Congress all too often uses budget gimmicks and tricks to hide debt and work around rules and processes that are meant to encourage bipartisan cooperation and slow down major increases to our national debt. Right now, as the House and Senate try to reconcile differing approaches to the FY 2025 Budget Resolution, they are discussing using two gimmicks: 1) adopting a current policy baseline, and 2) waiving the short-term deficit point-of-order.
- Many tax cuts in the 2017 Tax Cuts and Jobs Act (TCJA) were only authorized through 2025. Extending these tax cuts for another ten years will cost $4.5 trillion.
- Congress is trying to extend these tax cuts through a process called reconciliation which allows them to avoid the 60-vote filibuster in the Senate and pass the bill with a mere majority in both chambers.
- Reconciliation has special rules including needing a 60-vote threshold to increase the deficit beyond the current 10-year budget period.
- Congress is discussing using a “current policy baseline” to pretend the tax cuts don’t expire and don’t affect future deficit calculations.
- Adopting this gimmick would allow Congress, with a mere majority vote, to make the tax cuts permanent without corresponding offsets and without ever acknowledging the cost.
- Congress is also discussing another gimmick, used in previous budgets, that would waive the 60-vote threshold needed to increase the deficit within the current 10-year budget period.
- Adopting this gimmick would allow Congress, with a mere majority vote, to enact additional tax cuts and spending increases without corresponding offsets, though they would at least have to acknowledge the cost.
- These gimmicks don’t actually make the cost go away. They just increase (once again) the cash advance we are getting on our national credit card, even as interest rates go up and the interest payments on our $36 trillion national debt now exceeds our spending on national defense.
Restoring fiscal responsibility in Washington will require a renewed commitment to transparency and accountability in the federal budget process. Avoiding gimmicks like a current policy baseline and waiving points of order would be a great place to start.
Why the Budget Resolution Matters
The congressional budget resolution establishes the recommended levels of spending, revenue, deficits, and debt over the next ten years. To achieve these levels, the budget resolution provides for a special process known as reconciliation that avoids a 60-vote filibuster in the Senate. Thus, subject to certain other 60-vote points of order discussed below, Congress can pass a reconciliation bill with a simple majority vote.
Congress used the reconciliation process to enact the 2017 tax cuts (TCJA). Because this process also includes a 60-vote point of order (Byrd Rule) against increasing the deficit beyond the 10-year budget period (2018-2027 as of passage of the bill), many of the tax cuts were scheduled to expire at the end of 2025 to avoid this point of order.
Now that the scheduled expiration date is approaching, many members of Congress want to extend the tax cuts. But extending the expiring tax cuts another 10 years, through 2034, wouldcost nearly $4 trillion, plus $600 billion in additional interest on the national debt. Rather than offsetting this cost with spending reductions or other sources of revenue, some proponents of extending the expiring tax cuts want to pretend the cost is zero.
To accomplish this result, they want Congress to adopt a current policy baseline that assumes the expiring tax cuts do not expire. In their view, the expiring tax cuts are in effect right now (current policy), so extending them into the future has no cost because that would merely maintain the status quo. But current policy is not current law.
Current Law vs. Current Policy
The cost of legislation enacted into law is determined relative to the current law baseline produced by the Congressional Budget Office (CBO). This baseline reflects the levels of spending, revenue, deficits, and debt that would occur under the laws that have been enacted to date. Thus, legislation that extends the expiring tax cuts would reduce revenue and increase the deficit relative to current law.
Those in favor of adopting a current policy baseline argue that Congress routinely extends expiring tax cuts, therefore it’s reasonable to assume they are permanent and extending them has no cost. But this argument ignores the very reason why the tax cuts are temporary – Congress was unwilling to offset the cost of making them permanent.
A current policy baseline is more than just a gimmick to obscure the cost of extending the expiring tax cuts. It would also allow Congress to circumvent the Byrd Rule, because once the expiring tax cuts are assumed to be permanent there could be no point of order raised against making them permanent. Thus, under a current policy baseline, the temporary tax cuts enacted in 2017 could be extended indefinitely without any corresponding offsets.
Another 60-Vote Point of Order
There have been other efforts to prevent Congress from using the reconciliation process to increase the deficit. In 2007, the Senate adopted a 60-vote point of order against any reconciliation bill that increases the deficit in excess of $10 billion in any year of the budget period, unless the cost is fully offset over the entire budget period.
Like the Byrd Rule that was intended to prevent an increase in the deficit beyond the 10-year budget period, this short-term deficit point of order was intended to prevent an increase in the deficit (greater than $100 billion) within the 10-year budget period. Unfortunately, Congress chose to waive this point of order (Section 3003) in 2017, thereby allowing the deficit to increase by $1.5 trillion.
As the Concord Coalition has previously written, the most recent Senate budget resolution would also waive this point of order. If this waiver remains in the final budget resolution, Congress would be able to extend the expiring tax cuts or increase spending, without finding corresponding offsets, with a simple majority vote.
Restoring fiscal responsibility in Washington will require a renewed commitment to transparency and accountability in the federal budget process. Avoiding gimmicks like a current policy baseline and waiving points of order would be a great place to start.
Steve Robinson, Chief Economist, The Concord Coalition
