Trump Puts Dems in a Bind with Request for Border Billions

Plus, California's coming tax windfall

Trump Puts Democrats in a Bind with Request for Border Billions

Democrats face a quandary over President Trump’s request for $4.5 billion in additional border funding. “House Democrats are in no mood to simply hand over the cash after condemning Trump’s anti-immigrant rhetoric and policies over the past two years,” Politico’s Sarah Ferris and Heather Caygle report. “They also don’t want to ignore a mounting humanitarian crisis.”

The money in question wouldn’t be for Trump’s promised wall along the border with Mexico. The administration says it needs more funding to shelter and care for a surging number of migrants coming to the United States and address the growing humanitarian needs. Some of the money would be used for border security, including an increase in the number of detention beds.

Democrats are split on how to respond. Some argue that the administration can’t be trusted or worry about being seen as validating Trump’s claim of a security crisis, even as they want to address the developing humanitarian one.

“Democrats contend that the president brought this housing crisis on himself with his push to scoop up as many noncitizens as possible, rather than prioritizing those considered dangerous, as previous administrations did,” The New York Times explains in an editorial. “Instead of asking for more money, Democrats assert, ICE should redirect existing resources to the border.”

The Times editorial suggests that the White House would have been wise to set aside its request for more money for detention beds, a hot button issue. Nevertheless, it urges Democrats to relent, arguing that “until better policies are in place, Democrats need to find a way to provide money for adequate shelter” — and that both sides should look to avoid blame-game politics and be flexible in trying to solve the problems at hand.

But the complicated politics at play won’t make that easy. “The result” of the Democrats’ intraparty divide, Ferris and Caygle write, “is likely to be a weeks-long battle within the Democratic Caucus that will expose deep splits on immigration and complicate Washington’s next big funding fight. And with Trump gearing up for his reelection campaign, the issue is only going to get hotter.”

Chart of the Day: Seeing the Big Picture on Health Care Costs

“The health care services that rack up the highest out-of-pocket costs for patients aren't the same ones that cost the most to the health care system overall,” says Axios’s Caitlin Owens. That may distort our view of how the system works and how best to fix it. For example, Americans spend more out-of-pocket on dental services ($53 billion) than they do on hospital care ($34 billion), but the latter is a much larger part of national health care spending as a whole.

The Biggest Hurdle to an Infrastructure Deal

President Trump confirmed over the weekend that he was considering a large-scale infrastructure plan that Democrats said they had discussed last week. In a tweet Saturday, Trump wrote:

“There is nothing easy about a USA Infrastructure Plan, especially when our great Country has spent an astounding 7 trillion dollars in the Middle East over the last 19 years, but I am looking hard at a bipartisan plan of 1 to 2 trillion dollars. Badly needed!”

The tweet contained mixed messages, simultaneously affirming a great national need for infrastructure investment while reducing the putative value of the theoretical package from the $2 trillion Democrats announced to a range of “1 to 2 trillion dollars” and citing high military spending as a potential fiscal constraint.

Trump’s tweet echoes the central issues critics have been debating since House Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Chuck Schumer (D-NY) first announced the potential deal last week: how big it should be, what it should do and how to pay for it. The Hill’s Naomi Jagoda and Niv Ellis rounded up some of the latest comments:

A key Democrat said that tax increases may be unavoidable: “It’s $200 billion a year, so that’s not an easy pay-for. I don’t know how you’d do it without raising taxes,” said Rep. John Yarmuth (D-KY), chair of the House Budget Committee. “If we can find a way to pay for it, or pay for a substantial portion of it, I think it’s a great goal to have.”

Other Democrats said infrastructure should be paid for in full: “I think it should be fully offset,” said Rep. Dan Lipinski (D-IL), a member of the centrist Blue Dog Caucus. “Transportation and infrastructure has always been done by user fees, and I continue to support doing that.”

While some Democrats noted that there are plenty of ways to pay for it: “There are so many ways to pay for infrastructure,” said Rep. Pramila Jayapal (D-WA), a leader of the Congressional Progressive Caucus (CPC). “From a wealth tax to a financial transactions tax, there’s all kinds of specific, documented ways in our CPC budget that we propose paying for that,” she said.

Others said that infrastructure is worth borrowing to pay for: “I want us to have an honest conversation about what it’s going to take to pay for it and not start with the idea that we take debt off the table,” said Rep. Dan Kildee (D-MI). “We borrow money to buy a house, but we have the asset of the house so we don’t really fret with the amount of debt associated with it. We have to look at infrastructure as an asset.”

A budget watchdog said it could be paid for over time: “Interest rates are still pretty low, so it doesn’t need to be paid for in year one,” said Marc Goldwein, of the Committee for a Responsible Federal Budget. At the same time, the package would have to be paid for eventually, since in Goldwein’s view, deficit-financed infrastructure doesn’t pay for itself (though others disagree) and “we can’t just keep adding $2 trillion at a time” to the national debt.

But several Republicans made clear that they have no interest in raising taxes:

  • “No, I wouldn’t raise taxes,” Sen. Steve Daines (R-MT) said last week. “That’s going to be the heaviest lift of all of this, is figuring out a way here from a fiscal viewpoint making this affordable on our current balance sheet.”
  • “You would have to have a gas tax to do it, and we’re not for a gas tax,” Rep. Mark Meadows (R-NC) said Thursday. “I mean, $1 trillion you could maybe do; $2 trillion, there is no way to get the money other than raising taxes and there is not an appetite for an increase in taxes by Republicans in the House or the Senate.”
  • “I’m certainly not in favor of any type of tax increase, no gas tax increase. That would be a bad idea, and $2 trillion is an unbelievable amount of money, particularly when we’ve got a $20 trillion debt,” said Rep. Jim Jordan (R-OH), a member of the conservative House Freedom Caucus.

In the end, GOP support may hinge on Trump: “We know we can spend the money,” said Rep. Tom Cole (R-OK). “People will be delighted to spend the money on roads and bridges and inland waterways and ports and rural broadband, no problem. But the part of the discussion that's lacking is, how are you going to pay for it?"

Cole added, “I think enough Republicans could support something like that if the president were for it.” The problem for now, though, is that Trump hasn’t taken a clear position on the issue. “I don’t know what the president is for. He hasn’t told us,” Cole said.

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Our deepest condolences go out to the family and friends of Stan Collender, The Budget Guy, who died Friday at age 68. Regular readers of The Fiscal Times know we often relied on his unflinching analysis of budget matters. He will be missed.

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California Set for Tax Windfall from Big Tech IPOs

At least six California-based companies worth more than $1 billion are expected to go public this year, Adam Beam of the Associated Press reports, and those IPOs will likely create a surge of tax revenue for the state.

The companies include Uber, Slack and Airbnb, and their initial offerings could provide a boost to California’s $200 billion annual budget — although it doesn’t really need one right now, Beam says, since the state is running a projected $21 billion surplus this year under Gov. Gavin Newsom (D).

It’s hard for state officials to predict exactly how much tax revenue the IPOs will produce, given the large number of investors involved. When Facebook went public in 2012, the state took in about $1.3 billion — most of that from founder Mark Zuckerberg.

Whatever the final number, lawmakers will be faced with the decision of whether to spend it now or save it for the next downturn, Beam says. “From a state budget perspective, major IPOs are a bit like rainbows,” said H.D. Palmer of the California Department of Finance. “They are lovely to watch but they don’t last for very long.”

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