Larry Kudlow, the economist who advised the Reagan administration and the presidential campaign of Donald Trump, said investors who are concerned about the likelihood that tax cuts will get approved this year need to keep an eye on the budget process.
“Here’s the growing problem with getting tax cuts: You have to have a budget resolution,” Kudlow said on CNBC. “No budget resolution, then you can’t issue reconciliation instructions to have taxes and spending.”
Congress returned from its five-week summer recess today as storm-ravaged states demand Harvey aid and the Trump administration asks for a swift increase in the nation's borrowing authority. Lawmakers face fast-approaching deadlines, including the need to fund the government and increase the United States' $19.9 trillion debt ceiling by month's end.
The policy makers on taxes known collectively as the “Big Six” were scheduled to meet Tuesday with President Trump at the White House. The six are Reps. Paul Ryan and Kevin Brady, Sens. Mitch McConnell and Orrin Hatch, Treasury Secretary Steven Mnuchin and White House economic policy chief Gary Cohn.
To pass tax reform, lawmakers must first adopt a budget resolution that will have special parliamentary instructions for the Senate to consider and pass a tax overhaul by a simple majority, as opposed to the 60 votes necessary to overcome a filibuster.
“I don’t think there’s any problem with raising the debt ceiling. And I don’t think there’s any problem with a continuing resolution to year-end. And I don’t think there’s going to be any problem with the Harvey money,” Kudlow said. “You need a budget resolution to get your tax cuts.”
President Trump last week outlined his tax agenda in a speech in Springfield, Missouri, that emphasized the benefits of tax reform for workers.
Last week, Kudlow said the Senate’s approval of tax reform will depend on some key votes from a handful of senators, including Sen. Joe Donnelly, D-Ind., Sen. Joseph Manchin III, D-W.V., Sen. Heidi Heitkamp, D-N.D. and Sen. Claire McCaskill, D-Mo.
Trump singled out McCaskill, who will be seeking her third term next year, telling the audience to vote her out of office if she doesn’t support tax reform. Trump won Missouri last year with 56.4 percent of the vote, compared with Democrat Hillary Clinton’s 37.9 percent.
Republican Mitt Romney won Missouri in 2012 by 9.4 percentage points over President Barack Obama.
“Most Republicans are going to stay on board,” Kudlow said. “They like the growth, they know they need a ‘W’ after the healthcare fiasco. The politics play out well.”
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