Heads I Win, Tails You Lose: The Myths Behind ​“Current-policy Baseline”

Just four months ago, the U.S. Chamber of Commerce wrote to Congress outlining their priorities for the expiration of the Tax Cuts and Jobs Act (TCJA), noting the importance of ​“driv(ing) economic growth while improving fiscal responsibility.” Given the Chamber’s longtime advocacy for the U.S. reversing its unsustainable fiscal path ​“sooner rather than later,” I was surprised to see its recent paper (and related letter to Congress) arguing in favor of disregarding $4.5 trillion of additional federal debt through the use of a budget gimmick known as the ​“current-policy baseline.” The Chamber makes four arguments in favor of this gimmick, though none of the four stand up to scrutiny.

Below, I address the four myths the Chamber uses to justify its dramatic pivot in its concerns about our national debt – each in turn. 

It absolutely does not. The reality is, if Congress makes the expiring TCJA provisions permanent without additional offsets, the Treasury Department will have to borrow an additional $4.5 trillion over the next ten years. But a current-policy baseline would allow Congress to claim TCJA permanence will have no impact on the national debt — which is more like a fantasy.

The Chamber’s claim that a household’s tax liability this year constitutes ​“reality” for all eternity – and therefore, congressional budget estimates of proposed legislation should be judged relative to that baseline – threatens to open a Pandora’s box of big government mischief. As recently as 2021, for example, Congress provided pandemic unemployment benefits far above historical levels, discouraging beneficiaries from working and costing taxpayers hundreds of billions of dollars, much of it in fraudulent claims, for a program scheduled to expire in less than six months. Imagine if Congress said, ​“We should ignore the CBO score of trillions of dollars to make these unemployment benefits permanent. These benefits are ​‘reality’ for the people receiving them, and therefore making them permanent doesn’t actually cost anything.”

That’s exactly the standard the U.S. Chamber of Commerce is endorsing and the fiscally reckless precedent it is trying to set. Congressional Republicans must recognize that a future Democratic Congress and President will use that precedent to enact Medicare for All, the Green New Deal, and Universal Basic Income for just one year, and then come back a year later and make it all permanent at ​“zero cost” because, ​“those programs are reality.” 

The Chamber falsely claims that only a current-policy baseline can allow the expiring TCJA provisions to be made permanent. What is true is that Congress may not make all of the TCJA provisions permanent without also offsetting the cost outside the budget window. But the Chamber conveniently forgot to add those words at the end. Whether to make the TCJA permanent with offsets, make some of it permanent with some offsets, or make it all expire with no offsets is a choice, based on a set of trade-offs, for Congress to make. For the Chamber to imply that there is only one option available – expiration – is as misleading as it is self-serving.

This is false. The Chamber astoundingly tries to argue that ​“adopting a current-policy baseline could facilitate even greater spending reductions because it would provide congressional committees more flexibility to identify spending reductions as they work through the reconciliation process.” In other words, if we could just liberate Congress from worrying about whether to offset TCJA extensions, it would give them more time to come up with… offsets. This is the weakest of arguments. And the precedent will turbo-charge overspending by future Congresses by allowing lawmakers to ignore the costs.

This is a misleading characterization of the budget rules. A great deal of myth and misunderstanding surrounds the question of how the budget rules treat spending and taxes differently. In fact, congressional Republicans – led by Speaker Newt Gingrich and House Budget Committee Chairman John Kasich – largely fixed the asymmetry in 1997 for new spending and tax cuts. 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. For example, think of all the temporary spending in the American Recovery and Reinvestment Act of 2009, the CARES Act of 2020, and the American Rescue Plan Act of 2021. If Congress had wanted to make any of that spending permanent in subsequent legislation (and some of it was made permanent), it would have been required to recognize the full cost of permanence relative to a current law baseline. Permanence did not cost zero just because it was spending. 

What the Chamber and other advocates of a current-policy baseline are proposing today, however, is not to treat tax cuts more like spending, but rather to treat these particular tax cuts differently than any spending program or tax cut has ever been treated in our history. The Chamber wants to use a current policy baseline in 2025 to claim that TCJA extensions have no cost, even though these same TCJA provisions were scored against a current law baseline when they were enacted in 2017 so that only eight years of costs were counted rather than permanent costs. This ​“heads-I-win-tails-you-lose” scoring rule has never been applied before, and for good reason: it represents cherry-picking which baseline one uses at different times to maximize how much of the cost is hidden. Rep. Dave Schweikert (R‑AZ), Chairman of the Ways and Means Committee’s Oversight Subcommittee, recently referred to this bait-and-switch as ​“intellectually a fraud.” 

Well said, Congressman.