Administration's Argument Against Pay-As-You-Go For Tax Cuts Does Not Withstand Scrutiny
June 13, 2006
Bipartisan budget watchdog groups such as the Concord Coalition and the Committee for Economic Development have called for reinstatement of the Pay-As-You-Go rules, which helped move the budget from deficits to surpluses in the 1990s. Eminent figures such as former Federal Reserve chair Alan Greenspan and David Walker, head of the Government Accountability Office (GAO), similarly have called for these rules to be reinstated. Under the PAYGO rules, entitlement expansions and tax cuts -- including the extension of expiring provisions of law that expand entitlement programs or cut taxes -- must not increase the deficit; they must be paid for through offsetting entitlement reductions or tax increases.
The Bush Administration strongly opposes reinstatement of these rules. In attempting to justify its opposition to subjecting tax cuts (including any extension of the tax cuts scheduled to expire in 2010) to the discipline of a pay-as-you-go rule, the Administration has resorted to the claim that applying PAYGO to the extension of expiring tax cuts would be inequitable because the budget baseline rules treat expiring tax cuts unfairly. The Administration argues that the baseline rules favor entitlement increases over tax cuts and that backing those rules up with PAYGO would magnify this inequity.
Examination of the baseline rules makes quite clear, however, that these Administration claims are simply inaccurate. The budget rules do not unfairly treat expiring provisions of the tax code or provide favorable treatment to entitlement expansions over tax cuts.
Furthermore, the Administration has proposed changes in the baseline rules that it suggests would "even the playing field" between taxes and entitlement programs, but that, in fact, would tilt the field dramatically in favor of the Administration's tax cuts. The Administration's proposals would write an unprecedented gimmick into the budget rules by allowing tax cuts enacted in 2001 and 2003 to be made permanent without the full costs of those tax cuts ever having been "scored" or subjected to budget control procedures.
Administration's Claim Is Without Merit
New Office of Management and Budget Director Rob Portman reiterated the Administration's claim in his recent confirmation hearing before the Senate Homeland Security and Governmental Affairs Committee. Portman said:
"[T]he way we currently would operate PAYGO, unless we change the scoring rule, it is true that there is a bias, in my view, for spending and a bias against tax relief. Why? Because we assume that programs go out indefinitely on the spending side. For instance, the farm bill,...which would expire in 2007, would be assumed to continue, as would other mandatory spending programs. Whereas on the tax side, we assume the tax relief would not continue."
As this analysis explains, the claim that scoring rules favor spending increases over tax cuts is without merit:
- The general budget rules treat temporary provisions of the tax code exactly the same as temporary provisions of entitlement programs;
- A special rule dealing with cases where an entire entitlement program (such as the farm program) would expire does not give any advantage to such programs; and
- The Administration's proposed change in baseline rules would open the door to a stunning gimmick that would greatly advantage the tax cuts enacted in 2001 and 2003, with those tax cuts counted as temporary when they were enacted and then considered as permanent when legislation to extend them was considered, so that the cost of the tax cuts (beyond their initial period) would never be counted or subject to any budget limitations.
The Pay-as-You-Go Rule
The pay-as-you-go rule was first established in the Budget Enforcement Act of 1990 to help ensure that the entitlement cuts and tax increases enacted as a result of the Bipartisan Budget Summit Agreement of 1990 (an agreement negotiated by the first President Bush and Congressional leaders of both parties) were maintained rather than reversed by subsequent Congresses. The rule required that if legislation was later enacted that cut taxes or increased entitlement spending, the cost of those changes had to be fully offset by increasing other taxes or cutting other entitlement programs, so that the deficit would not be increased. This requirement was enforced by an across-the-board reduction in non-exempt entitlement programs that would occur automatically if legislation producing the required offsets was not enacted.
The Senate also adopted its own pay-as-you-go rule, which prohibited consideration of entitlement and tax legislation that would cause or increase the deficit during the first year, the first five years, and the second five years. This constraint could be waived only if at least 60 Senators voted to disregard it.
Budget Watchdog Groups Call For Reinstating the Pay-As-You-Go Rule and Applying It to Both Tax Cuts and Entitlement Increases.*
"Our organizations have maintained consistently that the President and the Congress should reestablish the pay-as-you-go rule -- applying to all tax cuts and all mandatory spending increases -- to require lawmakers to consider the tradeoffs inherent in the enactment of costly new legislation.
".... It is not responsible to continue to promote legislation that is supposed to improve the lot of the American people without considering the corrosive effects that the cumulative deficits and debt added by such legislation would have on current and future citizens. ...
