As Congress hurtles toward its next major fiscal showdown — the expiration of key TCJA provisions — lawmakers face a critical choice: uphold budget discipline with a current law baseline or use a current policy baseline to mask the true cost of tax extensions. News reports emerging this week indicate that Republicans are moving forward with a plan to sidestep the Senate Parliamentarian to assume away the true deficit impacts of tax cut extensions through a current policy baseline.
The appeal of using current policy is obvious: Republicans get their tax cuts, fiscal hawks get to claim even larger deficit reduction, and everyone walks away declaring victory. But a deal that trades away baseline integrity for a near-term win on tax cuts could prove to be a costly mistake. It would set a disastrous precedent making it even harder to maintain fiscal discipline in the future. Congress already plays too many budget scoring games that contribute to our unsustainable debt. Making it easier to hide costs with baseline tricks means blindfolding the very people we need to chart a path to a stronger fiscal future.
Changing the score doesn’t change the actual deficit impact
In the next few decades, the fiscal consequences of ignoring the cost would be hard to ignore. Thanks to a letter from Rep. David Schweikert (R‑AZ), who referred to the notion of a current policy baseline as “intellectually a fraud,” the Congressional Budget Office projected the national debt under two scenarios: 1) if TCJA were extended without offsets and 2) if TCJA were extended without offsets in a higher interest rate environment. These prompts demonstrate the long-term debt environment no matter what baseline you use, and the results are staggering.
Using one approach over another does nothing to change how much we spend, how much revenue comes in, and how much debt we need to float to cover the difference between the two. Utilizing a current policy baseline is the equivalent of telling your bathroom scale that certain calories don’t count: it might make justifying excess easier, but it does not change the underlying measurement on which one’s health depends.
Opening Pandora’s box
Once Congress abandons consistency and transparency in baseline projections, there’s no going back. It becomes open season on budget scoring rules.
This means the current debate is not just an inconsequential conversation about arcane Congressional procedures. It’s about whether lawmakers should be allowed — on this and any future legislation — to rig the game when measuring the impact of tax and spending policies to hide their real costs. The current law baseline used by the Congressional Budget Office assumes that expiring tax provisions actually expire. Thus, costs not counted on the “front end” of legislative proposals are accounted for on the “back end” when extension is considered. A current policy baseline, by contrast, assumes they will be extended, making it seem as though continuation has no fiscal impact at all.
As I argued recently:
“Budget rules are like guardrails: they protect everyone, regardless of who’s driving. If Republicans adopt this gimmick now, Democrats will exploit it in the future to justify massive expansions in government programs without acknowledging the true costs.”
On the idea that Democrats will use this break in precedent, the piece went on to warn:
“The implications of this shift are enormous. Imagine if Democrats claimed the temporary provisions of the $1.9 trillion American Rescue Plan Act of 2021 were “current policy” a year later in 2022. They could have pretended that $1,400 “stimulus” payments, a child tax credit of up to $3,600, tax-free treatment for forgiven student loans, and $350 billion in slush-fund dollars for states, among other provisions, could be made permanent for free. No doubt Senator Bernie Sanders (IVT), chair of the Senate Budget Committee at the time, would have eagerly made such an argument if he thought it would stick.”
This is not an abstract argument; Democrats have already begun to explore their options should budget rules be changed.
For example, in a letter sent to the Joint Committee on Taxation (JCT) in February, Elizabeth Warren prompted JCT: “If JCT were to employ a current policy baseline, would you have estimated a budgetary impact from an extension of the child tax credit expansion from the American Rescue Plan Act (ARPA)?” and “If JCT were to employ a current policy baseline, would you estimate a budgetary impact from an extension of the Affordable Care Act (ACA) enhanced insurance premium tax credit, which is otherwise set to expire in 2025?” JCT replied and that under a current policy baseline “legislation extending the enhanced premium tax credit would have no reportable budgetary effect.” JCT could not answer the question about the ARPA CTC extension because current policy is not well defined in the request — an answer that emphasizes the immense challenges of changing scorekeeping rules without a formal process.
And it highlights the fact that once you create “Frankenstein’s baseline” by selectively mixing current law and current policy to get the most favorable score, every major fiscal debate becomes a game of creative accounting. Instead of forcing Congress to make real choices about trade-offs, it would enable legislators to ignore those decisions through gimmickry. As AV’s Program Integrity Fellow Doug Criscitello warned in a recent issue brief:
“Those advocating for the use of a current policy baseline are seeking beneficial treatment on both ends of TCJA: Current law treatment when it was enacted, which limited forecast costs given scheduled expirations; and current policy at extension, which fails to recognize the scoring benefit realized at enactment from the expiring provisions.”
