Who Wins? Trump vs. the Koch Brothers on Jobs
Benefiting from the soft bigotry of low expectations, some pundits have announced that Donald Trump qualifies as "presidential," an elusive quality Trump supporters always thought the man had and many others still doubt he has attained.
On Tuesday night, President Trump certainly took a step toward normalizing his presidency. In his address to a joint session of Congress, he came across as “presidential,” at least in conforming to certain tropes of his predecessors and praising a fallen soldier, while issuing the usual raft of exaggerated, true, partly true, and misleading statements. Mostly he reiterated his campaign themes and offered a bouquet of expensive promises.
Having cleared the low bar of appearing presidential, Trump now faces the higher bar of actually being presidential, and doing things like crafting legislation that is enacted into law with real-world effects. Jobs are his biggest test.
In the speech Trump spoke vaguely of a trillion-dollar infrastructure jobs program, but only committed himself to a single jobs measure: a tax on imports, otherwise known as a border-adjustment tax (BAT).
As Trump put it, "We must create a level playing field for American companies and workers. Currently, when we ship products out of America, many other countries make us pay very high tariffs and taxes, but when foreign companies ship their products into America, we charge them almost nothing."
By eliminating taxes on exports and imposing them on imports, a BAT would give market advantage to domestic producers and thus create American jobs in industries like aeronautics, pharmaceuticals and medical equipment that export. It would disadvantage retail employers selling imported clothes, electronics and food.
Can the president deliver? House Speaker Paul Ryan has drafted tax reform legislation that includes BAT provisions, but Ryan has struggled to sell a trillion-dollar tax to a caucus of habitually anti-tax Republicans. The House Republicans mostly want the BAT to fund the trillion-dollar tax cut for the wealthy, which is their higher priority. These Republicans may prefer to let Trump's plan die rather than vote for what they would—if it was proposed by a Democrat—surely describe as a "massive protectionist tax increase."
Into the Swamp
So after a month of orders and tweets, Trump is entering the legislative arena where he has to confront and cajole people who opposed him. Trump is new to the "swamp," as he has dubbed the capital nexus where money shapes lawmaking. He has no real problem with lobbyists from the swamp. He has already hired several for senior government jobs.
His opponents on the BAT, ranging from the Koch brothers to Walmart, know the terrain quite well. While Ryan struggled to sell the import tax to his caucus, his opponents mobilized. A couple of hundred retailers, ranging from Abercrombie & Fitch to Walmart, sent a letter to Congress calling Trump's proposal "a massive tax increase on consumers and would result in increased costs on everyday necessities like food, clothing, gasoline and prescription drugs—necessities that Americans rely on daily—by as much as $1,700. It is really a 'cost of living tax' that will make the lives of millions of middle-class Americans harder and more expensive."
The National Retail Federation has started running a heavy-handed TV ad saying, "It'll tax your car, your food, your gas, your medicine, your clothes; you name it, BAT will tax it."
On the other hand, exporters like Caterpillar, Dow Chemical and Pfizer support the BAT concept because it makes their products more competitive overseas. Trump met with leading manufacturing CEOs last week and came away talking up the BAT. Steve Bannon, White House adviser and economic nationalist, is also a BAT proponent.
As Trump forges ahead, he will confront one of the biggest alligators in the proverbial Washington swamp: right-wing funders David and Charles Koch. Like other oil importers and refiners, the Koch brothers are out to kill the BAT in the cradle.
The Kochs' nonprofit front group, American for Prosperity, has mobilized its activists in 35 states to lobby against Trump’s proposal. The group’s political director told Politico that AFP has set up meetings with about 100 senators and representatives in their state and district offices this week. The group is focusing on the 23 Republican members of the House Ways and Means Committee. The goal is to prevent the idea from ever reaching a floor vote.
In the unlikely event Trump can rally a majority of House Republicans behind the bill, he will have to introduce a companion bill to the Senate. Finance Chairman Orrin Hatch (R-Utah) has already warned Trump and Ryan that border adjustment won't likely have the support needed to clear the Senate, according to Politico.
No Senate. No bill. No jobs—at least none that Trump can take credit for.
Thus, on the issue of the import tax to create jobs, the Republican unity that elected Trump is visibly fracturing, turning 2016's campaign allies into 2017's legislative adversaries.
Can Trump steamroll the Koch brothers? And the Senate? Does he even want to? It would be more characteristic of Trump to quickly abandon an unsellable product and move on to his next promise, the infrastructure jobs program, with details to come later.
Treasury Secretary Steve Mnuchin said last week he hopes to have BAT legislation passed by August. Whether Trump's proposal can survive that long is in doubt. Trump is a long way from being presidential on job creation.