What Ryan got in his Omnibus

The Briefing, Vol. III, Issue 43-

To: Our Readers

This week:

  • Why Republicans agreed to the omnibus
  • The drawbacks
  • Three long-term benefits


Ryan Omnibus: Conservatives have plenty of reasons to be unhappy with the omnibus spending bill that passed the House last week. But it is noteworthy that there was no massive conservative rebellion in the House, in a day and age when such rebellions seemed to be getting more common. One hundred fifty Republicans voted for the bill that Speaker Paul Ryan, R-Wis., put forward. That’s about 50 more than had been expected originally. The low expectations existed for the very reasons rank and file conservatives are disappointed now: The bill does not stop federal funding for Planned Parenthood. It does not address the question of Syrian refugees in the way that many of them feel is appropriate. It does not stop Obama’s Clean Power Plant or Waters of the United States EPA rules (both now under litigation). It does not stop funding for Obama’s executive amnesty (also under litigation). It does not halt the Labor Department’s new fiduciary rule, a clear overreach.

For a lot of conservatives, one or more of these seems like a game-ender. Especially on Planned Parenthood, many believe that no other benefit of the law can outweigh what seems like a betrayal.

On the other hand, a fight to the death against Obama over Planned Parenthood at this particular moment would have been more likely to lead to a government-wide shutdown than the actual defunding of Planned Parenthood, and that has to be at least considered.

But there are three things this bill does that, given a long-term outlook, will promote large conservative goals that may not be immediately obvious. These are the areas to watch — the areas where history will ultimately judge Ryan’s speakership and determine how long he gets to keep it.

1. Obamacare Repeal: Believe it or not, the stage for repeal of this law has now been set. By keeping the 2014 Rubio provision intact, which bars any taxpayer bailout of insurers losing money in Obamacare’s exchanges, this omnibus prevents the Obama administration from wasting taxpayers’ money to delay the Obamacare law’s day of reckoning.

Although the issue has been slightly below the surface for more than a year, Obamacare is currently in greater peril than it was at any point during the government shutdown of 2013. Insurers are losing their shirts in the exchanges at a rate no one expected, mostly because the law (as critics predicted) brought in a sick, high-use crowd into the insurance market without attracting enough healthy payers to cover them. Premiums have risen and are expected to keep rising at a rate that has the potential cause a rebellion on the same scale as the anger over insurance cancellations and the HealthCare.gov website.

The problem is acute enough that Hillary Clinton had to acknowledge it during the little-watched Democratic debate over the weekend, referring to it as “glitches.”

What the Rubio provision does, originally passed in 2014, is prevent the “risk corridor” program — a provision in Obamacare that redistributes some insurance company profits from Obamacare’s biggest winners in its first three years to its worst losers — from drawing any funds from taxpayers. This merely bolsters the statutory language in Obamacare, which appears to imply that the only money available to pay out is that drawn from insurers with profits greater than three percent.

But there isn’t enough money being made by profitable insurers to bail out the many big losers. And so the Obama administration desperately wants to interpret this language as authorizing a large insurer subsidy that comes from the Treasury.

The inclusion of the Rubio provision stops this. And it will not, as some have suggested, kill Obamacare, but it will let it die a natural death with dignity. The risk corridor program was not intended to prop up unsound companies for the long haul, it was just supposed to brace them for the immediate shock of the new post-Obamacare insurance world. But not only are badly created insurance co-ops going out of business after losing as much as $100 million, but larger, experienced insurers like UnitedHealth are expected to pull out, a sign of just how badly the law was designed. This will lead to even higher premiums. Instead of ruining health insurance for a decade or more, the refusal to mollify insurers with a bailout is likely to shorten the period of destruction and force repeal (or reforms, if Democrats keep the White House) sooner.

The bottom line is that Republicans were right to insist on the inclusion of this provision, even if it had to come at the expense of some of their other priorities.

2. Tax reform: Conservatives like low tax rates. They dislike special interest tax breaks. This bill makes several of the latter permanent. That’s bad, right?

Well, maybe not. This has barely been noticed, but the package that just passed takes a critical step toward passage of a tax reform plan that conservatives will like. In fact, it would probably not be possible otherwise. Although the reasons are highly technical, we will go into them briefly, because one cannot grasp this without understanding them.

When the Congressional Budget Office calculates tax revenues and budget deficits, it is required to assume that current law will be followed as it is written. That sounds reasonable to the layman, but in fact it’s absurd. Congress changes laws all the time, and with tax laws, it has a nasty habit of extending certain tax breaks temporarily over and over and over again, so that they are effectively permanent. This makes the CBO always wrong in its revenue projections, but through no fault on its own. And that matters a lot.

A holy grail for conservatives — and a goal Ryan has personally pursued for years — is a major, revenue-neutral tax reform plan that cuts tax rates for everyone and makes up the lost revenue by eliminating special interest loopholes and deductions. The desired result is a simple tax code that collects about the same amount of revenue, but without strangling taxpayers in red tape and creating billions of hours of lost productivity.

The problem is that under CBO rules, the elimination of temporary loopholes and deductions doesn’t count toward “revenue-neutralizing” tax rate reductions, even in cases where those loopholes are constantly being extended and are effectively (but not legally) permanent. In other words, you can’t come out even if you eliminate a temporary special-interest tax break and lower the tax rate by a corresponding annual amount.

This means that in order to make the math work and ensure as low a tax rate as possible, you must first make permanent as many special-interest tax breaks as possible, so that you can eliminate them and use the increased revenue to lower rates by a corresponding amount. Otherwise, you face a tough choice — either tax reform becomes an actual tax hike that most Republicans have sworn to vote against, or you have a bill that technically increases the deficit and you might need 60 instead of 51 votes to get it through the Senate.

By making several (per se undesirable) special tax breaks permanent, Ryan is preparing the field for what he’s always wanted to do, increasing the likelihood of tax reform after Obama leaves office. It’s a longer-term goal, but it’s a very important one, considering how bad tax laws, accumulated over the years by special interests’ pleading and lobbying, made the U.S. economy less competitive over time.

3. Oil Exports: This one is perhaps the most obvious benefit. By repealing the irrational four-decade ban on oil exports and getting Obama to agree to it (reluctantly), Congress has set the stage for a future in which the U.S. is a net exporter of petroleum. As recently as last year, no one believed this legal change could be made. In the end, all it took was a small sop — a special tax break for independent refiners — to grease the wheels.

It’s been a long time since the world saw the U.S. exporting more oil than it imports — more than 70 years, as a matter of fact. But it is sure to happen as soon as prices rise again, and it will affect everything from the economy to foreign policy.

Trade deficits (a very large share of which — more than half in some recent years — have been due to oil imports) could become a worry of the past even when oil prices rise again. And hundreds of thousands of new, high-paying jobs would be created and secured for the long haul.

This is a clear win for prosperity over the forces of populist ignorance and demagoguery that took hold after the oil embargo.


So there you have three very long-term ideas that underpin the deal Republicans just agreed to in unexpectedly large numbers. The jury is out as to whether they got a good deal.

If Republicans had passed this bill just to ease Ryan into the speakership — as a courtesy to him, as Rep. Tim Huelskamp, R-Kan., put it — they would have been making a big mistake. But the fact is, they had other reasons as well. When judging Ryan’s performance as speaker, conservatives must keep an eye on how these areas develop. If he succeeds or fails, it will be based on these three main areas whether this deal ends up being a good one.

Thus ends the third year for The Briefing, which will next appear on Tuesday, Jan. 5. We wish a Merry Christmas and a Happy New Year to you and yours in the meantime. And get ready, 2016 is going to be wild.