.  According to a Washington Post article, chronic diseases cause this county to have the shortest life expectancy in the nation.  At one of the five clinics operated by the Tug River Health Association a nurse practitioner treats a lot of unemployed coal miners.  Many of them once had good paying jobs and company health insurance.   For now they are able to get free health care due to the Medicaid expansion under the Affordable Care Act (Obamacare).  In fact, last year 61 percent of the 20,000 visits to Tug River’s clinics were covered by Medicaid.

One 54 year- old miner walks with a cane and suffers from diabetes, arthritis, diverticulitis, high blood pressure and high cholesterol.  He may no longer be employable but he listened to Trump’s promises to bring coal jobs back.  He didn’t understand what problems repealing Obamacare would cause but figured that if he had a job that provided health insurance he wouldn’t need Medicaid.  So he joined the 74 percent of the county that voted for Trump.

It is likely that a large percentage of these voters benefit from government assistance of some kind, not only Obamacare and Medicaid but food stamps and Medicare.  Yet a recent survey showed that 36 percent of West Virginians favored the GOP’s American Health Care Act, one of the highest approval ratings among the states.

Swift County, Minnesota is a rural area a couple hours’ drive west of Minneapolis.  In 2010 the Prairie Correctional Facility closed, eliminating more than 350 jobs.  This was devastating for a population of 9,700.  Thereafter the poverty rate increased and unemployment soared.  The local farmers were in a bind because the global commodity markets tanked and so did prices for corn, wheat and soybeans.

Although Swift County voted heavily Democratic in the past, last year Trump beat Hillary Clinton by taking 59 percent of the vote.  These voters believed the recovery hadn’t reached them so they took a chance that Trump’s promises might improve their economic conditions.

Recent statistics show that rural counties are voting for Republicans while urban counties are strong for Democrats. According to researchers at Brookings less than 500 counties across the nation voted for Clinton in the 2016 election; Trump won in around 2,600.  But the counties that voted for Clinton produce an astounding 64 percent of the nation’s gross domestic product.

Obviously Trump’s supporters live in less productive areas where folks must wonder how his budget will help them.   Well, here is some of what it calls for over 10 years:  Medicaid cut by $610 billion on top of the AHCA’s cuts of $800 billion, agriculture cut by $46.5 billion, including support for crop insurance, education cut by $143.2 billion and food stamps cut by 190.9 billion.

Not all of Trump’s cruel budget will be included in the fiscal year 2018 appropriations but you can bet Congress will reduce federal spending significantly.  Meanwhile Trump is proposing tax cuts that will benefit the wealthy urban counties and he’s flip-flopping on health care and other promises he made to his rural county base.

So I have to wonder — what does Crawford County think of Trump now?

While most of the nation was focused on former FBI director James Comey’s testimony before the Senate Intelligence Committee on Thursday other important issues were brewing.  The investigations of Russian hacking and the involvement of Donald Trump’s campaign may take years to resolve; here is what was on the front burner last week.

Senate Majority Leader Mitch McConnell put the Obamacare replacement legislation on a fast track and told President Trump that a bill would be passed before the July 4 recess.  Unfortunately we don’t know what’s in this bill.  It is being drafted in secrecy by a dozen or so conservative Senate Republicans.  No problem, Trump will sign it without hesitation and tout it as a huge advancement for health care. 

The Senate will make some improvements to the American Health Care Act that was passed by the House.  Still, the final GOP bill will leave millions of people without health insurance.  Medicaid funding for Planned Parenthood will likely be eliminated and those who receive subsidies may be prevented from purchasing policies that cover abortion — same old, same old.

Meanwhile, the Trump administration is creating uncertainty in the Obamacare markets that is driving up premiums.  Insurance companies in these markets need assurance from Trump that they will receive payments of cost-sharing reductions next year for those low income policy holders that need help with co-pays and deductibles.  In North Carolina, Blue Cross Blue Shield would have asked for an 8.8 percent premium increase for 2018 but due to the cost-sharing payment uncertainty the company asked for a 22.9 percent increase. 

