Liam Donovan

That's a good summary of the debate. And I think, and I think the current debate, I mean, the one or two bills is the MacGuffin, right? It's going to matter, but it's downstream from the real question, which is do, do you agree on tax? Can you agree on tax? And how soon can you agree on tax? Because that's what it really boils down to is, when are we going to do tax?

And the Miller proposition is just from a tactical standpoint. It's a tactical question, really. If you want, as Republicans profess to want for the last several months, they want to do this out of the That will not include a broader agreement on tax because they just don't, not only do they not agree, they don't even understand. This is, I think, puts in perspective.

I did the math earlier this morning. And of the members who were in the chamber in the House in 2017, so not that long ago, eight years ago, the people who were around to vote for the bill in 2017 that we're sort of trying to extend theoretically of 219 Republicans that are in the house right now, only 84 of them were around.

So like a third of the conference and of those, like several didn't vote for it. Like Stefanik didn't vote for it. Issa didn't vote for it. Um, you know, a handful of others didn't even vote for it. So most people don't have any idea what we're really talking about now. if the ignorance were good and people didn't care about things like deficits, it would be easy.

But the real issue is that when you have such a narrow majority and you do have people, you know, principled or otherwise people that are like, no, we have to pay for this stuff. It's going to be really hard. And remember, as I said, whatever you do on the substantive side, you have to agree on like the bottom line, the sort of

Bingo. And that's the exact issue. That's that Corker, that Corker to me conversation. And here's the key. That's why Republicans got it done in 2017. And frankly, it's why Democrats almost like lit themselves on fire with the Build Back Better bill, which was sort of resurrected as the IRA.

But because they never had that conversation with Joe Manchin of like what the bottom line is going to be, what you had was like Bernie Sanders and Mark Warner say, OK, well, maybe it'll be three trillion or something like that. Manchu was never on board with that.

So you have to hash that stuff out up front, figure out how big your box is, and then you can put whatever you can in it and go with the trade-offs that lead to that. But that's the fundamental key. Now, you could always put an instruction of, you know, lower the deficit by $1 to the Ways and Means and Finance Committees, but that would be locking yourself into paying for everything online.

Piece of cake. But I think to your point, this really boils down to the strategic question such as it is, do you need wins up front? And if you do, you should – and this isn't exclusive of tax. If you can agree on tax things, do it. Find what you can agree on, build consensus, and make a move as quickly as possible because you just can't count on the future.

You don't know if and when things will go off the rails. Remember –

Here's where it gets interesting, because it's not what Stephen Miller will tell you. It's not necessarily what you hear from Bannon. But part of the virtue of doing a spending bill up front is that, remember, you need 60 votes for the appropriations, the traditional appropriations process. And if you need 60 votes, you're not going to get money for the wall. You're not going to get money for...

more defense without giving something up to Democrats. That bargaining that has to happen in the appropriations process, guess what? You have an easy button. You can do the things that you agree on.

So the reason we don't just CR in perpetuity, the reason our CRs are like three months is because the defense hawks typically, there's enough members who care about defense above all in both parties, you can't CR forever. So if you could plus up

defense and plus up border or whatever get your wall money before that like come out of the gate that's part of like it's it's kind of unspoken but that's a big factor here because if you could plus those things up then who cares if you like republicans if they could agree on a cr and stick together and get it out of the house that puts the senate in the position where what are democrats going to filibuster that and and like shut down the government probably not that

are they able to do that? If you got a bill out of the gate, like if you, if you went to bill strategy, like I don't like that terminology because I think it misses the point, but there are tax things that you agree on that you could put in there.

Like you could make Jason Smith happy at some level by taking, remember there was a Jason Smith tax bill last year that was meant to serve as a bridge between the expiring provisions and the end of this coming year. Remember the cliff that we're dealing with isn't till the end of this year. Yeah. Yeah. Yeah.

No, I think that has to be the rubric. It has to be. And Trump has given them license to do this. He has certain instincts that are better than, than the politicians and his instincts are right here. Like he's not helping in that. He's sort of like sounding off whoever talked to him last and made a persuasive case. He's like, yeah, let's do that. And then the next day he's like, well, like,

These guys seem like they have a good idea, too. Like, whatever. I don't really care. That's kind of where this has landed. Like one bill, two bill. I don't care. You shouldn't care. What you should care about is what can we agree on and let's get some wins. Johnson knows his conference. Jason Smith knows his conference.