The long-term impacts are sweeping. Former GOP staff director for the Senate Budget Committee Bill Hoagland warned Republicans of this in Politico, saying, “I would caution my friends, my Republican friends and senators up there, be careful about this — someday you may be in the minority…As far as I’m concerned, that might as well give away the filibuster in the Senate.”
The precedent-busting effects are even more concerning if Republicans intend to simply substitute the Budget Committee Chairman’s word in place of an actual score from the Congressional Budget Office. In this scenario, the Senate Budget Committee Chair can just dictate a score and any objection to it can be defeated by majority vote as challenging the Budget Chair’s interpretation, not the contours of the Byrd rule.
This approach would effectively gut the reconciliation process, allowing the Senate to use its lower vote threshold even for bills that are flagrant violations of precedent and the Byrd rule. In other words, it would be a sort of back-door elimination of the legislative filibuster by opening the reconciliation process to anything the Senate Budget Chair supports.
Needless to say, such a precedent would empower future Senate Budget Chairs to do the same maneuver. In fact, it could even justify a more aggressive approach allowing the Chair to institute a score for provisions that never passed in the first place. In other words, in the last Congress then-Senate Budget Chair Bernie Sanders (I‑VT) could have asserted that Medicare for All was the law of the land (though it never passed) and that extending it permanently would cost $0.
Short-term gains for long-term pain
Some in Congress have suggested that they could accept the use of a current policy baseline, so long as there are significant spending reductions to ameliorate deficits in the coming years. For those considering such a position, there is an important question that needs answering: Once Congress has dispensed with transparency in budgeting, what confidence can there be that proposed budget savings will actually materialize?
Sadly, there is a long history of proposed spending cuts being cancelled or undermined soon after passage. For example, the Budget Control Act of 2011 purported to establish caps on discretionary spending enforceable by sequestration – the fallback option to make up for the failure of the so-called “Supercommittee” to identify $1.2 trillion in deficit reduction – only to see Congress repeatedly exceed the sequester caps in the decade during which the BCA was in effect.
Even in the best of circumstances, it can be difficult to hold legislators to deficit reduction promises. The notion that Congress will hold firm on $2 trillion in spending cuts, after giving itself a new way to hide the deficit impacts of tax extensions, is wishful thinking. As AV Executive Vice President of Public Finance George Callas recently stressed, changing precedent will only “turbo-charge overspending by future Congresses by allowing lawmakers to ignore the costs.”
That’s why Rep. Tom McClintock (R‑CA) stated that members should be “very skeptical of any accounting gimmickry that reduces pressure to reduce spending [cuts].”
Current law baselines don’t favor spending
Some in Congress have argued that a current law baseline systematically privileges continuation of spending, but not tax reductions. This is misleading, as I argued:
“The Congressional Budget Office does assume some temporary programs continue in its projections, but this applies to both spending and revenue and only under specific, long-established criteria. Narrow definitions mean that only a small fraction of revenue and spending policies receive this treatment in the baseline.”
To better understand this narrow exemption, consider this case study laid out by Criscitello:
“Despite only being authorized for five years at a time, the CBO baseline assumes the budgetary costs of SNAP continue over the full 10-year scoring window. In effect, the budget baseline and scoring rules treat the existing SNAP program as being permanent.
Accordingly, when SNAP is reauthorized, that action is scored as having no budgetary impact relative to the baseline. To the extent the reauthorization includes provisions to make the program more generous, additional costs above baseline levels would be scored and assumed to continue even beyond the extension period.”
As Callas pointed out, this idea is rooted in a problem that was addressed nearly three decades ago: “Since 1997, the vast majority of new, temporary spending has been scored as temporary — meaning that subsequent extensions are scored relative to current law and thus cost money.”
Congress must preserve honesty in scorekeeping
In the debate over TCJA, Congress should “do both:” extend pro-growth tax provisions and identify budget savings to offset the deficit impact. Finding $4.5 trillion in savings is achievable, given that CBO estimates that our budget will include $89.3 trillion in spending and $67.5 trillion in revenues over the next 10 years.
But it should do both honestly. Spending provisions should be debated on their own merits. Tax policy should be debated on its own merits. And budget scoring should be consistent, regardless of which party is in charge. Trading away baseline integrity has the potential to be a monumentally bad deal not just for today, but for every budget fight to come.