"There are many national needs that could potentially be addressed through tax cuts or entitlement increases. Lawmakers can disagree about [specific measures to] meet those needs. But lawmakers should agree that there is an overriding imperative to bring unsustainable deficits under control. On our current path, we are in danger of ever-expanding deficits and declining growth in our national output and living standards.
"As a first, critical step toward meeting this imperative, policymakers should agree not to take any actions that make the deficit outlook worse. They should immediately reestablish and abide by the principle that -- no matter how worthy the goal of the proposed policy -- any tax cut or entitlement increase (including the extension of expiring tax cuts or expansion of existing entitlement benefits) must be offset in order to avoid digging the fiscal hole any deeper.
"....Restoring the pay-as-you-go principle would, at a minimum, force Congress to weigh the short-term political attractions of new proposals against the long-term fiscal consequences. Given where deficits now stand and the known fiscal challenges that lie ahead, it is policymakers' responsibility to do this. They owe future generations no less."
* Excerpt from Joint Statement On The Need For Pay-As-You-Go Discipline, June 23, 2005, Center on Budget and Policy Priorities, The Concord Coalition, The Committee on Economic Development, The Committee for a Responsible Federal Budget, and Centrists.org.
Throughout the 1990s, the pay-as-you-go rules effectively prevented entitlement expansions and tax cuts from being enacted without their costs being offset. In 2001, however, budget surpluses and pressure from a new administration combined to convince Congress to waive the statutory pay-as-you-go rule to enact large tax cuts that were not paid for. At the end of fiscal year 2002, the statutory and Senate pay-as-you-go rules expired. (In 2003, the Senate pay-as-you-go rule was reestablished, but with a fundamental change that allows deficit-financed tax cuts or entitlement increases as long as the Congressional budget plan in effect assumes those policy changes. This makes the current Senate rule rather hollow and ineffectual.)
Despite calls from a wide range of budget experts and watchdog groups (see box above), opposition by the Bush administration and tax-cut proponents in Congress has prevented the reinstatement of a pay-as-you-go rule that would apply to both entitlement expansions and tax cuts. The Senate earlier this year came within one vote of supporting the reestablishment of a true pay-as-you-go rule that would apply in the Senate; an amendment to the Congressional budget resolution that would have reinstated the rule failed on a 50-50 vote. This issue has not come to a vote in the House in the past few years, as the House leadership will not allow a vote on it.
The Bush Administration's Position on Pay-as-you-go and Budget Baseline Rules
The Bush Administration supported waiving the statutory pay-as-you-go rule then in effect in order to enact large tax cuts in 2001. It steadfastly opposed reinstating the statutory rule or the original Senate rule after those rules expired at the end of fiscal year 2002; the expiration of those rules facilitated the enactment of further tax cuts in 2003 and subsequent years without the super-majority support that would have been necessary to waive the pay-as-you-go rule.
As noted, the Administration has claimed it would be inappropriate to reinstate a pay-as-you-go rule that applies equally to tax cuts and entitlement expansions, in part because of what the Administration asserts is the "unfair" treatment of tax cuts under the budget baseline rules. Instead, the Administration supports a version of the pay-as-you-go rule that would prohibit increases in entitlement programs unless they are paid for by cuts in other entitlement programs, while allowing unlimited, deficit-financed tax cuts.
In addition to proposing that all tax cuts be exempt from the pay-as-you go rule, the Bush Administration also proposes to alter the budget baseline rules so that the cost of extending most of the tax cuts enacted in 2001 and 2003 would be subsumed in the baseline itself. That would mean that legislation extending these tax cuts not only would be exempt from a pay-as-you-go rule but would be scored as having no cost at all. This would make the extension of these tax cuts exempt from any limits on tax cuts included in future congressional budget resolutions.
The Bush Administration bases its opposition to a pay-as-you-go rule that applies equally to tax cuts and entitlement increases, and its support of a change in the way that its 2001 and 2003 tax cuts are treated in the budget baseline, in part on the claim that the current baseline rules treat expiring tax cuts and expiring entitlement provisions differently and that the different treatment is unfair to tax cuts. As explained below, the claim that the baseline rules unfairly disadvantage expiring tax cuts is simply false. Even if were true, it is not clear why that would justify the Administration's position that all tax cuts (not just the extension of expiring tax cuts) should be exempt from a pay-as-you-go rule. Furthermore, the Administration's proposal to "fix" the supposedly unfair baseline rules would notensure fair treatment of expiring tax provisions; it is designed purely and simply to allow the 2001 and 2003 tax cuts to be made permanent without the resulting costs ever being scored or subject to any budget controls.
