J. Scott Applewhite/AP Photo
House Speaker Mike Johnson (R-LA) shakes hands with President Joe Biden at the conclusion of the National Prayer Breakfast, February 1, 2024, at the Capitol in Washington.
The Revolving Door Project, a Prospect partner, scrutinizes the executive branch and presidential power. Follow them at therevolvingdoorproject.org.
President Biden just can’t catch a break with fiscal policy. Ever since he brokered a deal with then-Speaker of the House Kevin McCarthy, the clouds of a budgetary storm have lingered overhead. In the aftermath of that deal, I wrote in the Prospect that President Biden “may have won a reprieve from fiscal policy fights, but there’s a fiscal policy hurricane brewing” that will strike in 2025.
That metaphor still largely holds; we will soon be caught in the destructive wake of a policy clash with enormous impact for which Democrats seem woefully unprepared. Unfortunately, the White House had not won a reprieve.
In a tempest such as this, the media instinctually latches on to more digestible stories about individual parts of the larger fiscal landscape. Politicians are rewarded for dealmaking and splitting up large proposals into discrete bargaining chips to trade away for small concessions. It’s an easier story to tell: Democrats trade Republicans X and get Y in exchange. But President Biden must avoid the impulse to peel off priorities from his key legislative goals in pursuit of media praise. The best arrow in his quiver is the contrast between his opponent—a crook who will enrich himself and his super-rich friends at the expense of the American people—and himself, Union Joe, a president who has done more than anyone since the Reagan Revolution to revitalize labor and protect consumers and workers from corporate exploitation.
Nothing exemplifies that distinction as much as his tax plan. But to make that case, he needs the tax plan—not a million little pieces wheeled and dealed in a million side deals.
Republicans abandoned the budget deal that McCarthy had signed on to that would have (for once) had them pass a real budget. For that matter, they abandoned McCarthy himself. Ever since, Republican disarray has undermined any chance for a coherent appropriations process.
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After multiple failed candidacies—notably Financial Services Chair Patrick McHenry (R-NC)— House Republicans settled on Mike Johnson (R-LA) as their Speaker, who almost immediately discovered what McCarthy had: It would be impossible to pass a budget without any Democratic support. With the Freedom Caucus insisting on a no-quarters approach that was too extreme for moderate coastal members of his own caucus, Johnson does not truly have a majority, at least when it comes to federal funding. And so Johnson, after initially implementing a stopgap continuing resolution, went down the same path McCarthy did and settled for a compromise that was basically the same as what Democrats would have passed with McCarthy.
Now, the Congress-watching world is abuzz with everyone’s favorite political thriller: tax code negotiations. Discussions around what to do with the expiring measures in the Tax Cuts and Jobs Act of 2017 (TCJA, or, in common parlance, the Trump tax cuts) are cropping up right on cue. Combine that with a bipartisan deal now before the Senate that trades an expanded Child Tax Credit for (a lot) of tax cuts for billionaires and hedge funds, and it’s clear that the floodwaters of critical fiscal negotiations are rising.
In some ways, the fiscal hurricane landing early could be a blessing in disguise. For one thing, if Democrats can rally to achieve key policy wins, they can potentially lock in some huge improvements before the next Congress (and potentially, president) is sworn in. Given the awful map Senate Democrats are running in, that’s not nothing. There’s also potential political upside here. Democrats and President Biden have a chance to really crystallize the differences between them and Republicans by centering fiscal issues. Poll after poll after poll after poll finds that the American public overwhelmingly supports higher taxes on the rich and corporations.
Similarly, there is massive support for a significant chunk of the nondefense discretionary spending that Democrats want to fully fund and Republicans don’t. For instance, after a year of high-profile transportation disasters, Republicans are a barrier to funding the FAA to inspect planes and take Boeing to task for literally selling aircraft with loose bolts painted over instead of properly fastening them (Alaska Airlines reportedly found “quite a few” such issues during inspection of their 737 MAX 9s). The public might be concerned that Republicans are delaying re-upping the FAA Reauthorization Act as part of the budget fight.
Democrats have to be wary; the more they fragment negotiations, the less they have to work with at the table.
That said, nothing looms quite so large as the Trump tax cuts. While most of the corporate tax cuts were permanent, virtually all of the personal income tax cuts are set to expire at the end of 2025. The TCJA was President Trump’s signature legislative achievement, an epochal symbol of his entire presidency. And, while it overwhelmingly helped the ultra-rich most, it did still lower income taxes. If a new policy keeps the tax burden low for most ordinary people while increasing what corporations and the super-rich pay, that would be a huge win for President Biden in an election year. It would allow him to campaign on improving tax fairness and on keeping tax cuts for ordinary people.
