Trump Says Shutdown Could Last ‘Months or Even Years’

Plus, tax issues to watch in 2019

Trump Says Shutdown Could Last ‘Months or Even Years’

Two weeks into the partial government shutdown, there are few signs that the standoff will be resolved anytime soon.



President Trump and congressional leaders made little progress Friday at a White House meeting. In remarks to reporters afterward, Trump described the talks as “productive” but also confirmed that he told Democrats he’d be willing to keep the government partially closed for months or even years if he does not get the money he wants to build a wall along the border with Mexico. “Absolutely I said that,” Trump told reporters. “I don’t think it will, but I am prepared.”



He added that he hopes the shutdown doesn’t go on even for days: “It could be opened really quickly.”



At the same time, Trump discussed the possibility that he could declare a national emergency and build a wall without approval from Congress. “We could call a national emergency and build it very quickly,” he said after being asked if he was considering such an option. “That’s another way to do it. But if we can do it through a negotiated process, that’s better.”



Democrats, meanwhile, said the meeting was “sometimes contentious” and pushed the president to first reopen the government and then resume talks about border security.



"How do you define progress in a meeting? When you have a better understanding of each others’ position? When you eliminate some possibilities? If that’s a judgment, then we made some progress." House Speaker Nancy Pelosi told reporters.



As expected, the Democratic-led House on Thursday passed legislation to fund most parts of the government that are now closed through September while providing money for the Department of Homeland Security through February 8, allowing negotiations to continue. But that package was described as dead on arrival in the Senate, as Majority Leader Mitch McConnell insists he won’t call for votes on legislation unless Trump indicates he’ll sign it.



The two sides will hold staff-level meetings over the weekend to continue talks, but the shutdown now appears certain to extend at least until next Tuesday, when the Senate reconvenes.



If it does so, it would become the second-longest shutdown since 1976, behind only a 21-day shutdown in the 1990s. And based on the public comments by Trump and Democratic leaders this week, it looks likely to shatter that record.

Why Negotiations to Open the Government Have Been So Difficult

The Washington Post’s Josh Dawsey and Seung Min Kim lay out Trump’s “enigmatic” stance on reopening the government and the issue of the border wall funding, with some details from the president’s Wednesday’s situation room meeting with lawmakers. Their piece is worth a read, but here’s the crux of it:

“In Trump, congressional Democrats and Republicans have found a principal who often changes his mind on a whim, whose messages to Capitol Hill can be mixed and who undercuts his own vice president and advisers in high-stakes negotiations with little hesitation.

“But despite Trump’s unpredictability, lawmakers are wary of negotiating with any of his aides because they believe only Trump speaks for Trump — a lesson that has been reinforced in recent weeks.”

The Widening Impact of the Shutdown

The Washington Post’s Kimberly Kindy, Lisa Rein and Joel Achenbach: “As the partial government shutdown enters Day 14, its effects are starting to cascade far beyond the hulking agency buildings in Washington. Private companies with federal contracts are coping with chaos, confusion and uncertainty, while businesses large and small that rely on the operations of the vast federal bureaucracy are starting to feel sand in their gears.”

Economist Mark Zandi of Moody’s Analytics tells the Post that the shutdown could have significant effects on the housing market and other areas of the economy if it drags on for months. “If it extends into the spring, it’ll start to do real damage and have real impact, because it probably signifies other things are going off the rails — the acrimony in Washington is run amok,” he said.

Axios’s Mike Allen rounded up this list of ways the shutdown will get worse the longer it goes on:

  • Federal immigration courts, which will have to pick and choose which cases to handle, pushing some years down the road. [NYT]
  • The Interior Department, which can't pay out treaty rights obligations to Native American tribes.
  • The IRS, which won't pay out refunds or answer questions on taxes, even as tax season begins. [CNN]
  • The Securities and Exchange Commission, which is shut down while unicorn startups like Uber and Lyft prepare IPOs. [WashPost]
  • Housing and Urban Development: "Public housing officials say they don’t know how long rental assistance payments will keep coming ... a suspension could put millions of tenants at risk if the shutdown drags on into February." [NBC]

Good Government Proposal of the Day

From the Brookings Institution’s William Gale:



“To avoid the costs and uncertainties of future government shutdowns, Congress and the president should enact a rule that says that if appropriations bills are not passed on time, a CR that funds the government at the previous year’s inflation-adjusted levels would automatically occur. This would not eliminate gridlock on other issues, but it would take one potential obstacle out of the way, and it would help legislators – even in times of extreme partisanship – meet their most fundamental responsibility – to keep the government open and functioning."

