osewalrus (osewalrus) wrote,
osewalrus
osewalrus

Not a Jedi Master -- Why Rs Are Not Extending the Bush Tax Cuts in the Debt Ceiling

I occasionally see efforts to justify Obama's deal with the observation that he secured from the R leadership tacit cooperation in expiration of the Bush tax cuts. Actually, the reason for this is far more prosaic. Extension of the Bush tax cuts (or making them permanent) is a big ding for the score from the Congressional Budget Office (CBO), since it means forgoing projected future revenue. Ryan brushed this off by arguing that it would increase the deficit in the short run but would grow the economy, and therefore reduce the deficit, in the longer run. But CBO is less sanguine about this coming to pass and therefore refuses to score it in the manner desired by Republicans.

[Another fun thing the GOP does not seem to get/care about on the econ front. There is no difference economically from forgoing a revenue stream (for example, via a tax cut) and spending money directly (for example, via extended unemployment). The difference is one of economic impact. But from a deficit perspective, they both count as expenditures.]

So Boehner and the rest could not include extension of the tax cuts in the debt ceiling deficit reduction, because they insisted on a dollar for dollar match with the debt ceiling increase. This is one of the reasons the spectrum stuff fell out of the bill. While the proposed auctions would raise revenue, the bill also required spending $7 billion (in the Reid version) on a public safety network. The Rs were clear that the deficit ceiling was going to be cuts only, not expenditures, or everyone was going to start hanging their projects on it like Christmas ornaments.

(Reid also claimed that because spectrum auctions are a bill for the raising of revenue, it needs to originate in the House. This is plausible, but then Rockefeller is wasting his time pushing for a floor vote on his spectrum/public safety bill. But I digress.)

Anyway, my point is that the extension of the tax cuts is going to be hard, if not impossible, to get into this debate as a consequence of the inflexible CBO math. This plays out differently in the larger budget fight, because then the GOP can claim that the increase in deficit spending is a consequence of Obama's spending while brushing aside the score on tax cut extension. Also, in the budget process, you don't need offsetting cuts.

But here, and for the Super Committee, CBO is the ultimate score keeper. And, as I noted in my blog post on scoring spectrum auctions, CBO has a truth spell woven into its making. It's rules for accounting may be arcane, it may hide the truth in weasel words, but CBO cannot actually out and out lie on the budget projections, or fail to somehow describe the basis for its score.

So extension of the tax cuts is off the table in debt ceiling/deficit reduction, unless someone comes up with a plausible way to offset the loss in projected revenue. It may still come back in the budget process, which is separate.
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