The High Stakes of Tax Reform

A little more than seven years ago, on March 23, 2010, Barack Obama signed into law the Affordable Care Act.

Despite the ACA’s egregious failure as policy, it was at the time a landmark legislative achievement that radically transformed the U.S. health insurance market. And at its crux is the individual mandate, which requires Americans to purchase health insurance or pay fines for failing to do so. Ah, freedom!

Now, in the autumn of Trump’s first year as President, Senate Republicans are attempting to kill two Democratic birds with one big conservative stone by tying repeal of the ACA’s individual mandate to their much-hyped tax reform package.

The purpose of tying the mandate to tax reform seems to be twofold: it’s an easy avenue by which to gut the ACA, and it frees up $338 billion to help compensate for Republican tax cuts that could add to the deficit in the short term.

Not long ago the current Congress was openly mocked for its failure to make good on Trump’s promise to repeal the ACA, and many doubted that tax reform was truly within reach. Now, however, some of the usual naysayers within Trump’s own party who have thwarted past repeal efforts seem to be on board with the Senate plan.

It’s still a gamble alright, mocked by snowballs in hell as a long shot. But the payoff is huge — should Republicans pass tax reform and repeal the individual mandate simultaneously, it will be the most significant legislative achievement since Obama signed the ACA into law. And, when considered alongside Trump’s other accomplishments thus far, such passage would make Trump’s first year in office the most successful of any modern President.

Lest you think me hyperbolic, consider that major tax reform has escaped Congress for more than three decades. And in many ways passing tax reform is considered by many as equally difficult (or perhaps more so) as repealing the ACA.

But by killing the mandate, the proposed tax reform essentially does both.

With no penalty in place for those that fail to purchase health plans, the number of consumers in the market will decline. Insurers, in turn, will be forced to compensate for this lack of revenue by raising prices, injecting further chaos into an already crumbling ACA.

The markets will almost certainly experience some early turbulence, but only by gutting Obamacare and starting over can we hope to make health care, and Trump’s first year in office, great again.

Despite the partisan anti-Trump rhetoric parroted by the media and oft-reported polls showing public disillusionment with the current administration, Trump’s first year has featured some real achievements.

For starters, the economy has been gaining serious steam on nearly all fronts.

While Presidents generally exercise limited control over a dynamic domestic economy influenced not only by policy at home but also by global events, Trump’s record rollback of regulations is playing an outsized role in the current wave of relative prosperity.

In fact, the market’s climb in the six weeks following Trump’s election was the largest post-election gain since 1900, a surge due in large part to speculation that the lifelong businessman would shred the red tape strangling commerce, innovation, and entrepreneurship.

Strong job growth, soaring consumer confidence, and a steadily climbing stock market are all bestowing upon the President some serious economic street cred; the accomplishments aren’t his alone, but he has helped to create a business-friendly environment where they could develop.

Add to the economy the confirmation of Supreme Court Justice Neil Gorsuch and the rapidly turned tables in the battle against ISIS, and Trump’s first year looks fairly remarkable, particularly compared to the past few Presidents’.

For starters, Obama couldn’t push the ACA through despite having a majority in Congress, and his first foray into international politics amounted to a pathetic apology tour for the country he was supposed to be championing.

Obama’s predecessor, George W. Bush, had a fairly uneventful first year with the exception of 9/11, the largest terrorist attack in American history. While clearly not Bush’s fault, it was a tragic event that would in many ways define the rest of his Presidency, both good and bad.

And Clinton’s early days in the White House were sufficiently chaotic to warrant a Time magazine cover story with the words “The Incredible Shrinking President,” and his socialist health care proposal was roundly rejected by his own party, which just so happened to also control Congress.

So while Trump’s competition isn’t exactly fierce, his predecessors’ early mediocrity invites opportunity, and the passage of tax reform alongside a mandate repeal would result in a phenomenal first year for the 45th President.

Should the effort fail, however, Trump’s first year will be remembered more for Republicans’ legislative inefficiency and party infighting than for the other aforementioned accomplishments.

Tying repeal of the ACA’s individual mandate to tax reform is a real gamble, but with great risk comes great reward.

The President, and Senate Republicans, must be feeling pretty lucky.

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