The politics of House Republicans are probably such that they need to say we're going to do one bill. When they go down that road and realize, okay, we can only agree on so much, then you kind of call the audible as you go. But that instruction piece is the important part.

And so I think what you could imagine happening here that kind of solves the problem is, again, a nominal instruction to the Ways and Means and Finance Committee, like something that wouldn't be a big deficit number. But that would just mean that whatever they put in through the tax piece has to sort of be offset automatically.

As I said, Smith has a bill, the Smith-Wyden bill, which was sort of the trading of the extensions of corporate tax policy that had rolled off for some plus-ups in the child tax credit. I don't think you can get Republicans to agree on the child tax credit piece because that's something for the broader discussion. But you could certainly –

Take the tax piece of what they agreed on and passed through the House last year. Put that in here. You've built that bridge to the end of the year. You have to get into this process. This risk for Republicans is you failed to launch.

I think you have to get started to even establish where your trouble points are. And the more you sort of, we're literally like arguing how many angels are dancing on the head of a budget resolution. It doesn't matter. Just figure out what you can agree on and go for it.

Here's the fundamental question, and it's playing out quietly, but it is how do they grade themselves? How do they agree mutually to score these things? And if you listen to what Chairman Mike Crapo from Idaho, the chairman of the finance committee, is saying, he's selling the idea, and he's not wrong. Typically, we don't.

pay for ongoing tax policy like the current policy baseline that is a nearly five trillion dollar question if you just say current policy is current policy this is people's own money we're not going to sort of their plan is five trillion dollar that's the king of debt man five trillion dollar tax cuts

And that's the real question is, who out of the 219, where are your trouble spots there? And how do you sell the politics of this? Because... I think the revenue pressure and the appetite and desperation to find the loose change in the couch cushions of the federal government comes down to, okay, what are you obligated to pay for?

And again, maybe they split the difference, but if they can agree, okay, we don't have to pay for current tax policy, then all of a sudden that takes a huge weight off of that pressure. And then that's just to ensure that no one, that you and I don't pay more in taxes or any of our

Relatives or what have you. Everyone's taxes go up, which is another way of saying tax cuts and jobs act really did reduce almost everyone's taxes. Didn't necessarily get credit for that. But the flip side is when it goes away, everybody's taxes go up. Politically, that's untenable. So part of the problem with the two bill argument or one bill argument is a tax bill is going to happen.

The only question is, do you have to bargain with Democrats to get it?

This won't happen, but this is what they should do. This is the ideal situation. The model is don't do what you did in 2017, which is go in without a plan and spin your wheels for seven months before realizing you just wasted it. You take the model that Democrats said, it gave them no political benefit.

But from a substantive matter, if you think about what Democrats did in 2021, they came in, they immediately passed a budget resolution. Now, they had a leg up and they had the urgency of the COVID moment. And they had a plan that had been relatively socialized and sort of campaigned on. But they immediately moved on the American Rescue Plan. Republicans didn't think they could do it.

The idea that with a 50 seat Senate majority with people like Joe Manchin, Kyrsten Sinema, people didn't think they could get that. Republicans thought they'd have a lot of leverage in there. They were trying to negotiate. Democrats passed it.

that passing it set the tone and put Republicans on notice that if you don't bargain with us, if you don't help us, we're going to go back and do more by ourselves. So that was how you got the bipartisan infrastructure law.

No, they are. But this sets up the model for the theoretical virtues of the two bills is if you can demonstrate a baseline level of legislative competence of Trump getting the stragglers in line... You laugh.

It should not be that difficult if you can get out of your own way to pass.

You pass something that opens up leasing, throws off revenue that way. It offsets some of the border and wall spending. You throw in some stuff for defense. It's not that difficult to find what Republicans could agree on. You could even layer in some of the tax pieces that I mentioned from the Smith-Wyden bill. But you have to do something that puts Democrats in a position where they –

I think you saw it with the Lake and Riley stuff that's going on right now. I mean, even listening to people like AOC, I think there's a recognition that they just can't be seen as reflexively against policies. Why, though?

I think it's less about... whether there'd be consequences to suffer more that the repairing the party's image that Democrats need to do is just different than the needs and capacity of Republicans to improve their image. But I think there's a recognition that things are seen that are seen as populist and are seen as politically effective. Democrats have to change their tack on those things.

