In Harvey's Wake, New Financial Realism Hits White House

by Peter Heinlein

2017-09-04

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WHITE HOUSE —When Hurricane Harvey ripped into the Texas/Louisiana Gulf coast last month, causing untold devastation and upending millions of lives, it also poured a heavy dose of reality onto President Donald Trump's political agenda.

With disaster relief funding likely to add hundreds of billions of dollars to the federal budget, there will be new questions about Trump’s centerpiece tax reform proposal, which he says will spur job growth but which critics call a massive tax cut for corporations and the rich. There are also new doubts about building his long-planned border wall.

As recently as two weeks ago, Trump was touting the idea of closing the government if Congress didn’t allocate money for a wall along the U.S.-Mexico border. But in the wake of the most expensive natural disaster ever to hit the United States, the idea of using a government shutdown as leverage suddenly seems absurd.

“That’s what has changed the most,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Budget. “The chances of a government shutdown have been reduced to near zero.”

Quick approval for flood aid & debt ceiling?

Trump’s new strategy, outlined by Treasury Secretary Steve Mnuchin, is to combine the nearly $8 billion request for a first round of disaster relief with a bill to raise the federal debt ceiling, which Congress must pass by September 29 to avoid a catastrophic default on financial obligations.

Mnuchin said in a Fox News Sunday interview that the two funding initiatives should be linked to ensure the emergency desperately needed rebuilding money starts flowing quickly to Texas and Louisiana.

"The president and I believe that it should be tied to the Harvey funding," Mnuchin said. "Our first priority is to make sure that the state gets money. It is critical. And to do that, we need to make sure we raise the debt limit. Without raising the debt limit, I’m not comfortable that we will get the money that we need this month to Texas to rebuild," he said.

That strategy, however, is likely to draw strong opposition from conservative Republicans, who were instrumental in sinking the Obamacare repeal effort. Rep. Mark Meadows, the influential chairman of the conservative House Freedom Caucus, called linking the two issues into one piece of legislation a “terrible idea.”

“The Harvey relief would pass on its own, and to use that as a vehicle to get people to vote for a debt ceiling is not appropriate,” Meadows told the Washington Post.

'Stressful September' for Republicans

The disagreement among Republicans could make for a rough September for President Trump, who sees his first year in office slipping away with little to show in the way of legislative accomplishments, says Kyle Kondik, managing editor of Sabato’s Crystal Ball at the University of Virginia’s Center for Politics.

“I don’t think there’s any indication that Harvey has changed Trump’s mind on much of anything,” Kondik said. “It just adds another wrinkle to what is likely going to be a very stressful September for the White House and Congressional Republicans.

Many observers say the last best hope for the president’s legislative agenda is tax reform. Rewriting the mammoth, unfathomable tax code has been a Republican priority for years, and should be easily within reach at a moment when the GOP controls both chambers of Congress.

But with the failure to repeal Obamacare still fresh in their minds, along with the new demands for Harvey recovery money, GOP calls for tax cuts are sounding increasingly hollow. Opinion polls suggest most Americans think wealthy individuals and corporations already pay too little taxes.

Senator Mike Lee of Utah told the Fox Business Channel last week that failure to pass a tax reform bill would be fatal for the party. “If we don’t get tax reform done, we’re dead,” Lee said. “We might as well flip up our tent and go home.”


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