The Budget Baseline Rules are Not Unfair to Expiring Tax Cuts
The Bush Administration's claim that the budget baseline rules treat expiring entitlement provisions more generously than expiring tax provisions is based on a misrepresentation of the budget rules. When the budget baseline rules and scoring practices of the Congressional Budget Office are properly understood, it is clear that tax cuts do not suffer from any procedural disadvantage compared with entitlement increases. The basic rules apply in the same manner to tax cuts and entitlement increases. In the special case of entitlement programs as a whole that are scheduled to expire under current law (as distinguished from expiring provisions affecting an entitlement program), the scoring rules ensure that no advantage is gained by assuming in the baseline that the entitlement program will continue. Finally, the change in the baseline treatment of the 2001 and 2003 tax cuts that the Administration proposes would result in an unprecedented budget gimmick, as it would allow several trillion dollars in tax cuts to be enacted without being accounted for or subject to any budget controls. The remainder of this analysis examines these issues.
Budget Baseline Projections Treat Expiring Tax and Entitlement Provisions the Same Way
The rules governing the baseline projections that the Congressional Budget Office and Office of Management and Budget produce are set forth in section 257 of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. Subsection (a) of that Act states the basic rule for projections of revenues and entitlement (or direct) spending:
"Laws providing or creating direct spending and receipts are assumed to operate in the manner specified in those laws for each such year...."
Thus, when CBO and OMB analysts prepared the ten-year (or in OMB's case, five-year) baseline projections for revenues that they released at the beginning of 2006, they based their revenue projections for each year on the provisions of the tax code that would be effect in that year under current law. For example, in projecting the amount of revenues that would be collected, the analysts took into account the fact that the Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the tax rate on capital gains income from 20 percent to 15 percent through 2008, but provided for that rate to return to 20 percent after 2008.
In general, the analysts did exactly the same thing when they projected expenditures for entitlement programs -- they took into account the provisions governing each program that would be in effect each year, under the laws now in place. So, for instance, in projecting Medicaid expenditures, they took into account the fact that the Deficit Reduction Act of 2005 extended the Transitional Medical Assistance (TMA) provisions of the Medicaid program only through December 31, 2006. The CBO and OMB baseline projections of Medicaid expenditures consequently assumed that the TMA provisions, which provide up to a year of transitional Medicaid coverage to families that work their way off welfare, will expire at the end of 2006.
Thus, the baseline treatment of the expiring capital gains tax cut and the treatment of the expiring TMA provisions were entirely consistent. The baseline treatment of these expiring provisions also was consistent with the "scoring" of the original legislation that contained these temporary provisions. The 2003 tax-cut law that sunset the capital gains tax cut at the end of 2008 was charged only with the cost of reducing the capital gains tax rate through 2008. Likewise, the Deficit Reduction Act of 2005 was charged only with the cost of extending the TMA provisions through the end of 2006.
Similarly, the scoring of recently enacted legislation to extend the reduction in the capital gains rate through 2010 is consistent with the scoring of proposals (not yet enacted) to extend the TMA provisions beyond 2006. In both cases, the costs of the extensions are the added costs not reflected in the baseline projections, which assume these provisions would expire on schedule.
It is abundantly clear that the neither the baseline nor the scoring rules give extension of the expiring Medicaid TMA provisions any advantage over extension of the expiring capital gains tax cut. There is no bias here against tax cuts or in favor of entitlement increases.
Special Baseline Rule for Programs That Expire Provides No Advantage for Such Programs
A special baseline rule applies in cases where Congress has decided that an entire mandatory program should be reexamined periodically and, to make sure the reexamination occurs, has provided that the entire program (as opposed to certain provisions of the program) will expire if legislation to extend the program is not enacted. For instance, when Congress wanted to expand health care coverage for uninsured children in 1997, it enacted a new State Children's Health Insurance Program (S-CHIP) that it funded for fiscal years 1998 through 2007. The expiration of the program at the end of 2007 ensured that Congress would be forced to reevaluate the program. Congress has made a similar decision in the case of a limited number of other mandatory programs, including farm programs funded through the Commodity Credit Corporation and the Food Stamp Program (which together are reauthorized about every five years in the so-called "farm bill") and the Temporary Assistance for Needy Families (TANF) block grant.