But the upshot is I think the virtue of of doing what you can now is that there are lots of things that Democrats can and probably would work with you on if you can put them in a position where there's pressure. And remember, whether it's Joe Biden and his budget or Kamala Harris and her campaign propositions, Democrats actually agreed with... They wanted to extend...

60, like about $3 trillion of the Tax Cuts and Jobs Act policies. They wanted to extend that. So the way this would go at its best is work with Democrats on the things that are bipartisan overlapping. with the leverage of being able to go back and do everything else on a partisan basis in that second bill.

But the problem is, without the forcing mechanisms of the urgency of running up against a deadline, it's just really hard to stand something up right now and come up with these sorts of... If you say, oh, we're going to do it all at once, well, that's fine, but you're probably going to be waiting until the end of the year.

They won't have... I don't think the government shuts down for any, I mean, you might see a partial, you know, you can do like the CR, most of it and the parts we can't agree on you shut down, but I don't think it'll be, I don't think it'll be a significant shutdown. You never put it past him, but I think that's part of the problem is that like the last Trump shutdown was so pointless.

Like it, it just kind of like ran its course at this rate. I wouldn't expect passage by Memorial day. They need to decide not one bill, two bill, When do you want to bill? Because if that's the goal, if the goal is to pass something by Memorial Day, that's fine. But you just need to decide then if we haven't agreed on things by March, we just got to go. I think they will.

I think there will be a recognition at a certain point that the longer you wait, the harder things get. But I just think people need to understand that if you intend to move a tax bill in the first tranche, that it won't be a sort of universal deal that covers the $5 trillion in policy that we're talking about.

I think Mike Johnson had a better showing than I might have expected even hours before it played out. And that should tell you that if you can narrow it down to a limited group of holdouts, I think Trump can turn the screws in ways that would be formidable. But the problem is he can't help you at this stage. He's the closer at best.

I'm kind of inked into this junk.

history with Joe Jean like this is I could I could run with this because I'm genuinely curious like which elements of this has any like yeah did something happen in 1867 did something happen in you know the the late 40s like I genuinely don't know and now I'm kind of curious what I've learned here for you because this isn't Facebook so we can do a fact check is Andrew Johnson's secretary of state in 1867 Andrew Johnson America's worst president until Trump

I like it. I mean, I heard somebody made a good point. I think we're thinking too small. We need to go. Somebody put out gulfofcrypto.com. We got to think sponsorship.

Yeah.

I think that's a source of revenue for a reconciliation conversation.

Working backwards, I think everybody understands from a Schoolhouse Rocks perspective, most people do when they think about it hard. It's nice to have control of the U.S. Senate, like it gives you fancy titles and chairmanships and gavels and you can call yourself the majority leader and you can schedule the votes. But the way the Senate works, I mean, there's two fundamental problems.

Unless 100 senators agree on things, it takes a lot of time to do really anything. And even if you go through all the procedural steps, you still need 60 votes to do almost anything. That's because there's procedural steps to get to the final passage. Yes, maybe to pass that bill in the end, it only takes – 50 plus one, you know, the president, vice president can break the ties.

It's really hard to do most things. And so what that means is when it comes time to fund the government, as we saw in December, the reason Republicans were very frustrated and the reason conservatives always get mad at the end of the year, at the end of the fiscal year is because Well, Democrats have a role in this process, too, if you need to get 60 votes.

The virtues of budget reconciliation, which is a process that was created about half a century ago and has sort of evolved over time, is that it's one of the few mechanisms by which Congress can do an end around around the filibuster for a limited prescribed categories of issues, specifically spending money. So appropriations, revenue, so tax and tariffs, and the debt limit.

So there's sort of three flavors within reconciliation. So you can't do a five-week abortion ban under reconciliation. So the short answer is no. But I want to get to that because there are interesting ways to come at things that you want to do, not facially, right? You can't just, yes, you can't just insert that in there. And this is a little grim to go through with that.

But there are creative ways that you can get at policy issues through it.

Like in all seriousness, and that's like sort of 301 stuff, but like at the 101 level.

No, no, no. But the point is we've seen in the modern era, you know, like post 1990, whatever, let's just say Bush era on reconciliation has become the preferred way, particularly in, you know, quote, so-called trifecta. When one party has unified control of Congress and the White House, this is the way things get done.

And early on, particularly in the Bush era, we think back to the Bush tax cuts, the 0-1, 0-3 tax cuts. That was done through reconciliation, but it actually had democratic support in some cases, significant democratic support in some cases. So it makes things easier.

