Reagan and Clinton reached across the aisle and the results for the economy were impressive. Bush and Obama were as partisan as can be and economic growth was sub-par for Bush and on death's doorstep for Obama. We can do better.
The Syria Success Creates a Chance for Bipartisan Tax Reform
Trump should reach out to Democrats and put a plan with four elements on the table.
President Trump at the White House with Nancy Pelosi, Paul Ryan and Chuck Schumer, Jan. 23. PHOTO: ASSOCIATED PRESS
By
David M. Smick
April 13, 2017 6:54 p.m. ET
30 COMMENTS
President Trump’s successful strike on Syria has earned him praise across party lines. Chuck Schumer, the top Democrat in the Senate, lauded the Syria strike as “the right thing to do.” His counterpart in the House, Nancy Pelosi, called it “a proportional response.” Could this be a new beginning, an opening for renewed bipartisanship?
For the moment, Washington is on hold. Republicans continue trying to negotiate a deal on health-care reform. Those negotiations will determine whether Congress can pass tax reform this year. While the country waits, President Trump loses nothing by reaching out to Democrats, particularly the 25 senators up for re-election next year, to propose a bipartisan fiscal plan.
That could help Mr. Trump win back support from independents, who jumped ship after he accused his predecessor of wiretapping Trump Tower—as if President Obama had donned earphones in a van across the street. Mr. Trump’s approval rating has fallen from 46% after his inauguration to 41% this week, according to Gallup. Going bipartisan on tax reform may be a way to win back that support. But merely calling for bipartisanship isn’t enough. The president needs to quickly put a proposal on the table.
Bipartisanship has historically been good for the economy. Presidents Reagan and Clinton were willing to compromise when they had no other choice, which provided certainty and stability to financial markets and businesses.
In 1983 Social Security faced insolvency in a matter of months.President Reagan worked with Democratic House Speaker Tip O’Neill on a compromise plan to save the system by raising the retirement age, delaying annual cost-of-living adjustments, and increasing payroll taxes. In the 1990s, President Clinton and Republican Speaker Newt Gingrich reformed welfare and passed a budget that cut the tax rate on capital gains. The budget ended up in surplus.
Both presidents achieved economic success. From 1983-88, average growth in the country’s gross domestic product topped 4.5% a year. From 1993-2000 the economy grew by an average of nearly 4% a year. Contrast these results with the meanly partisan eras of George W. Bush and Barack Obama, which featured average growth of 2.1% (2001-08) and 1.5% (2009-16).
Rob Shapiro, a former economic adviser to President Clinton, argued in a March 2015 paper for the Brookings Institution that one reason for the difference is that the policy approaches of both Presidents Reagan and Clinton “supported stronger rates of business investment,” as well as “public investments to modernize infrastructure, broaden access to education, and support basic research and development.” They also “pushed measures to liberalize trade and foreign direct investment.”
What was the result? “Households of virtually every type,” Mr. Shapiro writes, “experienced large, steady income gains, whether they were headed by men or women, by blacks, whites or Hispanics, or by people with high school diplomas or college degrees.”
Which brings us back to Mr. Trump’s fiscal policy. The president should reach out to Democrats and put on the table a bipartisan plan with four elements. First, reduce corporate tax rates from 35% to 20%, with pass-throughs included and many loopholes eliminated. Second, allow immediate expensing of capital investment. Third, create a generous repatriation incentive that allows American companies to bring home the $2.5 trillion sitting offshore so long as they purchase a specified amount of low-interest infrastructure bonds. Fourth, spend serious money to modernize the country’s major infrastructure.
The president should offer Democrats some sweeteners that would be tough to vote against. One might be a new program giving disadvantaged families vouchers to help them relocate for better job opportunities. Another might be a modest, incremental increase to the minimum wage, carefully designed to avoid threatening small-business solvency.
The president should also ask the Senate to move quickly on such a plan under “regular order,” meaning 60 votes required for passage. For now, leave out overhauling the individual tax code, which would only inflame partisan passions. Argue the merits of individual tax changes in a later reconciliation bill, which requires only 51 votes for passage.
The key to winning legislatively is to build momentum. Mr. Trump showed a different side of himself when he acted decisively in Syria. Now he could demonstrate the same largeness of character and political flexibility in his fiscal policy. Democrats and Republicans alike should remember that policy changes often show their effects after an uncertain lag. The 1986 tax reform, for instance, happened on Reagan’s watch but arguably laid the foundation for the Clinton economy. Both parties gained politically, but the big winner was the American people.
Mr. Smick, author of “The Great Equalizer: How Main Street Capitalism Can Create an Economy for Everyone” (PublicAffairs, 2017), was Rep. Jack Kemp’s chief of staff (1979-84).
