Paul Ryan invited Donald Trump’s most senior advisers to Capitol Hill a week ago to head off a quiet tug-of-war between congressional Republicans and Trump officials over tax reform. For more than two hours, the speaker laid out his alternative to Trump’s plan to slap tariffs on companies that move jobs overseas, which he believed would encourage companies to stay in the U.S.
But not even a week later, Trump dismissed Ryan’s idea, calling it “too complicated.” And now Ryan is left with a potential trillion-dollars hole in his tax plan.
It was the latest instance of the president-elect big-footing Hill Republicans’ carefully laid policy plans. Trump hasn’t even set foot in the Oval Office, yet his tweets and off hand comments on everything from tax reform and Obamacare to prescription drug prices and a border wall have backed lawmakers into a corner over and over again — and in some cases sent them right back to the drawing board.
It’s a wake-up call for GOP leaders, many of whom hoped Trump to let them take the lead writing legislation to carry out his campaign agenda, given his own lack of policy background.
Trump clearly doesn’t see it that way.
His most recent dismissal of a cornerstone of Ryan’s tax plan is perhaps the most surprising yet, given the impossible position it puts the speaker in. He and Ways and Means Chairman Kevin Brady (R-Texas) had spent months crafting their so-called “border adjustable” business tax on imports, which they say would bring in $1 trillion over a decade. The duo needs that money to finance tax cuts for Americans and U.S. businesses. Remove it from the equation and it’s hard to see how tax reform — a top priority for Trump and Ryan — happens.
Ryan and Brady had pitched the tax changes to Trump as an antidote to a problem Trump railed about on the campaign trail: U.S. manufacturing jobs being shipped overseas. The idea, at its core, is more palatable to free-market Republicans than slapping a 35 or 45 percent tariff on companies that move jobs abroad.
But Trump’s team wasn’t sold, multiple Hill and transition sources told POLITICO. His pick for Commerce secretary, Wilbur Ross, and the head of his new trade council, Peter Navarro, believe tariffs should be on the table. Other Trump officials — and the president-elect himself, apparently — worried Ryan’s plan was too complicated to sell to voters. And a third group of advisers fretted it would raise prices on consumers and hurt middle and lower-class workers over the long run.
“Anytime I hear ‘border adjustment,’ I don’t love it,” Trump told the Wall Street Journal. “Because usually it means we’re going to get adjusted into a bad deal. That’s what happens.”
Republicans realized how quickly Trump could upset their plans when he told The New York Times earlier this month that Obamacare repeal should coincide with a vote on an alternative. GOP leadership just before the New Year had sketched out a plan to repeal Obamacare in the first 100 days of the new administration and pass replacement legislation by year’s end.
“Our legislating on Obamacare, our repealing and replacing and transitioning, the legislating will occur this year,” Ryan told reporters at a Jan. 5 news conference.
Six days later, Trump disagreed. “It’ll be repeal and replace. It will be essentially, simultaneously…. the same day or the same week, but probably, the same day, could be the same hour,” he said at his own news conference.
Now, House and Senate committees — some that only settled on their membership for the new Congress days ago — will have to quickly write both repeal and replacement proposals in a matter of weeks. They had thought they’d have months.
The same basic script played out over the weekend, when Trump vowed to the The Washington Post that whatever replaces Obamacare would provide “insurance for everybody.” For years, GOP leaders had intentionally avoided making such sweeping promises, knowing they’d be virtually impossible to keep.
Instead, Republicans had been talking about “universal access,” as well as their goals of increasing insurance competition and driving down premiums prices.
The Democratic Congressional Campaign Committee is already promising to hold the GOP’s feet to the fire during the 2018 campaign season should a single person lose insurance.
Some GOP insiders on Capitol Hill privately downplay Trump’s policy remarks. They argue that Trump’s policy team is well aware how complicated these issues are, and they understand it will be hard, if not impossible, to do as he’s asking. Some Hill Republicans are crossing their fingers that Trump will allow them to proceed as they were, despite his remarks.
If not, they’ll have to make a choice: Follow the unorthodox, new head of their party, or stick to their guns and dare Trump to wield his veto pen.
Their decision will likely depend on the issue. While the GOP sped up its timetable for Obamacare repeal in response to Trump, it’s unclear whether congressional Republicans will scramble to accommodate him on other issues.
Case in point: Ryan pushed back against Trump’s recent talk of having the federal government play a role in keeping down prescription drug prices. Ryan’s spokeswoman, Ashlee Strong, also defended the speaker’s tax plan after Trump dismissed it.
“Speaker Ryan is in frequent communication with the president-elect and his team about reforming our tax code to save American jobs and keep the promises we’ve made,” she said. “Changing the way we tax imports and exports is a big part of that, and we’re very confident we’ll get it done.
Trump actually considered including a border adjustment proposal in his own tax-reform plan during the campaign. But his advisers drop it amid divisions over its merits, according to Stephen Moore, economic adviser to the Trump campaign.
“When we were devising the tax plan back many months ago, there was some disagreement whether [a border adjustable tax] made sense,” said Moore said in a recent interview. “Because it was controversial, it was taken out…There was a concern that it was going to raise prices and hurt companies that import.”
Those divisions started to spill out into the open last week.
“This is an exercise in government planning and complexity that I believe is doomed to fail,” Larry Kudlow said of Ryan’s proposal on CNBC last week. Kudlow helped write Trump’s tax plan and has been mentioned as a potential candidate to head his Council of Economic Advisers. “I think the whole corporate tax reform, which is the most important pro-growth measure, will go down the drain over this.”
Brian Faler contributed to this report.