Over decades of intense disputes about the federal budget, Republicans and Democrats have shared a set of expectations for what government spending and taxes would look like in the future.
The baseline, as it is called, assumed that Congress would operate on a form of autopilot. Spending would climb every year, in part to keep up with inflation, and tax rates would go up or down based on laws already on the books. The cost of policy changes would then be assessed against this rough sketch of the country’s fiscal trajectory.
Senate Republicans are preparing to upend that standard with the broad tax and health care bill they are trying to muscle into law. They want to create a new baseline of their own and wipe away much of the stated cost of the bill. The accounting gambit has angered Democrats and depressed independent budget experts. It could also soon force a reckoning between Republicans’ ambitions for cutting taxes and the Senate’s longtime parliamentary rules.
“We do worry about the precedent that this sets for both parties to say that this thing, whether it’s a spending increase or a tax cut, doesn’t cost what traditional scoring conventions, the conventions we’ve been using for decades, say it costs,” said Andrew Lautz, an analyst at the Bipartisan Policy Center, a think tank. “You worry about opening Pandora’s box when it comes to scoring.”
The Republican effort focuses on changing how scorekeepers represent the cost of tax cuts. Under traditional standards, extending tax cuts beyond their scheduled expiration is treated as passing a new tax cut — and therefore a new cost to the budget. In wonky budget-speak in Washington, this is called the “current law baseline.”
Because much of their legislation is dedicated to extending temporary tax cuts from 2017, Senate Republicans have become preoccupied with this accounting practice. Just maintaining the 2017 tax cuts after this year would cost roughly $3.8 trillion over a decade under the current law baseline.
That’s a huge cost. So Senate Republicans are hoping to use their own standard, called the “current policy baseline.” This alternative framework takes it as a given that the 2017 tax cuts exist in perpetuity, rather than expire at the end of the year. By this logic, extending the 2017 law should not represent a new cost to the budget, even if it is the centerpiece of the Republican legislative agenda this year.
Senate Republicans have already instructed the Joint Committee on Taxation, a nonpartisan group of experts that evaluates and helps devise tax policy, to assess their legislation this way. With the alternative method, the group put the cost of the tax portion of the bill at $441 billion over a decade, a comparatively small sum that accounts only for changes beyond the extension of what is currently in place.
Democrats quickly asked the Joint Committee to evaluate the same piece of legislation against the traditional current law baseline. That analysis showed a far greater cost of $4.2 trillion. (The overall cost of the tax cuts is expected to be partly offset by other spending cuts, though scorekeepers have not yet completed their evaluation of those parts of the Senate bill.)
Of course, the actual growth in the debt does not depend on the accounting rules used by Washington bean counters, and global investors are likely to be alarmed by huge deficits regardless of the baseline used. But changing how expensive policy changes are represented could enable further fiscal profligacy down the road, experts warned.
“We used to have a shared vision of reality,” said Bobby Kogan, the director of federal budget policy at the liberal Center for American Progress and a former White House budget official. “It’s not that now there’s a Democratic version and a Republican version. There’s the official version and a made-up Republican version of reality.”
The biggest problem for budget experts is not that Senate Republicans want to assume that tax cuts are generally extended. Given how Congress has approached temporary tax cuts in recent decades, that is a reasonable way to think about the future of the federal budget. Instead, they take issue with how Republicans have decided to adopt an ad hoc standard and then toggle between it and more traditional rules.
A more consistent current policy baseline, budget experts say, would be one that recorded the long-term cost of tax cuts from the get-go, even if lawmakers were passing them only on a temporary basis. Then, when lawmakers decided to extend them later, the cost of doing so would be baked into budget expectations and would not need to be logged as an additional dip in federal revenue.
But Republicans are not accounting for costs that way. When they first passed the tax cuts in 2017, they did so temporarily. At the time, Republicans used traditional accounting standards to show a lower sticker price for the bill, and to conform with parliamentary rules. And in their current bill, they included another set of temporary tax cuts, including many of President Trump’s campaign promises, that are recorded as only short-term hits to the budget rather than permanent changes.
In other words, under the Senate Republican standard, the substantial cost of making temporary tax cuts permanent is not recorded when the tax cuts are initially put in place — nor when they are extended. So a future Congress could, hypothetically, approve a huge new tax cut for just one year, then authorize it the next year for the long haul without any apparent additional expense.
Douglas Holtz-Eakin, a former director of the Congressional Budget Office and Republican budget aide, is sympathetic to moving Washington scorekeepers to a new baseline for tax cuts. But he thinks lawmakers should formally write down a new, complete standard and amend the laws that direct scorekeepers on how to account for costs.
“Doing what they’re doing now is making it up on the fly. They’re setting a precedent they won’t like, and will only realize the problems later,” he said. “It opens up a whole new set of gimmicks, and the whole point is to minimize gimmicks and encourage good policymaking in the federal budget. You have to be careful when you do this.”
Rather than just an attempt at an optical illusion, Senate Republicans say, pursuing the alternative standard will help them work around another set of Washington conventions. The party is passing the legislation through a special process called reconciliation. While reconciliation allows them to steer around Democratic opposition in the Senate, the process also includes limitations on how bills passed through the process can affect the budget.
One of those rules is that reconciliation bills cannot add to the deficit in the long term — in this case after 2034. Given the huge cost of making the 2017 tax cuts permanent by conventional standards, Republicans would struggle to avoid reconciliation’s taboo on long-term deficits and still make the tax cuts permanent. Assuming that extending tax cuts costs nothing is a way to try to make the tax cuts permanent through the special process.
It is unclear if the Senate parliamentarian, who helps enforce the chamber’s rules, will accept the Republican argument, which relies on a clause in years-old budget legislation that could allow Senator Lindsey Graham of South Carolina, the Republican head of the Budget Committee, to unilaterally decide what certain policies cost. Negative feedback from the parliamentarian could upset the architecture of the entire Senate plan, potentially forcing a showdown over whether to follow her interpretation of the rules.
“The current policy baseline is really bad news, because what it essentially means is that whatever party is in power can pick and choose what counts as increasing the deficit,” said Carolyn Bourdeaux, the executive director of the Concord Coalition, which advocates lower deficits. “And that in effect undermines really the entire reconciliation process.”
Andrew Duehren covers tax policy for The Times from Washington.
The post Republicans Prepare to Open ‘Pandora’s Box’ of Budget Gimmicks appeared first on New York Times.
