Posted by Shyam Moondra
When President Donald J. Trump was inaugurated last January, the business
community was full of confidence that the federal tax code would finally be
reformed. Optimism about higher economic and jobs growth propelled the stock
market to record levels. However, in the last eight months, Republicans
couldn’t even deliver on their long standing promise to repeal and replace
Obamacare which was utterly shocking. The sharply divided Republicans in the
House and Senate made it almost impossible to move on the Trump campaign
promises. While Trump issued a series of Executive Orders to undo President
Barack Obama’s legacy, legislative victories were nowhere to be found. Most
Trump supporters are in total disbelief that Republicans can’t seem to get
anything done in spite of the fact that Republicans control the White House,
House of Representatives, and Senate.
With the possible government shutdown and default on federal debt looming
large, Trump had no choice but to negotiate directly with the Congressional
Democrats on the extension of federal debt ceiling and to provide funds for the
victims of hurricane Harvey. There are twenty five or so House Republicans and
five or so Republican senators that were proving to be obstructionists and
Trump badly needed the support of Democrats to avoid fiscal catastrophe on debt
ceiling and to immediately provide badly needed funds for the hurricane victims.
Trump should have sought
help of Democrats right from the beginning; if he did that, these first few
months of his presidency would have been more productive. The Republican Party is
badly divided and it doesn't look like it will get any better. Republican
leaders are the "swamp" in its truest sense of the word because they
are controlled by the lobbyists. It’s important for Trump to demonstrate that
he can get things done, so it was a good strategic move on his part to make a
deal with House Leader Nancy Pelosi (D-California) and Senate Minority Leader
Chuck Schumer (D-New York).
Trump can work with
Pelosi and Schumer to accomplish the following that involve common interests:
1. Make debt ceiling
extension automatic as needed. In the corporate world, we don't have a ceiling
on debt, so there is no reason for the government to have it either. Let the
free market and voters decide what should be the government debt ceiling; if
debt is too high, government would have to pay higher interest to raise new
funds which by itself will induce the government to live within its means.
Also, whoever pile up debt excessively will be thrown out of office by the
voters. So let these built-in mechanisms decide what level of debt is
appropriate. Trump has used debt as a primary instrument for growing his
businesses in the private sector (which at times worked against him and he had
to seek bankruptcy protection more than once). Trump’s agenda includes massive
increase in military expenditures and $1 trillion worth of investments in his
ambitious infrastructure plan. Therefore, Trump wouldn’t want debt ceiling
getting in the way to fulfill his campaign promises. In general, Democrats like
to spend beyond government means (e.g., Obama doubled the national debt to $20
trillion during his presidency). So there is a collusion of interest between
Trump and Democrats to get rid of the whole concept of debt ceiling for good.
This, of course, would be opposed vehemently by conservative Republicans,
especially the “Freedom Caucus” in the House, but Trump could put together a
coalition of Democrats and moderate Republicans to sideline conservative
Republicans and neutralize the issue of debt ceiling.
2. Fix the health care
system. Obamacare didn't last because it was passed by only Democrats. We need
a bi-partisan effort to come up with something that would endure. Trump could
work with Democrats to come up with a new health care plan, which is better
than Obamacare but at a higher cost to the government (in terms of subsidies via Medicaid for the
poor) than what conservative Republicans would want. But the passage of a new
health care plan would afford Trump to put a check mark against one of his prominent
campaign promises.
3. Get going with the $1
trillion infrastructure investment to fix our roads, highways, bridges, tunnels,
schools, airports, etc. Democrats tried unsuccessfully for years to get
concurrence of Republicans on a huge infrastructure improvement plan. During
the presidential campaign, Trump proposed a massive $1 trillion investment
(much of which could be financed by the private sector), which he considers
essential for the U.S. to be competitive in the global marketplace. Again,
Trump could easily forge a bi-partisan infrastructure plan with the help of
Democrats.
4. Reform the tax code
to make it simpler and fairer. Reduce taxes for the middle class, but keep the
taxes on the rich the same (may even increase a little for super rich as
advocated by billionaires such as Warren Buffett and others). Corporate taxes
should be reduced only to the extent loopholes are eliminated, so as to make it
revenue-neutral. Again, Trump could easily make a deal with Democrats to get
this done.
Trump and Democrats have
a real opportunity to do away with the Washington, DC gridlock that has
paralyzed the Congress for almost a decade with its approval rating plunging to
single digits. In the last presidential election, the voters made it abundantly
clear by electing a non-politician outsider that they want the gridlock to end.
If Trump’s coalition with Democrats and moderate Republicans is able to get the
above things done, the people would begin to have more faith in the government
and businesses would have more confidence which is needed if we ever going to
achieve 3-4% GDP growth and create millions of new high-paying jobs. Trump
should move quickly to replicate his success in dealing with a short-term fix
of debt ceiling issue and achieve bigger things that will guarantee him an easy
win for the second-term.
