Major tax infrastructure deal

Schumer in talks with Ryan on major tax, infrastructure deal

The two, along with Sen. Rob Portman, are trying to hash out a sweeping bipartisan package.

By Burgess Everett and John Bresnahan

Three years ago, Chuck Schumer called Paul Ryan's plans for deficit reduction a "fraud.” Now the future Democratic leader wants to cut a deal with him.

The New York senator isn’t playing it safe as he prepares to lead his caucus in 2017. Despite getting hit by liberals for siding with Republicans on the Iran nuclear deal, Schumer is in talks with the conservative Ryan (R-Wis.) and vulnerable Ohio Republican Sen. Rob Portman to deliver a major infrastructure bill that’s eluded Congress for a decade.

The discussions to marry international tax reform with transportation investment are not close to yielding a deal yet and already face serious skepticism from Republicans and Democrats, for policy and political reasons. But Schumer and Ryan are forging ahead, meeting twice in the Capitol this month to advance a blueprint that Schumer floated this summer alongside Portman. The Schumer-Portman team-up is notable because the Ohio senator faces a tough reelection next year, one of several races that will determine whether Schumer becomes majority leader in 2017.

But the deal-cutting Schumer, who faces questions from the party’s liberal wing about what kind of leader he would be, is brushing off any concerns about working with Portman and Ryan. Schumer said he can always walk away from the talks if it’s not a good deal for his side.

“If it’s not going to be robust, really strong on the highway side, we’re not going to get it done. We don’t want to get it done,” Schumer said in an interview.

Still, there are lingering concerns in the caucus over Schumer’s propensity to go out on a limb with Republicans. He is fresh off opposing President Barack Obama’s Iran accord, one of only four Senate Democrats to do so. Schumer’s stance, while not a surprise to fellow Senate Democrats, infuriated some on the left, who were upset to see the future party leader aligning himself with GOP hawks.

And after Democrats lost the Senate last year, Schumer said Democrats “blew” their mandate from the 2008 election by putting “all of our focus on the wrong problem — health care reform” during Obama’s first year in office. Though the remarks and his Iran stance did not go over well with many in his party, Schumer still enjoys strong support within the caucus to succeed Harry Reid, despite some criticism from the left, said Democratic sources both loyal to Schumer and skeptical of him.

Schumer is setting a high bar in his talks with Republicans. He wants to grant a one-time tax break on overseas profits that multinational corporations bring back to the United States. The “repatriation” windfall would finance a sweeping infrastructure package, for which he hopes to get strong buy-in from his caucus, and Republicans would get lower tax rates overseas moving forward.

Schumer has personally pressed Ryan and his lieutenants to agree to generating hundreds of billions of dollars for infrastructure projects. But the two haven’t gotten into particulars that will make or break the negotiations.

“The challenge for this is the details … there’s certainly going to be a vigorous debate about rates,” said Oregon Sen. Ron Wyden, the top Democrat on the Finance Committee. “The biggest challenge is the difference of opinion that Republicans have between themselves.”

Schumer has, however, recruited Democratic Sens. Sherrod Brown of Ohio and Mark Warner of Virginia to help shore up his effort’s support on the left and center of the Democratic Party, respectively.

“You’re going to need a very broad consensus on the Democratic side,” Schumer said. “We have the makings of it.”

Yet the dealings with Portman and Ryan, whose policies Schumer has used as an electoral foil for years, are troubling to some Capitol Hill Democrats. The key for progressives is how much to cut international tax rates. Give too much away, and progressives would hammer Schumer for selling out.

“This is incredibly sensitive, and [Schumer] has to be extremely cautious here,” said a Democratic senator close to the talks.

Portman was matched up with Schumer in an international tax reform working group designed by Finance Committee leaders earlier this year. One senior Democratic aide said an agreement with Portman and Ryan would be a loser all around, particularly by aiding a vulnerable Republican senator.

“On a political level, Schumer should be honest about the fact that striking a deal would absolutely help Portman in his race,” the person said. “Helping him secure a corporate tax deal that will be a stinker for Democrats and a talking point for Portman is only a good move if your sole goal is self-promotion, even if it comes at the expense of the caucus.”

Several other Democrats shrugged off the possibility that Schumer is hurting his own chances at becoming majority leader by collaborating with Portman. They believe that beating Portman hinges on turnout in the presidential race and the Republican’s embrace of the broader GOP agenda — not a long-shot attempt working across party lines with one of the nation’s most powerful Democrats.

Senate leaders must “do what they have to do: What’s right for their state and right for the country,” said Sen. Jon Tester of Montana, who leads the Democrats’ campaign arm.

However, Republican officials said that this type of bipartisan effort is central to the campaign of the Ohio senator, who helped craft a deal on unemployment insurance that stalled in 2014 and is eager for a major accomplishment to point to on the trail.

“This is good for Portman,” one national GOP official said.

Though Schumer risks upsetting internal caucus politics by pursuing an agreement with Ryan and Portman, people in both parties agree that linking international reform and infrastructure spending is an uphill battle that may end in failure. Democrats are looking for a transformative infrastructure plan after years of dithering on the Hill, and Majority Leader Mitch McConnell (R-Ky.) and his deputies doubt that Ryan would ever agree to the type of new spending and revenues that Schumer prefers.

“Their idea of tax reform is basically to raise more revenue. My idea of tax reform is to lower rates,” said Sen. John Cornyn of Texas, the No. 2 Senate Republican who often works out alongside Schumer in the Senate gym. But, he added: “They ought to talk, I think that’s useful.”

Still, there could be a window over the next month for the House to make a move. Resigning House Speaker John Boehner has long favored a big deal on infrastructure and his chamber is now on the hook to pass legislation that would be hashed out in conference committee with a three-year proposal approved by the Senate.

And since Boehner is against raising the gas tax, an international tax reform deal could conceivably be an alternative to McConnell’s proposal that keeps infrastructure spending relatively flat.

The Schumer-Ryan-Portman plan — which builds on earlier proposals from the White House and former Ways and Means Committee Chairman Dave Camp (R-Mich.) — is being pitched as a win for both sides. Republicans would get tax reform and lower rates overseas, Democrats would get more highway spending. And both sides would get potentially more jobs in the United States.

A deal “is urgent because if we don’t do it, you will see more and more American companies move their jobs overseas,” Portman said.

But the window for House action is small with Boehner's resignation effective at the end of October. The next speaker, probably Kevin McCarthy of California, will likely seek to lock down the conservative wing of the conference rather than seek bipartisan deals with Democrats in the coming weeks.

The talks do serve both sides politically even if they fall short: Ryan and Portman could say they tried but that Democrats want to plunge America deeper into debt. And Schumer could make the case that only a Democratic Congress can deliver a big highway bill.

“The only way a deal could come together is if it results in the longest, most robust infrastructure spending bill in a generation,” said a person close to Schumer. Otherwise “this isn’t going to work.”