Appeared in the Apr. 14, 2017, print edition.
The Syria Success Creates a Chance for Bipartisan Tax Reform
Trump should reach out to Democrats and put a plan with four elements on the table.
President Trump at the White House with Nancy Pelosi, Paul Ryan and Chuck Schumer, Jan. 23. PHOTO: ASSOCIATED PRESS
By
David M. Smick
April 13, 2017 6:54 p.m. ET
30 COMMENTS
President Trump’s successful strike on Syria has earned him praise across party lines. Chuck Schumer, the top Democrat in the Senate, lauded the Syria strike as “the right thing to do.” His counterpart in the House, Nancy Pelosi, called it “a proportional response.” Could this be a new beginning, an opening for renewed bipartisanship?
For the moment, Washington is on hold. Republicans continue trying to negotiate a deal on health-care reform. Those negotiations will determine whether Congress can pass tax reform this year. While the country waits, President Trump loses nothing by reaching out to Democrats, particularly the 25 senators up for re-election next year, to propose a bipartisan fiscal plan.
That could help Mr. Trump win back support from independents, who jumped ship after he accused his predecessor of wiretapping Trump Tower—as if President Obama had donned earphones in a van across the street. Mr. Trump’s approval rating has fallen from 46% after his inauguration to 41% this week, according to Gallup. Going bipartisan on tax reform may be a way to win back that support. But merely calling for bipartisanship isn’t enough. The president needs to quickly put a proposal on the table.
Bipartisanship has historically been good for the economy. Presidents Reagan and Clinton were willing to compromise when they had no other choice, which provided certainty and stability to financial markets and businesses.
In 1983 Social Security faced insolvency in a matter of months.President Reagan worked with Democratic House Speaker Tip O’Neill on a compromise plan to save the system by raising the retirement age, delaying annual cost-of-living adjustments, and increasing payroll taxes. In the 1990s, President Clinton and Republican Speaker Newt Gingrich reformed welfare and passed a budget that cut the tax rate on capital gains. The budget ended up in surplus.
Both presidents achieved economic success. From 1983-88, average growth in the country’s gross domestic product topped 4.5% a year. From 1993-2000 the economy grew by an average of nearly 4% a year. Contrast these results with the meanly partisan eras of George W. Bush and Barack Obama, which featured average growth of 2.1% (2001-08) and 1.5% (2009-16).
Rob Shapiro, a former economic adviser to President Clinton, argued in a March 2015 paper for the Brookings Institution that one reason for the difference is that the policy approaches of both Presidents Reagan and Clinton “supported stronger rates of business investment,” as well as “public investments to modernize infrastructure, broaden access to education, and support basic research and development.” They also “pushed measures to liberalize trade and foreign direct investment.”
What was the result? “Households of virtually every type,” Mr. Shapiro writes, “experienced large, steady income gains, whether they were headed by men or women, by blacks, whites or Hispanics, or by people with high school diplomas or college degrees.”
Which brings us back to Mr. Trump’s fiscal policy. The president should reach out to Democrats and put on the table a bipartisan plan with four elements. First, reduce corporate tax rates from 35% to 20%, with pass-throughs included and many loopholes eliminated. Second, allow immediate expensing of capital investment. Third, create a generous repatriation incentive that allows American companies to bring home the $2.5 trillion sitting offshore so long as they purchase a specified amount of low-interest infrastructure bonds. Fourth, spend serious money to modernize the country’s major infrastructure.
The president should offer Democrats some sweeteners that would be tough to vote against. One might be a new program giving disadvantaged families vouchers to help them relocate for better job opportunities. Another might be a modest, incremental increase to the minimum wage, carefully designed to avoid threatening small-business solvency.
The president should also ask the Senate to move quickly on such a plan under “regular order,” meaning 60 votes required for passage. For now, leave out overhauling the individual tax code, which would only inflame partisan passions. Argue the merits of individual tax changes in a later reconciliation bill, which requires only 51 votes for passage.
The key to winning legislatively is to build momentum. Mr. Trump showed a different side of himself when he acted decisively in Syria. Now he could demonstrate the same largeness of character and political flexibility in his fiscal policy. Democrats and Republicans alike should remember that policy changes often show their effects after an uncertain lag. The 1986 tax reform, for instance, happened on Reagan’s watch but arguably laid the foundation for the Clinton economy. Both parties gained politically, but the big winner was the American people.
Mr. Smick, author of “The Great Equalizer: How Main Street Capitalism Can Create an Economy for Everyone” (PublicAffairs, 2017), was Rep. Jack Kemp’s chief of staff (1979-84).
Appeared in the Apr. 14, 2017, print edition.