One way or another, Republicans are determined to cripple Obamacare and make health care much less affordable for millions of U.S. citizens.  And they are likely to make premiums more expensive for the rest of us too. 

This week the House passed the Choice Act.  This legislation dismantles most of the protections provided by the Dodd-Frank Act that was passed in 2010 in response to the 2008 financial crisis.  Rep. Jeb Hensarling (R-Tex.) introduced the Choice Act.  He said the Lehman bankruptcy “worked as it should have worked.”  In other words when large financial institutions fail they should not be rescued by the taxpayers or subject to Dodd-Frank’s orderly liquidation authority that was designed to avoid a taxpayer bailout.  The Choice Act repeals that authority and allows bankruptcy chaos to control.

I suspect that there are very few members of Congress who understand what Dodd-Frank does to protect  taxpayers and consumers from uncontrolled financial practices.  But one of its key provisions was to establish the Consumer Financial Protection Bureau that consolidated the responsibility for 10 separate consumer protections under one agency. 

The C.F.P.B. has authority to prosecute unfair, abusive and deceptive practices like the fake accounts Wells Fargo created for its clients.  The Choice Act would repeal that authority.  Reports indicate the C.F.P.B. has recovered around $12 billion for 29 million consumers who were damaged by questionable bank practices.  The Choice Act would essentially pull the bureau’s teeth.

Keep in mind that Republicans wanted market forces to correct the growing financial crisis created by the Lehman Brothers collapse in 2008.  The majority of Republicans in the House (101) voted against President George W. Bush’s Troubled Asset Relief Program in October 2008.  Without TARP’s stabilizing effects the financial markets could have collapsed, leading to a worldwide depression and a ravaged global economy.  

So what says the GOP; we’ll turn the clock back to 2008, que sera sera.

Although congressional Republicans are still working on a tax cut for the wealthy, milestone tax legislation was passed in Kansas last week.  The Republican controlled legislature overrode the veto of Republican governor Sam Brownback and voted for an income tax increase.

Yes, you read that right; Republicans actually approved a tax increase that will raise Kansas revenues by $1.2 billion over the next two years.  It rolled back some of Brownback’s massive tax cut that took effect in 2013.  At the time Brownback told the Wall Street Journal: “My focus is to create a red-state model that allows the Republican ticket to say, ‘See, we’ve got a different way, and it works.’ “   And he told TV talk show host Joe Scarborough, “We’ll have a real live experiment.”

Well, Kansas built a tax haven for businesses — but they didn’t come.  Instead Kansas legislators had to slash budgets for state services, including funding for education, libraries, public health programs and court systems.  Reports indicate that Kansas school teachers left the state in droves.  Kansas burned through its $700 million reserve fund and took $1 billion from the highway improvements fund to pay for Brownback’s tax cuts.   Even a large sales tax increase in 2015 didn’t help much.

Since 2013 Kansas credit ratings have been downgraded several times; Kansas gross domestic product increases have lagged the nation’s GDP performance significantly; and private employment growth in Kansas from 2013 through March 2017 was 45 percent less than U.S. employment growth.  In short, the “cut taxes and grow the economy” experiment failed miserably, not only in Kansas but in other Republican controlled states like Oklahoma and Louisiana. 

Obamacare and Dodd-Frank have been beneficial for health care and consumer protection while tax cut experiments have flopped.  These facts mean nothing to Republicans.  They are driven by ideology and can’t be bothered by evidence of which programs actually work.   

Congress has been in session since January 3, with Republicans in control of both chambers of Congress and a newly elected Republican president in the White House.  Congressional Republicans were all smiles as they quickly passed a concurrent budget resolution for fiscal years 2017 through 2026.  This would be their vehicle to repeal and replace the Affordable Care Act (Obamacare) with 51 votes under the budget reconciliation process.