In recognition of the fact that Congress intends to use the scheduled expiration of these major programs to trigger review and evaluation of the way the programs operate, rather than to let the programs actually expire, the baseline rules adopted as part of the Budget Enforcement Act of 1990 provide that a program with annual outlays of more than $50 million that is scheduled to expire will be assumed to continue in the baseline. The baseline rules were amended in the Balanced Budget Act of 1997 so this special rule applies automatically only to programs enacted prior to that Act. For new mandatory programs established after that, the House and Senate Budget Committees determine whether the program is assumed to continue in the baseline.
It is important to note that the special rule applies only to entitlement programs that are scheduled to expire under current law, not to program provisions that are scheduled to expire. As noted above, expiring entitlement provisions and expiring tax provisions are treated exactly the same under the baseline rules.
The special rule applicable to expiring entitlement programs does not apply to taxes because the tax code is not generally thought of as a collection of separate programs. For instance, it does not make sense to consider the expiration of the temporary reduction in the capital gains tax rate as the expiration of a tax "program." A temporary change in the capital gains tax rate is instead analogous to the temporary extension of the Transitional Medicare Assistance provisions of Medicaid or a temporary delay in the implementation of Medicare physician reimbursement rules, which are assumed to expire in the baseline just as the temporary reduction in the capital gains tax rate is assumed to expire. In general, provisions of the tax code are so interconnected that it would be extremely difficult to divide the code into separate "programs" to determine if some subset of the tax code that is scheduled to expire should be accorded the same baseline treatment as an expiring entitlement program.
Most importantly, the expiring entitlement programs that are assumed to continue in the baseline receive no overall advantage relative to expiring tax provisions.
- When estimating the costs of legislation that would establish a new entitlement program that will be assumed to continue in the baseline, CBO scores the cost of that legislation for every year of the applicable five-year or ten-year budget window. Congress can not make the cost of that legislation appear to be smaller by scheduling the new program to expire after a few years; CBO will score the costs in every year regardless.
Likewise, suppose Congress permanently increases the cost of a program, such as the Food Stamp Program, that is reauthorized every five years or so but that CBO treats as permanent under the baseline rules. In this case, CBO's estimate of the cost of the benefit increase will be shown as increasing costs in each of the next ten years even though the Food Stamp Program is slated to expire in 2007.
- Consequently, the option to Congress to make the costs of tax cuts look smaller by sunsetting them after a few years is not available to Congress when it establishes or enlarges an entitlement program that the baseline treats as an ongoing program.
The result is that no advantage is given to an entitlement program by the baseline's assuming that the program will continue. It is true that a simple extension of such a program beyond its scheduled expiration date will be scored as having no cost if the reauthorization legislation includes noexpansions or other cost-increasing changes in the program. But the legislation that established or expanded the program in the first place will have been scored for the full cost of the legislation for every year within the budget window, including the years after the year in which the program is scheduled to expire.
To understand how no advantage is gained from assuming that an entitlement program is continued in the baseline, consider the following example. Assume that a new entitlement program and a tax provision are enacted at the same time, that both are scheduled to expire after two years, that both are estimated to cost $5 billion over five years if they are extended ($2 billion in the first two years and $3 billion in the second three years), and that both are then extended for three more years in later legislation.
- If the entitlement program is assumed to continue in the baseline, the original legislation that established the program will have been scored as costing $5 billion over five years, even though the program is slated to expire after two years. The subsequent legislation that simply extends the program for three years will be scored as having no cost.
- In contrast, the original legislation containing the tax-cut provision will be scored as costing only $2 billion over two years. The subsequent legislation that extends the tax-cut provision for three more years will then be scored as costing $3 billion over three years.
- Thus, the new entitlement program and the tax cut will both be scored as costing $5 billion over five years. The new entitlement program gained no advantage from the baseline assumption that it would be continued.
- If proponents of the tax cut somehow believe that being charged with the cost of the tax cut in two installments is disadvantageous -- even though the total cost is no greater than if the tax cuts had been treated as permanent in the baseline and the original legislation had been scored on that basis -- they can avoid that outcome by making the tax-cut provision permanent to start with. In recent years, tax-cut proponents often have purposely opted for the installment approach, because they concluded that doing so would be to their advantage. Sunsetting a new tax cut after a few years can make the cost appear lower when the tax cut is first considered, making the tax cut easier to pass. Once the tax has been passed, its proponents then argue that it must be extended to avoid subjecting the public to a tax increase and damaging the economy.
