What a split Congress means for key domestic issues from taxes to health care

Posted at 3:27 PM, Nov 07, 2018
and last updated 2018-11-07 17:37:24-05

Both President Donald Trump and Democratic leader Nancy Pelosi spoke Wednesday about their desire to work across the aisle on bipartisan policy initiatives in the new Congress. But with the country more deeply divided than ever along partisan lines, it’s likely that gridlock, rather than cooperation, will be the dominant theme of the next two years with Democrats newly in control of the House pitted against the Republican-held Senate.

Here’s how five key domestic policy questions are expected to play out in a divided Washington:

Tax cuts

Trump promised middle class tax cuts in the days before the election.

The big question now is whether he might be able to get Democrats, who bitterly opposed the 2017 tax reform bill that included hefty cuts for corporations and the wealthy, to join in.

The President on Wednesday opened the door to working with Democrats if they come up with an idea to help cut taxes for the middle class even if it means potentially raising the corporate tax rate — now set at 21%.

“I would absolutely pursue something even if that means some adjustment to make it possible,” Trump said at a press conference, without defining specifically how much of a calibration he’d be willing to make. When asked, he clarified it as “a little bit of an adjustment.”

But Democratic Texas Rep. Lloyd Doggett, a senior member of the tax-writing House Ways and Means Committee, cast doubt Wednesday on the President’s pitch that an adjustment would provide sufficient relief to the middle class. And Democrats have pledged they will adhere to a strict policy of pay-as-you-go on new policy measures to avoid adding to a ballooning national debt.

Alternatively, Trump could focus on finding small fixes that even Democrats would go along with, but that he could still claim count as a tax cut — even if they’re nowhere near the 10% he promised last month, seemingly out of nowhere.

That includes maneuvers that would raise tax-free contribution levels for retirement plans or health savings accounts, both steps that have been included in bipartisan legislation introduced this year.

A more likely scenario would be making small tax changes — such the paid family leave credit — through a budget bill later this year, allowing Republican leaders to use the House-Senate reconciliation process to sneak additional tax cuts in.

“The only strategic move for them is to go through the budget process, which only requires 51 votes,” said Grover Norquist, president of Americans for Tax Reform. “It’s a rather aggressive play, but it’s perfectly fine to do and strategically wise.”

Health care

Health care took center stage in the midterm elections, so it’s expected Congress will look to tackle perennially thorny issues such as drug prices and health insurance over the next year as both parties look ahead to the next election cycle.

One area where there might be action: Drug prices. Democrats and Republicans agree that prices are too high.

Both Trump and House Minority Leader Nancy Pelosi, who is expected to become speaker in January, mentioned drug prices in remarks immediately after the election.

“I think that we could find common ground in reducing the cost of prescription drugs, if the President is serious about his saying that he wants to do that. He has pulled his punch on it so far,” Pelosi said on PBS Monday night.

But the two parties have different ideas of how to combat the problem.

Republicans favor boosting competition and increase price transparency, said Dan Mendelson, founder of Avalere Health, a consulting firm. Democrats, on the other hand, will focus on pressuring drug makers to reduce their prices if they take over one or both chambers.

“Democrats are not shy about digging into pricing,” Mendelson said.

When it comes to health insurance, Democratic House lawmakers are also expected to introduce bills that would expand Medicare to cover more Americans. There are various versions of this single-payer legislation floating around, though Vermont Sen. Bernie Sanders’ Medicare-for-all bill that he rolled out last fall is the most prominent. But Trump would almost certainly veto any version of the legislation, which he’s equated with socialism.

Poverty programs

First up is passing the farm bill. The House and the Senate each approved a version, but the effort remains mired in conference committee. One big sticking point: The current Republican-backed House bill would require more food stamp recipients to work, while the Senate wouldn’t.

Republicans are likely to push to approve a compromise bill before the party hands over the baton. Democratic Rep. Collin Peterson, ranking member of the House Agriculture Committee, told reporters Wednesday that he would focus on passing the legislation during the lame-duck session, according to Reuters.

After that, Democrats may look to increase funding for affordable housing, child care and job training, said Melissa Boteach, senior vice president of the Poverty to Prosperity Program at the left-leaning Center for American Progress.

Looming over any legislation is the growing federal deficit, which Republicans have renewed interest in. There will be a strong push to find ways to pay for any changes, said Robert Doar, a fellow in poverty studies at the conservative American Enterprise Institute.

Republicans will point to the strong economy and low unemployment rate as justification for adding work requirements to more programs.

Replacing NAFTA

Trump and his Canadian and Mexican counterparts are due to sign a replacement for the North American Free Trade Agreement — known as the US-Mexico-Canada Agreement, or USMCA — in late November, before the Mexican presidency changes hands.

But Congress still needs to ratify the agreement — and legislative procedure makes it almost impossible for them to vote on it before the end of the year unless majorities in both chambers are willing to alter the requirements laid out by the fast-track authority that applies to trade deals.

While Republican Sen. Chuck Grassley said in early October that Republicans would try to push it through during the lame duck session, Senate Majority Leader Mitch McConnell has knocked down the idea. He told Bloomberg News that the bill won’t come up before the end of the year.

Even under the current rules, it’s possible that Congress could skip some steps and vote as early as New Year’s Eve. But that would mean lawmakers would have to vote on the legislation on the very day Trump sends it to Congress, without any time for the committee meetings that would normally take place.

It would also likely mean that Congress would vote on the agreement before an economic impact study is published by the US International Trade Commission — which has up to 105 days to complete it after Trump signs the deal.

“I don’t see how procedurally, or politically, they can pull off a lame duck vote on NAFTA 2.0.” said Lori Wallach, the director of Public Citizen’s Global Trade Watch, a consumer advocacy group, and author of a book on the fast-tack authority.

And Trump’s own negotiators have already expressed hope that Democrats would get on board with his deal, in part due to improved labor standards and environmental protections that have been worked in.

He might have an ally in Massachusetts Democratic Rep. Richard Neal, who’s set to take over the House Ways in Means Committee next year.

Neal, who voted against the original NAFTA, has said that “the bar for supporting a new NAFTA will be high” and that Democrats will prioritize making sure Congress can enforce new standards on environmental protections and worker rights included in the deal.

Trump’s trade war with China

The Constitution gives authority over trade to Congress, but over the years it has delegated some of that power to the president — which is how Trump has been able to unilaterally impose tariffs on steel and aluminum imports.

The next Congress could attempt to slow Trump’s protectionist trade policies, which are hurting some steel and aluminum manufacturers as well as farmers, a key constituency for both parties.

Republican lawmakers have already attempted, though unsuccessfully, to take some of this power back. Legislation introduced in June by Tennessee Republican Sen. Bob Corker would limit the President’s power to impose tariffs in the interest of national security — which Trump invoked to put duties on steel and aluminum imports.

Senate Majority Leader Mitch McConnell has said he would not bring the bill up for a vote. Even Democratic Sen. Sherrod Brown, whose state of Ohio is home to some steel producers, strongly opposed the measure. Even if a bill passed both chambers, Trump would have the opportunity to veto it.

There has been less talk of revoking the President’s power to impose tariffs on countries that engage in unfair trade practices, which Trump used to put duties on $250 billion in Chinese goods.

Both Democrats and Republicans share concern over China’s alleged intellectual property theft and forced technology transfers.

Democrats in the House have already called for more oversight over Trump’s tariffs, the Republicans blocked a resolution of inquiry seeking information from the Trump administration about what is guiding its trade policy has been introduced by New Jersey Rep. Bill Pascrell, who called the President “chaotic” and “increasingly volatile.”