That was over four months ago and not much has been accomplished since.  Oh, the House finally passed the American Health Care Act (AHCA), but it is wildly unpopular all over the country.

During this Memorial Day week the House is in recess — again.  So far this year the House has been in session for only 67 days.  They will have just 31 total days in session during June and July and they will be off the entire month of August.  No wonder members of Congress will do anything to keep this job.

Well, here is what they haven’t done yet and must get done before October.

Health Care – First, the Senate needs to pass some form of the AHCA, which is not a sure thing.  If the Obamacare replacement isn’t signed by President Donald Trump before September 30, the concurrent budget resolution vehicle they are using could become void.

FY 2018-2027 Budget – Trump has sent his budget proposal to Congress.  It’s called “A New Foundation for American Greatness.”  Several top level Republicans said it was “dead on arrival.”  Still, both chambers must pass a concurrent budget resolution for these fiscal years and start the appropriations process.  This resolution will be the vehicle for another reconciliation process to pass tax reform without needing Democratic votes.  Already they are a month behind.

Appropriations Bills – I don’t think there has been one normal budget process since the GOP took control of the House in 2011.  Typically Congress uses a combination of the president’s budget and their concurrent resolution on the budget – neither of which is binding — to pass 12 individual discretionary spending bills for the fiscal year starting on October 1.  These bills are signed by the president.  I seriously doubt that Congress will be able to produce 12 coherent appropriations bills by September 30 and they may have to kick the can down the road with a continuing spending resolution like they have for the past six years.

Raise the Debt Limit – The federal debt limit was reached on March 15 so there can be no more government borrowing until that limit is raised.  Treasury Secretary Steve Mnuchin can use “extraordinary measures” to keep the government funded for several more months but due to slow revenue collections since March he has requested a “clean” debt limit increase bill from Congress by the end of July.  Far-right Republican House members may try to obstruct this process with poison-pill amendments like they did during President Obama’s administration.  Hopefully another debt limit crisis will be avoided.

Tax Reform – Tax reform, or at least a tax cut, is the most important item on the Republican agenda, and always is.  Trump has proposed a tax cut plan and so has House Speaker Paul Ryan.  But there is no broad GOP consensus on various taxing issues.  Ryan’s plan includes a border adjustment tax that would raise $1 trillion over 10 years.  Trump and Senate Republicans aren’t on board with this tax.  Ryan wants revenue neutral tax reform that won’t increase deficits.  Mnuchin says Trump’s plan will pay for itself by increasing economic growth.  That claim is laughable.

With all of these legislative requirements and such a limited legislative schedule, it is almost certain that Congress will not be able to pass tax reform this year.  If anything, they may adjust the rates for corporations and perhaps do some fiddling with the individual tax code and rates.  But simply reducing tax rates will cause deficits to increase significantly and they are already at unacceptable levels.

Infrastructure – During the presidential campaign Trump continuously touted his $1 trillion infrastructure program.  Stock market pundits hailed the “stimulus” that Trump would bring to the economy, along with the tax reform.  (Funny, stimulus was a dirty word when Obama was president.)  Trump’s budget does include language about a trillion dollar infrastructure program. But it actually includes only $200 billion of infrastructure spending over the next 10 years, $5 billion in 2018 and $25 billion in 2019.  I don’t call that stimulus.  At the same time Trump is proposing cuts in nondefense discretionary spending of $1.2 trillion over 10 years.  Those cuts would affect the economy too – negatively.

Watching Trump and the GOP leadership in Congress is like watching an extended showing of the Keystone Kops, a classic early 1900s silent film comedy series.  It featured inept policemen in pursuit of the bad guys, running around in hilarious confusion.  Come to think of it, the policies Republicans are pursuing are early 1900s too.  But what is going on in Congress these days is not very silent and certainly not funny.

There is one joke though, the approach Republicans in Congress take to work.  They are keen to put work requirements on people who receive food stamps and Medicaid but they are loath to put tough work requirements on themselves.