Last night, President Elon Musk and Vice President Donald Trump—yes, you read that right—joined forces to kill a funding deal crafted by congressional Republicans to keep the government from shutting down on Friday.
Good riddance. If Democrats are going to provide the majority of votes for a short-term government funding bill, it shouldn’t be one that would help unwind one of the signature accomplishments of the Biden era: cracking down on rich tax cheats.
Now, with Republicans in disarray, it’s time for Democrats to walk away. Let the Republican Party figure out how to deal with their own dysfunction. They’ve been focused on being the “adult in the room” but any parent can tell you that you shouldn’t negotiate with a toddler having a temper tantrum. Musk and Trump made this mess, pretending to care about fiscal responsibility, even as they support eliminating funding specifically designed to recover the $1 trillion that wealthy tax cheats steal from the IRS every year. If the government shuts down, it’s in no small part because Republicans want to help their rich friends keep stealing from us. Democrats should not help them.
Let’s be clear, we don’t want the government to shut down, especially before the holidays. But we also think that the deal that congressional Democrats agreed to, which would have frozen tens of billions for IRS enforcement funding, is worse for the country in the long run. And we are absolutely certain that whatever bill is acceptable to Elon Musk and Donald Trump at this moment would be even worse, especially if it involves raising the debt ceiling to pay for their planned massive tax cuts for the wealthy. If Democratic votes are needed to pass the bill, Democrats should give them no concessions.
This is a tough thing for some people to accept. But congressional Democrats’ repeated willingness to negotiate with, or fully capitulate to, Republicans who are acting in bad faith has never worked in their favor. In the rest of this email, I’m going to explain why—why this was such a bad deal, and why Democrats need to stop a pattern of behavior that has failed them over and over again, and instead walk away.
As a senior advisor to the Patriotic Millionaires for the last year, a former congressional staffer who served as a senior aide to Democratic House members for over a decade, and a long-time lobbyist for progressive causes, I was furious—if not entirely surprised—to see earlier this week that once again, Democrats were giving Republicans exactly what they wanted, and with barely a fight.
The short-term measure (called a “continuing resolution”) planned for a vote this week would have kept the government running through March 14, but it would put on ice an additional $20.2 billion in IRS funding. Enacted in 2022 as part of Democrats’ Inflation Reduction Act (IRA), the bill’s increased IRS funding —$46 billion specifically earmarked for enforcing our tax laws against ultra-wealthy tax cheats—was supposed to last the agency for a decade. Instead, with the full support of a Democratic White House and Democratic legislators, 92% of the funding that the IRS received for enforcement would have been repealed or frozen in just two years if the continuing resolution had gone through.
The IRS was supposed to use this funding to staff up with expert auditors over the next ten years, hiring highly trained lawyers and accountants able to pore over the complex tax returns of billionaires and the sprawling corporations they own. But if the next funding bill includes these cuts, instead of going after billionaire tax cheats with renewed vigor, the IRS will run out of enforcement funding before the current fiscal year is even over.
To understand how we got here, we have to look back to early 2023 when Republicans first took control of the House and, a few months later, to when President Biden capitulated to their economic hostage-taking.
In January 2023, it took the House GOP conference a historic 15 tries to elect Kevin McCarthy (R-CA) as Speaker of the House. But once they did, their first order of business—literally, their first legislative vote—was to repeal the IRA investment in the IRS. After all, Republicans might disagree with each other on nearly everything else, but they’re strongly united behind ensuring that the ultra-rich and major corporations can dodge even the most anemic of tax laws that Congress has managed to pass.
With the party aligned, Republicans launched into a campaign to default on our debt payments and threaten economic catastrophe unless their demands were met. High among those demands, of course, was gutting the IRS. Republicans claim that they simply want to cut government spending and protect the little guy from bureaucratic overreach, but this was always farce. Every $1 spent auditing high-income earners yields more than $22 in new revenue. Cutting the IRS budget actually increases the deficit. And as for helping the little guy… it was Trump’s IRS, starved for resources, that audited low-income workers, who have simpler, easier to audit returns, at a higher rate than millionaires for the first time in history.
To his credit, Biden initially refused to negotiate over the debt limit, calling on Republicans to reject nihilistic attacks on the full faith and credit of the United States and pass a clean increase. But then, he abruptly changed course, ultimately agreeing to a deal that would raise the debt limit and prevent recession (Democrats’ policy “win” from the debacle) while imposing harsh (and entirely unrealistic) spending cuts for the next two years. But that was just the text of the bill. Separately, a “hand-shake deal” between McCarthy and Biden would rescind over $20 billion of funding from the IRS over a two-year period and use that money to increase spending caps by $10 billion in FY24 and again in FY25.
Instead of treating the hard-won IRS funding as the precious, scarce, and non-renewable resource that it was, the Biden administration treated it like a piggybank in its negotiations with McCarthy. With predictably disastrous results.
In fact, I did predict it. Outraged by the announcement, I tweeted at the time that “This deal is going to cripple Biden’s presidency because now they know they can gore every sacred cow and Dems will fold. They’ve got us on the ropes.” I was scolded by non-profit executives who clutched their pearls and complained that, clothed or not, we never embarrass the emperor. I was gleefully retweeted by McCarthy-ally Marjorie Taylor Greene (R-GA). And yet, here we are.
Republicans now claim that this was their plan for gutting the IRS all along, and it might be so. After all, before the ink on the Financial Responsibility Act was dry, they moved to reject the higher spending caps set in McCarthy’s hand-shake deal. And Democrats, once again, sat down to negotiate in good faith with this cadre of knaves, liars, and promise-breakers. The result was a deal struck by Senate Leader Chuck Schumer and McCarthy’s successor, Johnson, to retain those higher spending caps, but at the cost of moving the entirety of the McCarthy-Biden agreed-to IRS cuts into FY24.
As the old saying goes, fool me 700 times, shame on you. But this was the 701st time. Shame on us.
Advocates recognized that this was a foolhardy decision at the time—one that opened up a gaping hole for FY25—but it looks even worse in retrospect. Republicans knew—and Democrats should have known—that a continuing resolution (CR) to fund the government in FY25 was inevitable and that, if they moved all $20.2 billion in IRS cuts to the FY24 funding law, there was a very good chance that those cuts would be repeated on autopilot.
That’s because continuing resolutions automatically carry forward the spending levels and policies of the law it is extending unless Congress includes language—an “anomaly,” in Hill parlance—to prevent them. Win $10 billion in cuts in FY24 and it could automatically get repeated and become $20. But get your opponent to agree to $20 billion in cuts in FY24 and now you’re talking about rescinding $40 billion in two years, almost the entirety of the IRS enforcement account, with barely anyone noticing.
Remember, there was no language in the just-tanked CR to cut the IRS. It was the absence of language preventing that cut that would make it all-but-inevitable.
Now, with the deal crafted to keep the government funded at previous levels dead, congressional Democrats have an opening to reverse their previous spinelessness. Let Republicans own this shutdown. Draw a line in the sand and demand IRS funding be restored, and if Republicans don’t like it, let them fail. Then maybe, when Democrats have real leverage, they can use it to preserve IRS funding and keep holding wealthy tax cheats accountable.