Administration's Proposal Would Add a Gimmick on Top of a Gimmick
The Bush Administration has proposed a rather remarkable change in the rules governing baseline revenue projections. The President's budget for fiscal year 2007 proposes that the baseline be changed to "[a]ssume extension of all expiring tax provisions in the Economic Growth and Tax Relief Reconciliation Act of 2001 and certain provisions in the Jobs Growth Tax Relief Reconciliation Act of 2003."
The Administration argues that "these provisions were not intended to be temporary" and that this rules change would make the treatment of these tax cuts "consistent with the BEA [Budget Enforcement Act] baseline rules for expiring mandatory spending."
Gaming the System in Passing the 2001 and 2003 Tax Cuts
The Administration and Congressional tax-cut proponents chose to enact the 2001 and 2003 tax cuts through the Congressional budget reconciliation process. Reconciliation bills are not subject to filibuster in the Senate, so they can be passed with 51 votes instead of the 60 votes required to end debate.
But Senate rules provide that a reconciliation bill cannot increase the deficit outside of the budget window (which in 2001 extended through fiscal year 2011). That created a problem for the Administration's 2001 tax-cut package. To avoid having to limit the magnitude of the tax cuts in that package to ensure there would be the 60 votes needed to pass the tax cuts outside of the reconciliation process, the Administration and Congressional leaders first decided to have the tax cuts expire at the end of fiscal year 2011 so they could use the reconciliation process and thus would need only 51 Senate votes. Then, in conference, when it became clear that the tax cuts would cost substantially more than the $1.35 trillion over ten years that the Congressional budget resolution allowed, Congressional leaders and the White House decided to have the tax cuts expire at the end of calendar year 2010 instead of the end of fiscal year 2011. The savings produced by having the tax cuts expire nine months earlier (December 2010 instead of September 2011) allowed additional tax cuts to be packed into the legislation.
Similar considerations governed decisions about the 2003 tax cuts, which included reductions in the tax rates on capital gains and dividends. Congressional leaders designed these tax cuts to expire at the end of 2008 for the same reason -- to lower the "scored" cost of these tax cuts so they could pack more tax cuts into that year's legislation.
As explained above, however, there is no inconsistency in the baseline treatment of expiring tax provisions and expiring entitlement program provisions, and the special rule that applies in the case of new entitlement programs that are scheduled to expire provides no advantage to those programs. To repeat, if the baseline assumes an entitlement provision is temporary, the baseline treats its costs exactly the same as it treats the costs of expiring tax cuts. If the baseline assumes that an entitlement program or program enlargement is ongoing, then the legislation that established the program or increased it will already have been charged with a cost for every year covered by the budget resolution, and Congress will not have been afforded any opportunity to artificially lower that cost by assuming that the program (or program increase) will expire.
Of particular note, the Administration's proposal would constitute a breathtaking budget gimmick. If the proposal were adopted, the costs of making the 2001 and 2003 tax cuts permanent would be scored at zero, since (under the proposal) the costs would already have been included in the baseline. The result would be that the costs that would occur in years after the year in which the tax cuts were initially slated to expire would never be scored -- these costs would be scored neither when the tax cuts were first enacted nor when they were extended. The 2001 and 2003 tax cuts would be the only provisions of tax or entitlement law ever to get (or have gotten) the benefit of this gimmick.
This would, in essence, represent a gimmick on top of a gimmick. By designing the original tax-cut legislation in 2001 and 2003 so that the tax cuts were slated to expire, the Administration and its Congressional allies were able to push through larger tax cuts than otherwise would have been allowed. Scheduling the tax cuts to expire, so that their costs in the years after their expiration dates would not be counted, enabled tax-cut proponents to lower the "scored" cost of these tax cuts and thereby to pack more tax-cut measures into the 2001 and 2003 tax-cut bills, without breaching the tax-cut limits the Congressional budget resolutions for those years had set. For the Administration first to push through larger tax cuts in 2001 and 2003 by taking advantage of the fact that the tax
cuts would be scored as not being in effect in the years after their expiration dates, and then to come back and argue that the cost of extending the tax cuts also should not count because the tax cuts weren't intended to be temporary to begin with, is a striking example of chutzpah.
More Evidence of Gimmickry: The Administration Would Apply Its Proposal Only to the 2001 and 2003 Tax Cuts, Not to Future Tax Cuts
Had the Administration proposed that as a general rule, "temporary" tax cuts enacted in the future should be "scored" and treated in the baseline as though they were permanent, this would not be a gimmick. It would mean that in the future, a temporary tax cut would be scored as permanent from the outset. A temporary tax cut consequently would have to fit within the budget targets for all years of the "budget window" Congress was using.
