Go Big Or Go Home
Posted on May 21, 2015
(This originally appeared in the Wall Street Journal's Think Tank)
When it comes to trade legislation, policy makers can see the light at the end of the tunnel.
The Senate is expected to finish with the Trans-Pacific Partnership and related bills soon; the House is likely to do so by July 4.
Getting to the finish line will involve a lot of horse-trading and maneuvering–political blood, sweat, and tears. I predict that Congress will give the president a big victory by passing TPP.
It’s harder to predict what big thing comes next.
Will it be a major highway bill, entitlement reform, or tax reform? A big budget deal that gets a presidential signature?
House Majority Leader Kevin McCarthy hinted to reporters Monday about what he thinks is doable: “I see a path to a long highway bill that lines up at the same time–has to be at the end of the year–because if you want to do repatriation, you gotta have tax reform to do repatriation, do you not?”
Funding our highways and changing the tax code do not have to be connected, but both are essential to economic growth.
The question isn’t only whether Congress and the president can work together to get both done before the 2016 campaign really heats up. It’s also: Can they afford not to?
The simplest way to fund a road bill is to increase the federal gas tax. But the politics of doing that are fraught, especially for Republicans.
This, though, argues for the approach implied by Rep. McCarthy: Go big or go home.
Given the president’s stated opposition to lowering tax rates for high-earners, Congress is likely to focus on corporate tax reform.
Policy makers worry about companies moving overseas because the U.S. corporate tax rate is the highest in the world. They also worry that more than $2 trillion in corporate cash held overseas–a huge chunk of potential revenue–will ultimately be used to expand other countries’ economies as businesses seek to avoid high U.S. taxes.
So what’s doable? A deal that could lower tax rates for corporations, make it easier for international companies to repatriate their overseas profits and fund a highway bill for as many as six years–it would be attractive to policymakers on both sides of the aisle by creating jobs through highway spending and making the U.S. a more attractive place to do business.
That doesn’t necessarily mean it will get done.
There are plenty of skeptics out there, including some small-business owners who want their taxes to be reduced too. But that’s unlikely to happen while Barack Obama is president.
So far this year, Congress has shown an unexpected ability to get things done, including a limited deal on Medicare reform.
Will it finish the year with a big package that creates jobs and economic growth? Hope springs eternal.