5 Tax Issues to Watch in 2019

A divided Congress isn’t going to make another round of sweeping changes to the tax law this year, but there are plenty of important tax issues that are likely to come up. Tax Policy Center Senior Fellow Howard Gleckman lists seven to watch. Here’s a look at some of the items on Gleckman’s list:

Will Congress fix the 2017 tax law? Rep. Kevin Brady (R-TX), who chaired the tax-writing House Ways and Means Committee in the last Congress, released a draft bill Wednesday to correct technical issues and other errors in the 2017 tax law. One popular fix would correct a drafting error that raised the tax burden on restaurants and retail establishments making renovations. Democrats may also look to modify the 2017 law’s $10,000 cap on the state and local tax deduction.

Individuals face their first filing season under the new law. Taxpayers will experience the full effects of the individual income tax changes brought about by the 2017 overhaul, potentially leading to confusion. “They may have some unpleasant surprises such as the SALT cap and the loss of personal exemptions; and some happy ones such as the bigger standard deduction and the demise of the Alternative Minimum Tax for nearly everyone,” Gleckman says. “The ongoing shutdown of the IRS won’t make it any easier.”

Dealing with expiring tax provisions. A number of provisions in the Tax Cuts and Jobs Act are due to expire by the end of the year (see here) and Congress may address a few dozen tax extenders that it didn’t deal with last year, Gleckman says.

States face some tax questions. Some states have yet to set rules for online sellers in the wake of a Supreme Court decision allowing them to require such retailers to collect sales taxes. States will also have to decide how to address the revenue impact they see from the GOP tax overhaul. “The 2017 law’s repeal of the federal personal exemption generated a revenue windfall for states that piggyback on federal tax law,” Gleckman says. “But it will result in tax increases for many large families—one that probably is politically unsustainable.” Sports betting and legalized pot sales will be new sources of revenue for some states.

New Democratic tax plans. With the 2020 campaign already underway, new tax proposals from candidates eyeing the Oval Office are bound to emerge. Which will win support from the party and the public?

Why 2018 Was an ‘Unusual Year’ for US Tax Revenue

Federal tax revenues were lower in 2018 than in 2017, reversing a trend of rising revenues seen in recent years, according to U.S. Treasury data tracked by District Economics Group.

DEG’s Diane Lim said that “2018 was an unusual year for tax revenue. Not just because revenue levels dropped so much but because they dropped so much as the economy was growing so strongly.”

Here’s how the two largest categories of tax revenues fared in 2018:

  • Individual tax receipts totaled $2.593 trillion in the 2018 calendar year, one percent higher than 2017 in nominal terms but about half a percentage point lower on an inflation-adjusted basis.
  • Corporate tax receipts were lower in both nominal and inflation-adjusted terms, coming in at $233 billion in 2018, down from $316 billion in 2017. That represents a 26 percent drop in revenues on a nominal basis and a 28 percent drop in inflation-adjusted terms.

In a separate blog post Thursday, DEG addressed the cause of the shortfall, saying that it “is too early for anyone to know (or even provide an adequately-informed guess on) how much of the apparent (and to at least some extent unexpected) ‘sag’ in revenues can be attributed to a costlier-than-expected tax cut versus a weaker-than-expected (yet still expansionary) economy. But it is clear that tax revenues are not as strong as in previous years, despite the economy being in good shape and still growing.”

The revenue results suggest that federal budget deficits may be larger than expected in the next few years, DEG said. The Congressional Budget Office projected higher individual tax revenues for the 2018 fiscal year, but DEG says the most recent figures for the calendar year suggest that projection is too optimistic: “Given the April 2018 CBO outlook of slowing economic growth and rising budget deficits through 2020, the real revenue ‘sag’ of 2018 that CBO did not predict may presage even larger deficits than previously forecasted.”

Quote of the Day

“If you say the tax cuts aren’t working, I’d say you’re in some kind of denial.”

– Kevin Hassett, chairman of the White House Council of Economic Advisers, defending the tax cuts at an economics conference in Atlanta on Friday.

Number of the Day: $21.974 Trillion

The national debt ended 2018 at nearly $22 trillion, more than $2 trillion higher than when President Trump took office, according to numbers released Thursday by the Treasury Department.

Your Prize for Making It Through the Week

Maybe take a break from D.C. drama and tune in to some Hollywood drama: The Golden Globe Awards are on this Sunday. Here’s a list of the nominees and some picks for who should win.

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