But this is not what the Administration has proposed. When the Administration submitted its legislation to treat the costs of the 2001 and 2003 tax cuts as permanent in the baseline,* it applied this proposal solely to those tax cuts. The proposal would not provide for future temporary tax cuts to be scored and treated in the baseline as though they were permanent.**
Failing to apply this proposal to future tax cuts would allow the Administration (and other tax-cut adherents) to replay in the future the same set of gimmicks the Administration seeks to use with regard to the 2001 and 2003 tax cuts. Tax-cut proponents could design expensive new tax cuts and make them temporary in order to squeeze them within the budget targets under which Congress was operating. Then, in a subsequent year, they could claim that they always intended the tax cuts to be permanent and that the extension of these measures should be reflected in the baseline, with legislation to extend these tax cuts consequently being scored as having no cost. Here again, the Administration seeks "to have it both ways" in order to advance more tax cuts.
* The Administration submitted this legislation in 2004 to accompany the explanations of its proposals contained in the Analytical Perspectives of the President's Budget.
** The Administration also did not apply its proposal to other existing "temporary" tax cuts such as the Research and Experimentation tax credit or other "tax extenders" that are nominally temporary but invariably extended every few years.
The Administration's position indicates it believes not only that tax cuts should not be subject to pay-as-you-go discipline but that a significant part of the cost of the 2001 and 2003 tax cuts should never be scored. The Administration successfully sought to have the cost of the legislation that initially created those tax cuts scored as if the tax cuts were temporary, but now seeks to have legislation to extend those tax cuts scored as if the original tax cuts had been permanent and their costs had already been taken into account. The Administration seeks to "have it both ways." As explained above, it is not possible to have it both ways with regard to an entitlement increase.
The Administration's attempt to "have it both ways" with the 2001 and 2003 tax cuts is analogous to a company entering into a one-year contract for computer services, recording the one-year cost of the contract in its books, and then -- when it extends the contract at the end of the year -- deciding it does not need to show the additional costs of extending the contract on its books because it never meant the contract to be temporary. (Note: if the company used the approach that is applied to expiring entitlements programs that the baseline assumes will continue, the company would have recorded the costs of the initial contract as if it were a permanent contract and thus carried higher costs.) This would be an unacceptable accounting practice in the corporate world. It should be unacceptable for the government as well.
 The Senate rule did not apply at that time because surpluses were projected for the coming ten years, even with the tax cuts.
 See Chapter 15, "Budget Reform Proposals," in the Analytical Perspectives volume of the Presidents Budget of the United States Government for Fiscal Year 2007, p. 211
 The current rules were essentially established in the Budget Enforcement Act of 1990, which amended the Balanced Budget Act, and are often called the "BEA" baseline rules.
 See baseline projections in CBO's March 2006 An Analysis of the President's Budgetary Proposals for Fiscal Year 2007 and Chapter 25, "Current Services Estimates," in the Analytical Perspectives volume of the President's Budget of the United States Government for Fiscal Year 2007.
 OMB actually prepared two versions of the revenue baseline: one that follows the BEA rules and one that incorporates the Administration's proposed baseline change and includes in the baseline the cost of extending the expiring 2001 and 2003 tax cuts.
 The Tax Increase Prevention and Reconciliation Act of 2005, signed into law May 17, extended the lower rate on capital gains through 2010 at a cost of $51 billionover 10 years. CBO estimates that the proposal included in the President's fiscal year 2007 budget to extend the TMA provisions through September 2007 would cost $524 million over 10 years.
 The farm programs represent somewhat of a special case since, if the current laws governing farm support payments were to expire, the permanent price support authority under the Agricultural Adjustment Act of 1939 and the Agricultural Act of 1949 would become effective. Since those laws were based on an agricultural sector that was dramatically different than the one that exists today, it likely would be impossible to produce sensible estimates of what the cost of the farm programs would be under those laws.
 CBO provides a list of the 13 expiring programs that are currently assumed to continue under the baseline rules. See CBO's January 2006 report, The Budget and Economic Outlook: Fiscal Years 2007 to 2016, p. 66.
Analytical Perspectives, p. 215.
 If an entitlement increase is scored as temporary, it will be treated as temporary in the baseline and the costs of any extension will be scored. Alternatively, if an entitlement increase is scored -- and projected in the baseline -- as permanent, the entire cost of the increase over the entire budget window will be scored up front.