JCPOh No You Didn't/Nothing is Certain but Death and... That's It

This week: the Iran nuclear deal and the tax plan!

Trump has wanted to do away with the Joint Comprehensive Plan of Action (aka JCPOA aka Iran Deal) since day -437. The deal provides a stable way for the US to keep an eye on Iran's nuclear facilities, and indeed, all their military facilities writ large, and practically every nuclear expert says "yeah, no, stepping away now would be dumb." According to the deal, the US president has to certify that Iran is keeping up its end of the deal every 90 days. If he doesn't, it allows Congress to reinstate sanctions.

If Trump decertifies Iran, tensions will almost certainly skyrocket. Trump would likely push Congress to impose additional sanctions, beyond what was previously in place, which is sure to anger the Iranians. So two questions: first, do we have confidence that Congress would be agile and responsible enough to effectively reinstate and negotiate sanctions? Would our international partners follow suit? Congress has shown itself to be... less that efficient these days, and Trump's especially "unique" approach to international politics has squandered what little goodwill we had left in this cruel, sad world. So maybe not.

Second, if Iran gets upset, what do we think will happen? First, they will race to the bomb asap, with no reason not to. North Korea has provided a wonderful example of how far you can apparently go under sanctions, and having nuclear capabilities provides an enormous ability to deter future threats. Following that, if the US decides to invade to stop such a nuclear power from existing, we embroil ourselves in yet another fruitless war in the Middle East, at the same time that tensions with NK are rising. And while we thought Trump would be on awesome terms with Israel, his relationship with Netanyahu has suffered, and don't think refusing to condemn literal Nazis in the wake of Charlottesville had no deleterious effect. So it becomes more difficult to count on their support, and we definitely can't expect them to step up and lead the effort with no US troops on the ground.

So, stepping away from the deal? Bad idea all around. Trump said he's made up his mind, but we don't know what the decision is. Sounds like he hasn't, but is buying time.

Second, the tax plan!

We didn't get a ton of detail, and what we got, we expected. Trump has obviously given up on the 15% tax rate for corporations -- that now sits at 20%. It also reduces the number of brackets from 7 to 3, and increases the bottom rate from 10% to 12%, so literally raising taxes on our poorest citizens, while simultaneously dropping the top rate from 39+% to something like 35 for individuals and killing the estate tax, which only affects inheritances in excess of $5.5mil.

That said, the standard deduction has doubled, so that's nice I guess. The plan says that ultimately the people in the bottom bracket would end up paying less, but there isn't enough detail yet to ascertain that.

Then there are the reform pieces. Killing the "death tax" (estate tax) is one thing. Simplifying the bracket system is another. The last piece is the possibility of a territorial tax system. Basically, if you make profits overseas, you only pay taxes on that income in the jurisdiction in which you made it -- not in the US. Does that make US businesses more competitive? Sure. Does it destroy our revenue stream? Yup. And it's complicated to implement.

The total deduction in tax revenue, based on this plan, is something like $3.5-4.5 trillion over 10 years. That's a lot of money, and there's no shot that they'll find a way to make it truly neutral, i.e. not rack up debt. Plus, Congress has said they won't cut taxes by more than 1.5 trillion over ten years, so this isn't going to fly. Keep in mind that this is a wish list, not a bill, so it only represents the opening bid. The corporate tax rate, for example, is likely to end up somewhere in the high 20s.

So what are the chances of this actually happening? Well, vote-wise, it's easy -- House Republicans have chosen to effectively bundle this with the budget reconciliation, so instead of the usual 60 votes, they only need 51 -- no Democrats needed, just add water.

That said, there's a time limit: they have to get to a vote in the House by effectively Thanksgiving in order to fit their timeline and use those rules. Because, keep in mind, 2018 midterms are coming, and so far, Congress has gotten nothing done. No healthcare, no infrastructure, nothing. So to do nothing would be political suicide. And, come spring, congresspeople will head back to their districts and begin campaigning. Without a win on tax, Reps run the risk of losing to the Dems in 2018, or worse (for them, and the country), getting primaried by an outsider Republican, as with Roy Moore and Luther Strange in Alabama.

So what do they have to do by March? The House has to pass a bill (and there's plenty of deliberation to be done there) and THEN the Senate has to pass a bill (and Senator Orrin Hatch has said that his committee won't be a "rubber stamp" -- i.e. they're gonna write their own bill, dammit) which is unlikely to match the House bill. Then those two different bills have to be reconciled. And then that has to be voted on, again, by both houses.

And there are only about 45 legislative days between now and the beginning of March.

So will we see some tax cuts? Yeah, probably. Will we see tax reform? Definitely not.

What do you think? #fpf