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Chairman Ryan Can’t Have It Both Ways on Taxes and the Debt Limit Deal

We issued a paper Monday explaining why the debt limit agreement does not prevent the new Joint Select Committee from including tax increases in its deficit-reduction package.  Since then, National Economic Council Director Gene Sperling has also written about why the Joint Committee isn’t constrained in this way.  House Budget Committee Chairman Paul Ryan claims otherwise, but his argument isn’t consistent with the new law — or with claims he made about his own budget plan just a few months ago.

Chairman Ryan asserts that the Joint Committee must measure deficit savings against an “existing-law baseline,” under which letting President Bush’s tax cuts for upper-income households expire wouldn’t count as reducing deficits because they (along with the rest of the Bush tax cuts) are scheduled to expire at the end of 2012 under current law.

More importantly, under Chairman Ryan’s claims, the type of tax reform that the Bowles-Simpson commission, the Senate “Gang of Six” plan, or the plan that President Obama and House Speaker John Boehner were negotiating for a while also wouldn’t count as reducing deficits.  That’s because these plans wouldn’t raise revenue relative to a baseline that assumes that all of the Bush tax cuts have already expired and revenues have returned to higher levels.

The Ryan approach wouldn’t rule out all revenue-raising measures — the Joint Committee could still recommend eliminating some tax loopholes, for example.  But for all intents and purposes, it would exclude any of the measures that could raise serious amounts of revenue and have any chance of attracting bipartisan support.

We’ve looked closely at the language of the Budget Control Act (the new law embodying the debt ceiling agreement) and believe there is little question that Chairman Ryan is wrong.  The conservative National Review has come to the same conclusion.  And here are a few new, highly salient points, beyond those we made in our paper.

  • The Budget Control Act contains no “point of order” or other procedure to bar Congress from considering a committee bill that includes tax increases, regardless of the baseline against which they are measured.  To the contrary, the new law explicitly waives all House and Senate points of order against the Joint Committee’s bill, regardless of the bill’s content.  This provision, by itself, disposes of any legal issue:  regardless of whether the bill includes substantial tax increases, it goes straight to the House and Senate floors and cannot be amended.
  • The Budget Control Act states that the Joint Committee’s report must include “a statement of the deficit reduction achieved by the legislation” in addition to a copy of the Congressional Budget Office (CBO) cost estimate (which, in keeping with CBO’s standard approach, would measure most tax changes against current law).  The Budget Control Act does not say that the committee’s report must include a statement of deficit reduction “as estimated by CBO.”  Why would the new law mandate a separate statement by the committee about the deficit reduction its proposal achieves unless it allowed the committee to differ from the standard CBO estimate — such as by using a different baseline?
  • Finally, neither Chairman Ryan nor CBO uses an existing-law baseline in certain other cases.  For example, Chairman Ryan’s budget plan, which the House approved on April 15, included massive cuts to SNAP (formerly known as the Food Stamp Program).  Yet that program is scheduled to expire in its entirety at the end of fiscal year 2012, so under an existing-law baseline, Ryan’s SNAP proposals would increase spending and deficits, not reduce them.  Instead, CBO estimated significant program cuts for that part of Chairman’ Ryan’s plan by assuming that SNAP would be extended, and Chairman Ryan then cited CBO when claiming that his SNAP cuts would produce significant savings.Presumably, Chairman Ryan will urge the Joint Committee to cut SNAP benefits for poor families, as his budget plan did (even as it called for generous new tax cuts for wealthy Americans).  But if CBO must score relative to existing law and the Joint Committee and Congress are bound by that score, his SNAP cuts would be precluded.  Chairman Ryan can’t have it both ways.