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New Rules Suggest Tax Cuts Trump Deficit Reduction for House Republicans

January 3, 2011 at 12:00 PM

“Are House Republicans serious about dealing with the deficit? You could listen to their rhetoric — or you could read the rules they are poised to adopt at the start of the new Congress, . . . [which] suggest that the new GOP majority is determined to continue the spree of unaffordable tax-cutting,” the Washington Post’s lead editorial today explains. A report we issued just before Christmas takes a close look at the new rules:

Current House rules include a pay-as-you-go requirement that any tax cut or spending increase for a mandatory (i.e., entitlement) program must be offset by cuts in other mandatory spending or increases in other taxes, in order to avoid increasing the deficit. Current rules also bar the House from using budget “reconciliation” procedures — special rules that facilitate speedy action on specified budget legislation — to pass bills that would increase the deficit. The new rules would alter and greatly weaken these commonsense measures:

  • The new rules announced December 22 would replace pay-as-you-go with a much weaker, one-sided “cut-as-you-go” rule, under which increases in mandatory spending would still have to be paid for but tax cuts would not.

    In addition, increases in mandatory spending could be offset only by reductions in other mandatory spending, not by any measure to raise revenues such as by closing unproductive special-interest tax loopholes. For example, the House would be barred from paying for continuation of a provision enacted in 2009 (and extended in the just-enacted tax compromise) that enables many minimum-wage families to receive a full, rather than a partial, Child Tax Credit by closing wasteful tax breaks for multinational corporations that shelter profits overseas. . . . Yet the same new rules would enable the House to expand tax loopholes for multinational corporations and wealthy investors without paying for those tax breaks at all, because any tax cut, no matter how costly or ill-advised, could now be deficit financed.

  • The new rules would stand the reconciliation process on its head, by allowing the House to use reconciliation to push through bills that greatly increase deficits as long as the deficit increases result from tax cuts, while barring the use of reconciliation in the House for legislation that reduces the deficit if that legislation contains a net increase in spending (no matter how small) that is more than offset by revenue-raising provisions.

As the report notes, we’ve been here before. In the 1990s, when pay-as-you-go rules applied to tax cuts as well as spending increases and Congress used reconciliation solely to reduce deficits, the country went from large deficits to a balanced budget. (A strong economy obviously helped as well.) But in the early 2000s, Congress set aside pay-as-you-go and used reconciliation to push through costly, unpaid-for tax cuts that contributed heavily to the return of large deficits after 2001. Now, House Republicans plan to restore the very type of permissive budget rules that caused much of the budgetary deterioration we’ve seen over the past decade.


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