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5 lessons from a Republican year of governing dangerously

- December 28, 2017

The Republican Congress ended its first year on a partisan high note by overhauling the tax code and undercutting the Affordable Care Act, setting up a trillion increase in the deficit in the process. Before the finale, the 115th Congress was buoyed by a strong economy, yet gridlocked by slim majorities, internal division and an erratic president. Over the course of the year, Republicans narrowed their agenda, abandoned fiscal orthodoxy, bent the rules, and kicked tough problems to next year and beyond.

Here are five takeaways from year one of all-Republican rule:

1. Congress veered to the right

Congress’s December achievements followed a mostly fallow legislative year: Republicans confirmed a Supreme Court justice, put a dozen conservative judges on the bench, overturned a handful of Obama-era regulations and cheered as Trump-led agencies targeted scores of environmental and consumer rules for repeal.

Except for imposing new sanctions on Russia and improving veterans’ health care, Republicans veered to the right. They exploited rules to box out Democrats and, at times, even ignored President Trump’s more populist legislative promises, such as reducing the cost of health care and addressing the opioid crisis.

2. A strong economy cannot heal partisan divisions

Even resurgent consumer confidence, record employment and booming stock prices could not facilitate bipartisan lawmaking. Instead, long-standing partisan rifts widened.

As we showed earlier this year, party polarization hit all-time highs in 2017. The two parties are now unrepentant ideological and electoral foes, and they have little common legislative ground. But even within their own party, Capitol Hill Republicans are remarkably divided. Led by a historically unpopular president, Republicans are fractured along nationalist, libertarian and ideological contours on the most visible issues. Voters might typically reward a congressional majority backed by a healthy economy, but antipathy toward an ineffective Congress and Trump’s dismal approval ratings put GOP control of Congress at risk in 2018.

3. Internal divisions narrowed the GOP agenda

Republicans finally united around tax cuts for corporations and the wealthy. The tax-reform bill enacted just before year’s end will deliver four-fifths of its benefits to the extremely rich. In doing so, it breaks some of Trump’s more populist pledges, abandons the GOP’s past commitment to fiscal prudence and exacerbates income inequality. No wonder the law is unpopular.

To pass the tax-reform bill under strict budget reconciliation constraints, which required that the bill not add to the deficit, Senate Republicans made sure that the individual tax cuts would end within a decade. Had Republicans been able to woo a few Democrats into voting for the bill, senators could have waived the rule. But Democrats voted lockstep against the bill. And reports suggest that even within the GOP, consensus is fragile. Sen. Bob Corker (R-Tenn.) argued that “if they brought in Democrats and began adjusting anything, it could cause the Republican side of this to fall apart.”

Despite their party’s control of government, Republicans’ internal divisions forced them to narrow their agenda. A deeply unpopular and unfocused president seemed incapable of uniting his divided party on salient legislative issues. Most dramatic, a seven-year campaign to repeal the ACA fell apart on the Senate floor — signaled with a dramatic thumbs down from Sen. John McCain (R-Ariz.). GOP lawmakers failed to find 50 senators to agree to revoke widely popular health-care benefits.

Republicans also stalemated on resolving the fate of the “Dreamers,” even after three dozen House Republicans (mostly from Democratic-leaning districts) urged party leaders to advance a solution for undocumented migrants who brought into the country when they were children. And Trump’s promised infrastructure plan never materialized, as Republicans disagreed over whether and how to pay to fix the nation’s crumbling roads and bridges.

4. Republicans bent and broke rules where needed

Some key GOP achievements required bending and breaking the rules. Following the lead of the Democrats, who in 2013 revoked the filibuster on judicial nominations below the top court, Republicans changed Senate rules to prevent Democrats from filibustering Neil M. Gorsuch’s Supreme Court nomination. To secure confirmation votes on a record number of judicial nominees in a president’s first year, Republicans curtailed the “blue slip” practice that had for decades given senators the power to block appellate nominees from their home states. Next year, Republicans intend to speed up confirmation votes even more by reinstating modest filibuster reforms adopted temporarily by a bipartisan supermajority in 2013.

And Republicans cut corners by ignoring the long-standing practice of listening to Congress’s in-house experts while devising legislation. Republicans passed the tax bill, claiming it would pay for itself — despite nonpartisan congressional scorekeepers’ analysis to the contrary. Republicans disregarded other congressional experts when trying to replace the ACA, voting before the Congressional Budget Office could deliver its estimates.

But Senate GOP leaders did draw the line when some colleagues advocated dismantling the Byrd Rule, a parliamentary requirement that made it harder for senators to repeal the ACA. Why? Probably for two reasons: divisions among Republicans themselves about the policy, and uncertainty about how Democrats might exploit the change in the future.

5. GOP played a strong game of kick the can

Republicans avoided the most pressing problems by repeated can-kicking. They failed to negotiate a deal with Democrats to fund the government for the fiscal year that began Oct. 1, punting a decision into January. They let the vital, popular and bipartisan-supported children’s health-care program known as CHIP lapse, promising to take that up next year as well. And to avoid blame for what used to be a partisan showdown under Obama, Republicans delayed an agreement to raise the nation’s debt limit until early spring.

Republican lawmakers also kicked the can in their signature tax law when they failed to make individual tax cuts permanent. Instead, key elements in the law — particularly benefits to the middle class — will expire in 2025, letting a future Congress handle that issue.

Finally, by reforming taxes in a way that increased the deficit, Republicans put future Congresses in a difficult position if an economic downturn requires new fiscal stimulus. Increasing debt levels and interest rates complicate an inevitable reckoning over national finances.

What’s next?

When Republicans return to Washington in January, they face the prospect of a government shutdown, an even slimmer Senate margin, and a volatile president often unable to lead Congress where he wants. Meanwhile, in the background, the special counsel’s investigation keeps simmering with possible complications.

Congress may find moderate solutions to fund children’s health care and protect the Dreamers. Bipartisan efforts could roll back some banking regulations and upgrade the nation’s infrastructure. Accomplishing these would require Trump and Republicans to set aside internal disagreements and tack to the center, engaging Democrats under the Senate’s normal, supermajority rules.

But can Republicans manage that to convince voters they can govern — without further demotivating their partisan base — before the midterm elections next fall? Republicans’ year-end gift to taxpayers should give the economy one more boost before lawmakers face the voters, but it will be hard to run on a signature legislative achievement that is so disliked.

Mark Spindel is founder and chief investment officer at Potomac River Capital, a Washington-based investment firm.

Binder and Spindel are co-authors of the recently published “The Myth of Independence: How Congress Governs the Federal Reserve” (Princeton University Press, 2017).