By Damian Paletta
Congressional Leaders See Room for Tax, Trade Deals, Play Down Budget Standoff
GOP congressional leaders said they plan to pursue targeted agreements with the White House on tax and trade policy next year, but they played down prospects for more sweeping measures in part because of fractured relations between both sides.
The Republican lawmakers also suggested there would be little likelihood of showdowns with the Obama administration on spending or the debt ceiling, with incoming Senate Majority Leader Mitch McConnell (R., Ky.) saying there wouldn’t be a government shutdown or default on the U.S. debt.
“We need to quit rattling the economy with things that are perceived by the voters as disturbing,” Mr. McConnell said at The Wall Street Journal CEO Council meeting. Government funding for many programs expires on Dec. 11 without congressional action.
Instead, Mr. McConnell and Rep. Paul Ryan (R., Wis.), appearing separately at the Journal event, spelled out a legislative agenda that they hope to build the party’s platform going into the 2016 presidential election. The GOP strategy will be to “get ready to govern in ’17 by giving the country an agenda in ’15 and ’16 and meanwhile pass what we can pass to make a difference in people’s lives,” said Mr. Ryan, soon to be chairman of the House Ways and Means Committee, which writes tax policy.
The lawmakers’ comments reflected recent efforts by party leaders to temper expectations about what they can accomplish legislatively as the party prepares to control both chambers of Congress for the first time since 2006. They said, for example, that Republicans in the House and Senate would try to repeal the Affordable Care Act but had little expectation that they would prevail. Instead, they plan to try and overturn parts of the law and pursue smaller-scale initiatives like free-trade agreements.
Messrs. McConnell and Ryan said moves by President Barack Obama since the Nov. 4 midterm elections, particularly related to immigration policy, erased any chances that Republicans would go along with bipartisan deals in the next two years to completely rewrite the tax code or revamp entitlement programs, among other things.
“By any objective standard, the president got crushed in this election,” Mr. McConnell said, characterizing the November GOP wins as a “butt kicking.” “So I’ve been perplexed by the reaction since the election, the sort of in-your-face dramatic move to the left.”
Many Republicans particularly bristled after Mr. Obama’s recent executive action to temporarily shield certain immigrants from deportation, with some conservative lawmakers suggesting that a government shutdown should be on the table as retribution for what they see as political defiance.
The White House has said the executive action should serve as an invitation to congressional Republicans to redraw the country’s immigration laws, and Mr. Obama has said he is open to working with congressional Republicans on a number of measures, including trade agreements and changes to the tax code. Asked Tuesday about shutdown prospects, White House spokesman Josh Earnest pointed to comments from Mr. McConnell after the election.
“He obviously is somebody who’s going to have a pretty significant say over how this process works,” he said.
On immigration, Mr. McConnell said Republicans would seek to move away from the broad overhaul that passed the Senate with bipartisan support in 2013 and instead try to pass a series of smaller bills, focusing on increasing border security and expanding access to certain worker visas.
Separately, Mr. Ryan, currently chairman of the Budget Committee, said that in his new post he would pursue an overhaul of the tax code that lowers rates for businesses but avoids major changes to individual tax rates because he believes the White House and Republicans will never be able to cut a deal. He wants to lower the corporate tax rate to 25% from 35% and change rules to make it easier for U.S. multinational companies to bring their overseas profits back to the U.S. He predicted such a tax overhaul would either occur in 2015 or 2017, not in 2016 during an election year.
The White House has proposed lowering the corporate-tax rate to 28% from 35%, so the parties aren’t far apart in some respects. But they have major differences in how they believe the government should tax overseas earnings, among other things, and the White House has said it is nearly impossible to lower the tax rate to 25% without losing revenue.
Such a change to the tax code, while more targeted than a broad overhaul, would still be complex and difficult, Mr. Ryan said. Many U.S. companies are structured in a way so that they pay their taxes through the individual code, not the corporate code, and they would have to be changed to ensure fairness, he said.
“We also have to remember we cannot ignore the individual side of the code,” he said. He added that “If we can get halfway toward comprehensive tax reform…I think that’s great.”