Trump Takeaway From Health Bill Fight: Do Your Own Arm-Twisting

  • White House will take charge of building tax coalition
  • After relying on House leaders, a lesson: Don’t outsource

Trump Says Premiums Will Come Down Under New Health Bill

President Donald Trump and his aides have learned one key lesson along the bumpy road to winning House approval of a partial Obamacare repeal: Don’t outsource.

That was how one key adviser to the president described the main takeaway after persuading enough House Republicans to set aside differences and unite on a plan to peel back the Affordable Care Act. As Trump moves to the Senate battle over the health bill -- and future fights on a tax overhaul and government spending -- his aides say he believes he’ll need to take personal charge of forging the political consensus needed for wins in Congress.

Trump and his top advisers determined soon after the failure of the initial health legislation in March that it had to pass the House or the rest of his agenda would be jeopardized, including his tax plan, a senior administration official said. But they also concluded that it was folly to rely too heavily on the party’s congressional leadership to size up divergent GOP factions’ bottom lines and find compromise.

That painful insight is already shaping the Trump administration’s approach to an overhaul of the U.S. tax system, an even more ambitious undertaking than health care, with the potential to touch every sector of the U.S. economy. Trump’s advisers expect a vast array of interest groups and companies to wage all-out fights to protect their breaks under the current tax system, said a third senior official. 

All of the officials asked not to be identified to speak candidly about White House strategy.

For more politics coverage, subscribe to the Bloomberg Politics Balance of Power newsletter

Laying Groundwork

Seeking a quick repeal of Obamacare, the White House largely outsourced development of the health care legislation to House leaders in the interest of speed. They are taking a far different approach on tax legislation.

Before releasing even a bare-bones outline last month, National Economic Council director Gary Cohn, Treasury Secretary Steven Mnuchin and their staffs had spent months meeting with top executives, lobbyists, economists and conservative groups to field ideas and pressure-cook their plans to look for weaknesses, according to senior White House officials. Cohn and Mnuchin also briefed members of Congress on the plan the day before the one-page outline was released, following weeks of back-and-forth between their staffs.

Trump deliberately bypassed a tax plan developed by House Speaker Paul Ryan and Representative Kevin Brady, a Texas Republican who chairs the tax-writing Ways and Means Committee.

“You will see us engage outside audiences sooner,” said White House head of legislative affairs Marc Short, in a briefing last week with reporters. “We have learned that in the House, the Republican party, to its credit, is enormously diverse in opinion. But that also sometimes creates challenges in bringing them together on a big legislative issue.”

Trump has proposed cutting tax rates for all businesses, from mom-and-pop grocers to multinational corporations, to 15 percent. The current corporate tax rate is 35 percent, though many companies trim their bills via various deductions and credits.

For individuals, Trump wants to consolidate the existing seven tax rates to three, with a top rate of 35 percent, down from the current 39.6 percent.

Trump's Tax Plan May Turn a Rush of Taxpayers Into LLCs

While details remain scant, the Committee for a Responsible Federal Budget released a rough estimate that Trump’s plan could cost the government $3 trillion to $7 trillion over a decade -- potentially “harming economic growth instead of boosting it.” Finding ways to pay for the cuts -- or negotiating shallower ones -- will be near the top of the agenda in talks with Congress.

Health Bill Miscalculations

Within days of the health bill’s introduction in Congress two months ago, White House officials realized they’d made major miscalculations. House leaders hadn’t first built consensus in their own party and had made minimal outreach to key interest groups. One senior administration official said they were stunned to learn in a meeting at the White House with conservative groups a few days after the bill was introduced that none of them felt they had been consulted and most were strongly opposed. 

That left the administration unprepared for the onslaught of opposition that stalled the bill for more than a month. Members of the House Freedom Caucus and other conservative groups united against the legislation, saying it didn’t go far enough to repeal Obamacare. The country’s largest doctors and hospital associations also quickly came out against the bill. They, too, said no one reached out to them before it was introduced. 

After House Republican leaders yanked the bill off the floor in March for a lack of votes, Trump and his top aides became much more personally involved in negotiating a compromise, a senior administration official said.

Trump’s engagement included a threat: on March 30, he suggested in a tweet that he’d back primary challenges to conservatives who opposed the bill. The senior administration official said White House aides now believe that threat was effective, galvanizing House Republicans to keep negotiating on the legislation.

The White House’s course correction has entailed some collaboration with congressional Republican leaders. Trump has been in near-daily contact with Ryan for the past month, said a senior Republican official. White House Chief of Staff Reince Priebus and Vice President Mike Pence also have been in regular touch with party leaders and individual House members.

While Republicans were able to eke out the votes in the House Thursday to move the health legislation to the Senate, the fate of the bill is still unclear. And when it takes up a tax overhaul, the White House is trying to avoid another black eye of the sort it suffered when the health bill initially failed.

‘Same Page’

“I’m convinced one of the lessons from the health-care debate is that the sooner the White House and Congress get on the same page with these major reforms, the better,” Brady said. “It increases the chances of success.”

Brady’s hope for unity on taxes is a far cry from the current political reality. The blueprint endorsed by Ryan includes far-reaching provisions that have scant support in the Senate or in the White House, most notably a so-called border-adjusted tax on imported goods and domestic sales.

In addition, Ryan and Brady’s insistence that tax cuts not add to the deficit in the long-run -- a prerequisite for permanent tax changes under rules that allow legislation to circumvent a Senate filibuster -- isn’t shared among Senate Republicans, some of whom are open to a tax cut that would automatically sunset after 10 years.

The day after releasing Trump’s tax outline, Cohn was back in meetings, sitting down with a dozen think tanks and conservative groups to get their feedback. The White House plans to spend the next month meeting with members of Congress to draft legislative language, according to a senior White House official.

And one side benefit of the health-care battle, a senior administration official said, is that Trump got to know a couple hundred lawmakers with whom he previously had no personal relationship. That gives him a better starting point for future debates, the official said.

Asked to reflect on lessons from the health-care fight, Representative Dave Brat, a Virginia Republican, said: “You’ve got to find out where are the poison pills for every group, way ahead of time.”

Watch Next: Trump's Tax Plan May Turn a Rush of Taxpayers Into LLCs

— With assistance by Sahil Kapur

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE