After accomplishing a major overhaul of the tax code to end 2017, the Republican controlled Congress needs to figure out what to do in 2018. Their agenda could include a combination of immigration reform, welfare reform, infrastructure reform, entitlement reform, health care reform and a host of other policy goals. But it’s DC, so their real goal will be to maintain as much power as possible after the midterm election.
History shows that the midterm election after a new presidency does not bode well for that President’s party. Thus, if Republicans want to keep their majority in one or both houses, they will need to get their act together and accomplish a few more major policy goals – such as making good on a decade worth of promises to return fiscal sanity to Washington. However, party leaders will most likely be more focused on the midterm elections than on ensuring a prosperous future for the the next generation. Although it is unlikely Congress will make real meaningful strides on these issues, here’s what we think Congress tries to tackle in 2018 (from most likely to happen to least likely).
Increase Government Spending
On so many issues, DC politicians live in la la land. There is no greater divide between DC politics and reality than on budget and spending decisions. The reality is that we are $20 trillion in debt with $100 trillion in unfunded liabilities, and a return to trillion dollar annual deficits is imminent. Every non-partisan objective analysis concludes that our nation’s budget is not sustainable. Yet, our leaders in DC will spend the beginning of this year deciding how much more we should increase spending, exacerbating our massive existing fiscal problems.
Many Republicans are demanding massive increases to the defense budget. Their Democrat colleagues say that any increases in defense spending must be matched by spending on non-defense discretionary spending (discretionary spending is the money that Congress doles out on an annual basis).
Congress is facing another government funding deadline on Friday and will need to increase the debt ceiling this spring. Despite a decade of speeches by Republicans stating that we need to get the federal budget under control, you can expect the tough decisions that must be made to get there will be punted once again. Instead, the likely outcome will be more spending and no meaningful changes to our long-term debt outlook.
Accomplished in 2018? Very likely.
No other battle will be more charged and politically toxic in the first quarter of 2018. Democrats and many Republicans, want Deferred Action for Childhood Arrivals (DACA) protections reinstated before the March expiration date. The hold up? President Trump and Republicans want more border security – including “the wall” – an end to chain migration and a visa lottery program to go along with it. Despite the caustic rhetoric, there are strong incentives and enough negotiating room that it is more likely than not a deal on DACA will eventually be made.
Accomplished in 2018? Likely.
The administration’s infrastructure plan, one of the President’s main policy goals, is expected to rollout this month. Seen as an area of potential bipartisan agreement, this is one area where there is broad agreement on need, but not on means. The means to do so will likely keep it from happening. The issue is that our infrastructure financing is built upon a user-fee premise. For example, the users of our highways pay a gas tax that is used to fund the construction and maintenance of our roads. However, the user-fee premise has been largely disconnected, as the political will to raise the gas tax or find alternative means to finance highways (such as a mileage tax) has not been found since 1993. Instead, Congress has used a series of one-offs to fund our highways (for example, changing the way banks receive interest from the Fed was used as a pay-for during the last highways bill).
There is also a question of efficiency. There is a ton of red tape that slows down major infrastructure projects. There is also a question of role. Should the federal government pay for highways, or local roads and bike trails?
Infrastructure improvement is a shiny object that everyone agrees is needed. But the devil is in the details and is unlikely to be solved this year. Unless, of course, there is a bipartisan agreement to fund a major infrastructure spending package with more debt – forcing the next generation to pay for the current one’s inability to make choices.
Accomplished in 2018? Not likely.
After a painstaking year of repeated attempts and failures by Republicans to change the Affordable Care Act, Republicans finally made a dent in the law by repealing the individual mandate through the tax bill. But the rest of the subsidies and many of the regulations are still in tact. It is unclear whether Republican leaders have the stomach for another attempt at sweeping healthcare reform. One major factor that will make it easier is that every Republican plan was publically hammered by CBO scores that showed massive losses in health insurance enrollment. The bulk of the impact was due to how CBO scored the effect of the individual mandate. With that off the table, the CBO scores of future attempts will look more favorable.
That said, healthcare reform is complicated and will remain difficult. Whether Republicans try to patch up Obamacare, go for full reform again, or do nothing is still up in the air. Given the timidness of Republican leaders and their desire to run the midterms on tax reform, it is more likely that a combination of patches and punts will occur.
Accomplished in 2018? Not likely.
Entitlement and Welfare Reform
If big-spending Republicans and Democrats really cared about protecting the defense and non-defense budgets, they would be working to contain the mandatory budgets that will continue to consume more and more of the government’s resources. Mandatory spending programs are the programs that are set on auto-pilot – such as Social Security, Medicare, Medicaid, food stamps, farm subsidies, and a host of other programs. In 1967, 60 percent of federal receipts remained after mandatory and interest spending. Today, only 20 percent remain. In a decade, that number will approach zero.
Although this issue is more important than any other policy on the slate this year, this will sadly, not be acted on. Democrats will be reluctant to work with Republicans, and members from both parties will find it tough to take a stance on the so called “third rail” in an election year. Our nation has $100 trillion in unfunded liabilities and will most likely forgo another year of reform in order to try and win the next election.
Accomplished in 2018? Not likely.