And as a sort of baseline case means that to the extent that one party has consensus, they can move things through within those parameters of tax spending and debt limit. Now, you can only do one reconciliation process per fiscal year. And this is where it gets confusing because we're talking about this year, next year, last year.

We are currently in fiscal year 25, and we were even in calendar year 24. We did not do a budget for fiscal year 2025. Typically, that happens last year. Typically, that happens in calendar year 2024 because in divided government – We, the royal we, the government, the House Republicans. By law, according to the Budget Act, Congress is obligated to – I mean the White House produces its document.

Congress passes its budget. They did not do that.

Republicans did not do that. I mean, Senate Democrats as well. So the divided government did not do that. The precedent that we're looking at here is in 2017, where for the first time, because in 2016, calendar 2016, there was not a budget done in fiscal year 2017. Republicans, when they sort of caught the car, Trump won, they picked up both chambers.

or kept both chambers in Congress, they realized, well, guess what? We can dust off that budget shell that didn't happen from the sort of ongoing fiscal year. We will use that to repeal Obamacare, and we'll use the next one for next year to have a big, beautiful tax bill. And Part of that came true.

And actually, if we think back eight years ago, around this time, they did the first step in the process. They passed a budget resolution. And I say shell because normally a budget is a big, huge document that has all kinds of details and weighty issues. That's not what we're talking about here. I mean, it's just numbers.

But in order to get to the fun part or messy part where you're actually putting the package together... You have to, quote unquote, instruct committees. You need to give sort of a number, a target number that tells, whether it's the Ways and Means Committee or any other authorizing committee, that you need to raise or lower the deficit.

You need to raise spending, lower spending, raise revenue, lower revenue by X dollar amount. Only then, and once it's adopted mutually in both chambers, only then can you go down the road of actually putting together legislation.

It is September 30th.

And really, I mean, I don't think there's any real question. I think they will... To the extent that we're going to do one here and now, they will use that fiscal year 25 budget. I haven't heard anybody suggest otherwise. But to your point, that only is ripe until the end of September. Now, here's the real issue.

When we're talking about one bill or two, it's not whether you would use that second one when it ripens. Because of course you would. Why wouldn't you? You'd want to pursue that. The real question is whether you do tax up front.

So that's the fun part. It does not have to be budget neutral, but you need to give yourself permission via these budget instructions for how much it can raise or lower the deficit. And the important thing here, and there's a really interesting sort of historical precedent here.

If you think back to 2017, and this is, remember, this is in the sort of the lowest of lows in the first year of the Trump presidency, where it felt like Democrats were never getting anything done. Obamacare dreams, you know, fizzled.

And you had on the budget committee, you had much more traditional Republican sort of spectrum here where you had the old school budget hawk in Bob Corker, who said, no, it's got to be every dollar has to be paid for. We're going to do revenue neutral tax reform. And the other side, you had Pat Toomey, the supply side or the art laugher disciple saying, no, no, no, it's going to pay for itself.

It's fine. where they ended up meeting in the middle was saying, okay, fine, because the scorekeepers won't give credit for all these great macroeconomic effects, what we're going to do is say... Did those play out, the budget cuts?

They did not pay for themselves, indeed. Oh, they didn't pay for the dumb tax cuts, didn't pay for themselves? Look, I think that's going to be an interesting factor here, is like Democrats pointing to those, you know, the old, but then there's going to be the same conversations again. But the upshot is where they met in the middle was $1.5 trillion.

The reason we're even here back talking about this contextually is in order to fit $6 trillion of tax cuts into a $1.5 trillion bag, they had to play with the date such that most of it, particularly as it relates to the individual side, you and I and anyone listening to this podcast...

our tax rates, because it was not done in a permanent manner, because they were not long-term pay-fors, it expires after seven years. So it expires at the end of this year. Now, that goes to, I think, your underlying question, which is it cannot raise the deficit in the out years. So in congressional budgetary We use a 10 year window.

And so the short answer of this is reconciliation can only do things for 10 years. Now, the reason why the corporate rate is permanent is that because some of the things that the corporate community gave up, they sort of throw off revenue down the road. So that's permanent. But everything on the individual side was like temporary cuts, just pure candy.

So, you can give yourself permission within that 10 years to raise the deficit as much as you want. You could just say, forget it. Like, these are good. Tax cuts are good. They're going to pay for themselves and we're going to put – Yeah, that's a king of debt.