A New ‘Battle Royale’ Over Trump's Tax Cuts

House Republican Leader Kevin McCarthy
Reuters
By Yuval Rosenberg

Happy Monday! For a local scarecrow contest, bakers in Benicia, California, have created a 6-foot bread version of Han Solo frozen in carbonite. They call it "Pan Solo." Voting in the scarecrow contest ends Sunday. May the Force be with them.

Here’s what else we’re chewing on:

A ‘Battle Royale’ Over Extending the Trump Tax Cuts

Republicans have been hammering President Joe Biden over inflation running at a 40-year high. The "Commitment to America" agenda outlined last month by House Republican Leader Kevin McCarthy of California promised to strengthen the economy and fight inflation. Yet as The Washington Post’s Jeff Stein reports, Republicans plan to try to extend parts of their 2017 tax cuts if they win control of Congress — a step that many economists say would worsen inflation and run contrary to GOP rhetoric about reducing the federal budget deficit.

To keep down the official cost of their 2017 tax reform, Republicans set some individual tax cuts to expire after 2025. But Stein reports that Republicans are now "preparing to advance legislation" to make permanent the 2017 individual income tax rates — and that the GOP "will also push for scrapping some of the law’s specific tax increases on corporations that were designed to offset the cost of their enormous overall cut to the corporate tax rate."

Stein adds that Republicans are already looking to extend a trio of corporate tax breaks that would collectively add some $600 billion to the deficit over 10 years.

Any such effort wouldn’t be a surprise — but it may run counter to the GOP’s promises regarding inflation and deficits.

"Many economists say the GOP’s plans to expand the tax cuts flies against their promises to fight inflation and reduce the federal deficit, which have emerged as central themes of their 2022 midterm campaign rhetoric," Stein writes. "Tax cuts boost inflation just like new spending, because they increase economic demand and throw it out of balance with supply. But Republicans say they believe these efforts would put Biden in a political bind, requiring him to choose between vetoing the tax cuts — giving the GOP an attack line in the 2024 presidential election — or allowing Republicans to win on one of their central legislative agenda items."

The White House is already punching back by reviving some familiar — and largely effective — attacks on the 2017 tax cuts, telling Stein that Republicans are selling out the middle class and "doubling down on their 2017 tax giveaway to the ultrawealthy and corporations."

Democrats will have some support on the point from analysts, too. "The Republicans did not want to look like they were giving too much away to businesses, so they had some of the business relief expire and had some offset by business tax increases," Steve Rosenthal, a policy analyst at the nonpartisan Tax Policy Center, told Stein. "Now to come back and extend business relief and reverse the increases would mean further tilting our tax system toward the rich and the powerful."

The bottom line: "It’ll be a battle royale in Washington over the next year over which of Trump’s tax cuts get extended," Stephen Moore, a right-wing economist, told the Post. "This will be a central, driving theme of the Republican Congress — making those tax cuts permanent."

One possible outcome would be particularly disappointing to deficit hawks: an extension of the GOP tax cuts combined with new spending programs that Democrats want, like a renewal of the expanded child tax credit.

Number of the Day: 100%

Probability modeling by Bloomberg economists Anna Wong and Eliza Winger now puts the chances of a U.S. recession within the next 12 months at 100%.

Yikes.

"The Bloomberg Economics model uses 13 macroeconomic and financial indicators to predict the chance of a downturn at horizons of one month to two years," Bloomberg’s Josh Wingrove writes. "While the chance of a recession within 12 months has reached 100% under the model, the odds of a recession hitting sooner are also up. The model forecasts the likelihood of a recession within 11 months at 73%, up from 30%, and the 10-month probability rose to 25% from 0%."

We’ll remind you that this is just a model — one of many, and other forecasts are far less certain that a recession is imminent, even as many find one likely to arrive before long. "A separate Bloomberg survey of 42 economists predicts the probability of a recession over the next 12 months now stands at 60%, up from 50% a month earlier," Wingrove notes.

Republicans Gain in Polls as Economic Concerns Weigh on Voters

Voters are worried about inflation and the economy, and that appears to be giving Republicans an edge in congressional races less than four weeks before the midterm election.

A New York Times/Siena College poll published Monday finds that 49% of voters say they plan to vote for a Republican in November, while 45% say they plan to vote for a Democrat. The results show an improvement for Republicans, who had just a one-point advantage in September. (The poll of a nationally representative group of 792 registered voters was conducted from October 9 to 12, 2022, with a margin of error of 4 percentage points.)

"With inflation unrelenting and the stock market steadily on the decline, the share of likely voters who said economic concerns were the most important issues facing America has leaped since July, to 44 percent from 36 percent — far higher than any other issue," says the Times’s Shane Goldmacher. "And voters most concerned with the economy favored Republicans overwhelmingly, by more than a two-to-one margin."

Republicans are winning more independent voters, who say they will vote for the GOP by a 10-point margin. Female independents have shown the biggest increase in support, moving from backing Democrats by a 14-point margin in September to supporting Republicans by an 18-point margin in the latest poll — a worrying sign for Democrats who had hoped that the politics of abortion would take precedence over the politics of inflation this fall.

Overall, voters reported feeling pessimistic about the national situation. Sixty-four percent said they think the country is headed in the wrong direction, more than twice the 24% who said the country is on the right track — a sour outlook that does not bode well for the party currently in control in Washington.

Quote of the Day

"The exorbitant rates charged to the Secret Service and agents’ frequent stays at Trump-owned properties raise significant concerns about the former President’s self-dealing and may have resulted in a taxpayer-funded windfall for former President Trump’s struggling businesses."

– Rep. Carolyn Maloney (D-NY), chair of the House Committee on Oversight and Reform, in a letter to Kimberly Cheatle, director of the United States Secret Service, requesting a full accounting of the Secret Service’s spending at Trump-owned properties. Documents released by the committee Monday indicate that Trump properties charged the Secret Service "exorbitant" nightly rates far above government rates, with some charges as high as $1,185 per room.

8 Million Americans Have Already Applied for Student Loan Relief

The federal student loan forgiveness program created by the Biden administration is now accepting applications, potentially providing tens of millions of Americans with significant reductions and in many cases eliminations of their student loan debt.

"Today, I’m announcing millions of people working and middle-class folks can apply and get this relief. And it’s simple and it’s now. It’s easy," President Joe Biden said Monday in a speech delivered at the White House. "This is a game changer for millions of Americans … and it took an incredible amount of effort to get this website done in such a short time."

In a brief beta test of the system that began last week, more than 8 million people applied for debt forgiveness.

The Biden administration unveiled the program in August. It forgives $10,000 in student loan debt for individuals earning less than $125,000 per year, and twice that amount for those who received Pell Grants, which typically are given to students from low-income households. The White House says more than 40 million people currently owe money on their student loans, with a cumulative balance of $1.7 trillion. The majority of borrowers will be eligible for some kind of relief.

Critics charge that the program is too expensive, with cost estimates in the neighborhood of $400 billion. Some Republican groups have sued to put a halt to the program, and litigation could delay if not derail implementation in the coming months.

The application form and more information are available at StudentAid.gov.

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