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A Standoff, But Not A Standstill

The incoming 116th Congress will probably feature a legislative standoff between House Democrats and Senate Republicans, but that does not mean it will be quiet – or that nothing important will come out of the Capitol for the next two years.

Democrats, who gained 40 seats and control of the House of Representatives in the midterm elections, are likely to waste little time before they issue subpoenas and convene hearings over any number of matters involving President Donald Trump and his administration. One early target is likely to be the president’s heretofore unreleased tax returns. Under Sec. 6103(f) of the Internal Revenue Code, the new chairman of the House Ways and Means Committee – Rep. Richard Neal, D-Mass. – can seek any tax return or taxpayer information from the Secretary of the Treasury, who “shall” provide that information. However, information regarding any specific taxpayer (including the president) can be released only to the committee when it is meeting in closed session, unless the taxpayer agrees otherwise.

It seems fairly likely that Trump, through Treasury Secretary Steve Mnuchin, will decline to release his returns on grounds that the committee cannot assure his privacy and has no legitimate oversight interest in the president’s returns. That may not be a winning argument in court, but it will take some time to play out.

In the meantime, at some point between April and October this year, the president will file his 2018 tax returns, covering his second year in office. In all likelihood Trump will decline to release those returns, as he did for his 2017 returns (which were filed shortly before the extension period expired last October) and for earlier returns that involved his years working in the private sector.

For most of America’s 140 million or so taxpayers, the more pressing question about taxes in this Congress is apt to be what sort of legislation is likely to come out of it. The answer is probably going to be either “nothing” or, at least, nothing especially bad. Republicans, who now hold a 53-47 edge in the Senate, are apt to reject any attempts by the House to roll back provisions of the 2017 tax overhaul, including a greatly increased estate tax exemption, much lower corporate tax rates, somewhat lower individual tax rates coupled with a higher standard deduction, and the new partial exemption for most income earned by individuals through pass-through business entities such as partnerships, S corporations and limited liability companies.

Except for the corporate tax rate cut, most of these provisions are scheduled to expire at the end of 2025. This expiration date may prove to be the basis for one potential area of compromise between the two parties. Democrats are largely opposed to the new law’s limitation on deductions for state and local taxes, which disproportionately affects residents of the high-tax coastal states that favor their party. Sometime in the next two years, it’s possible that Republicans may agree to relax the SALT deduction cap in return for an extension of other individual tax cuts beyond 2025. Democrats might be willing to gamble on that deal in hopes that, if they take control of the Senate and the White House in the 2020 elections, they can make further tax changes (read: higher rates for higher-income taxpayers and businesses) down the road.

Over in the Senate, an expanded majority will give Republican leader Mitch McConnell considerably more leeway to shepherd federal judges and executive branch nominees through the confirmation process. Democrats will continue to use the chamber’s procedural rules to slow things down, but McConnell will no longer need to count on support from the two least-reliable Republican votes, Susan Collins of Maine and Lisa Murkowski of Alaska, to force a tie that can be broken in the GOP’s favor by Vice President Mike Pence. Thus, the overhaul of the federal trial and appellate level judiciary in a more conservative direction is likely to proceed at a brisk pace for the next two years. This process is likely to be further energized by the promotion of Sen. Lindsey Graham of South Carolina to chairman of the Judiciary Committee, replacing Iowa’s Sen. Chuck Grassley, who moved over to head the Senate Finance Committee.

Graham drew the national spotlight last fall when he verbally tore into Judiciary Committee Democrats over their treatment of Supreme Court nominee Brett Kavanaugh. “Boy, y’all want power,” Graham told the panel’s Democrats. “I hope you never get it.” In this Congress and on that committee, Graham will wield the most power, amplified by the departure of frequent Trump critic Sen. Jeff Flake of Arizona.

The Senate’s Republican majority now lines up much more solidly behind the president, not only due to Flake’s retirement, but also that of Tennessee’s Bob Corker and the death last summer of Sen. John McCain. Although they voted with the White House and congressional Republicans much more often than not (“not” being illustrated most dramatically when McCain returned from medical treatment to offer a thumbs-down on a GOP repeal of the Affordable Care Act), these three senators were all outspoken critics of the president’s conduct and temperament, and often of his policy pronouncements as well.

The role of Republican critic is apt to be filled in the new Congress mostly by Mitt Romney. The 2012 presidential nominee enters the Senate, at age 71, as a freshman GOP senator from Utah. The question we might ask is why he bothered to run. The seat vacated by Orrin Hatch’s retirement would have gone to pretty much any Republican candidate in the Beehive State. Given his age and his resume, Romney is presumably not hoping to rise very far through the Senate’s seniority system. But perhaps he remembers that the late Sen. Strom Thurmond of South Carolina remained in the Senate past his 100th birthday.

More seriously, serving as a member of the Senate’s most junior class for the next two years seems to offer Romney nothing except a platform from which to criticize the president, or possibly to challenge him for their party’s nomination next year. During the 2016 primaries, Romney described Trump as a “phony” and a “fraud,” and he remained one of the most strident members of the party’s “never-Trump” wing up to Election Day. He has not warmed toward the president since then, either.

After the November midterms, Romney received a benediction of sorts from retiring House Speaker Paul Ryan, his 2012 vice presidential running mate. Ryan pronounced that Romney could follow McCain (the unsuccessful 2008 presidential candidate) as the GOP “standard-bearer.”

Ordinarily, a sitting president would be considered his party’s standard-bearer, particularly if that president is expected to run for re-election. Trump actually carried the Republican banner into the White House, while McCain and Romney both lost. In fairness, some might observe that McCain and Romney were bested by Barack Obama, who was the political equivalent of the NBA’s Golden State Warriors. Trump defeated Hillary Clinton, whose closer basketball analogue is the New York Knicks.

This brings us to what might be the most important point about the 116th Congress: It is really just the prelude to the 2020 elections, which will usher in another legislature and perhaps another president. We are just about one year away from the Iowa caucuses and, right behind that, the New Hampshire primary. Even before 2019 is over, most of the political world will turn its attention to the 2020 campaign. At that point, except for top-priority matters, Congress is not apt to do much of anything.

It is therefore highly unlikely that this Congress will tackle long-term issues like Social Security and climate legislation in any significant way. Neither the consensus nor the will exists to deal with those subjects. And although it has been a centerpiece of both parties’ platforms for years, health care is also most likely to be a nonevent for the next two years. Even the annual budgeting process, which was comparatively smooth under single-party rule in the last Congress (at least until a December 2018 imbroglio over border wall funding), is likely to be more fraught this time around.

Possibly the most fruitful area for action, apart from tax legislation, might be immigration, which is similarly high on both parties’ agendas. But there is always room for surprises.

Here is one final thought to consider: Might Trump, who was something of a surprise candidate and even more of a surprise winner, decide that one term is enough? He could declare that he has made America great again and voluntarily become an ex-president four years earlier than most people assume. He likely would position Pence as his successor. You might even call Pence the newly anointed standard-bearer, which would be a way of Trump repaying Romney for his verbal abuse. Romney, the failed candidate, might be left to run against a vice president who would carry Trump’s record without hauling Trump’s baggage.

Could Trump be so vindictive, or just so reluctant to risk leaving the White House as a loser, as to walk out on the world’s most powerful job? Might the man famous for declaring “you’re fired” decide to simply quit rather than hear those words from the American electorate?

We will see in due course. In the meantime, get ready for a year of political stalemate, but don’t expect it to be boring.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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