In fact, this is a cornerstone of Biden’s new-look economic pitch. According to Politico, “the president’s team is rolling out something a little different: an economic argument that tries to frame former President Donald Trump as the candidate of corporate tax cuts and Biden as a scourge of the ultra-wealthy.” That plan starts with Biden’s dual promise to keep taxes low on anyone making less than $400,000 a year while raising taxes on the ultra-rich and corporations. From there, the president and his team are planning to build on their “scourge” persona by throwing the book at corporate criminals, with the White House encouraging executive agencies to “boost competition or crack down on so-called junk fees.” Finally, President Biden is taking the fight to the enemies of the American public, a strategy we’ve been pitching for years.
A crackdown on corporations can draw attention to the question of who Republicans are eager to represent; there’s a reason billionaires are suddenly so concerned about border issues—and it has nothing to do with the border. Corporate leaders have made themselves enemies of Biden already. Now the White House finally seems ready to treat them as such, rather than as another demographic to appease, no matter what people like The Washington Post Editorial Board think.
And what better place to start than the embodiment of a giveaway to the wealthy? In the end, the Trump tax cuts lowered corporate taxes more than what corporations had even thought plausible to ask for. And their tax rate reduction isn’t going to expire, not unless Democrats repeal it. As chaotic as the fiscal landscape is, Biden and his party are being served a chance to articulate not only a better and fairer tax policy, but a more popular one as well. Heading into a general election, Democrats can campaign as both the saviors of tax cuts for most people and the party trying to put an end to corporations plundering the federal coffers while paying hardly anything back.
And yet, as much opportunity as there is for Democrats to make major policy and political gains in this mad dash, there is an equal measure of peril. Not least because of deals parallel to the main appropriations process, there is ample opportunity for Biden and congressional Democrats to drop the ball.
For instance, the Child Tax Credit deal brokered by Sen. Wyden promises a number of key tax breaks for corporations and the ultra-rich, which takes a number of bargaining chips off the table in reopening the tax code. The deal is also an example of a bind Democrats are particularly susceptible to: being willing to give away a whole lot in exchange for much less on one of their key priorities. It’s complicated. The deal will make millions of children less poor, and it’s hard to put a price tag on that. But in return, it also gives away a lopsided amount to Republicans.
The CTC deal does, however, demonstrate the Democratic urge to latch onto bits, pieces, and half measures even in the midst of a total reckoning. The tax code will be opened this year, and taking things off the table limits what can be negotiated then. It’s a workable issue if it happens a couple of times. But what happens when extending some of the few expiring corporate tax cuts is traded to Republicans for a small win on climate investment or antitrust funding or any number of other worthy causes? Or when the next deal swaps capital gains tax cuts for SNAP?
Democrats have to be wary; the more they fragment negotiations, the less they have to work with at the table. Even in the best-case scenario, President Biden will have to navigate tax reform overlapping with another budget fight and probably another debt ceiling standoff as well. The timeline the White House has to work with is crammed; the president’s negotiators need whatever latitude they can get. Congress still hasn’t passed a real budget for the current year, but to have as much settled as possible, the White House will likely wait until it does before kicking the tax fight into gear. But the true deadline to avoid serious cuts isn’t until the end of April, so who knows how much dithering will continue?
After that, there isn’t much time before Congress is embroiled in the next round of budget negotiations. The fiscal year starts in October, so talks will begin by late summer. And in order to make use of any of the opportunities the tax cuts offer them, Democrats must be ready with solid proposals by then. Politico reports that this new pitch on the economy will be a key piece of President Biden’s State of the Union address, which is set for March 7th. To keep taxes from fading from the public view, Democrats must avoid dithering and continually push tax fights into the spotlight.
The prevailing view is that passing tax changes will be implausible until late 2025, when the temporary tax cuts are actually slated to expire. Democrats cannot afford to wait until then. If Biden’s tax proposals are not introduced as part of or before the next set of budget negotiations, it will be too late. For one thing, the political power of a message about Republican tax giveaways is a lot less powerful if Democrats don’t highlight the issue during election season. Introducing new taxes that are popular and making Republicans publicly oppose them is going to be critical if Biden wants to be seen as a scourge of the elite. Scourges do not equivocate. They don’t say, “Well, I would, but it won’t pass.” They fight, they press, and they persist over and over and over again. Hearing that Biden’s team is building the resolve to do so is certainly a start.
But even beyond messaging, failing to start the push for tax reform in the next few months will likely make it dead on arrival because of another timeline issue. At the start of 2025, the United States will again hit the debt ceiling. And if tax reform and a budget deal aren’t sorted out by then, Republicans will use that to engage in hostage negotiations yet again. Last year, President Biden’s tax proposal was scrapped by the debt ceiling negotiations. What’s that saying about trying the same thing the same way over and over again?
It only gets worse if Republicans sweep the 2024 elections, hold the House, take the Senate, and get a new Trump presidency. This only serves to amplify the reason to start a serious tax fight now, and to underscore the importance of having something real to show to the electorate. President Trump’s advisers are already reportedly working on a proposal to double down on plutocratic tax breaks. Biden needs to champion an alternative and show that the Republican Party will only make things worse.
This story has been updated.
