In the midst of trying to convince Republicans to vote for the debt deal, House GOP leaders are making the case that the “Super-Committee” – charged with identifying $1.5 trillion in deficit reduction by Nov. 23 — will have a very difficult job embracing a package of tax reform leading to new revenues.
It’s a complicated argument, one hotly disputed by White House officials, and there’s a sort of subtext the Republicans are pushing that the Democrats obliviously agreed to grab the fuzzy end of the lollipop in this deal.
Moreover, given another recent budget squabble, it's an inconsistent by the Republicans.
Here’s how the debate shakes out:
As you may know, the agreement calls for a 12-member bipartisan “Super-Committee” – officially called the Joint Select Committee on Deficit Reduction – that will identify $1.5 trillion in deficit reduction.
The debt deal says that the “Congressional Budget Office shall provide estimates of the legislation…including estimates of the effect of interest payment on the debt…”
And that “Not later than November 23, 2011, the joint committee shall vote on— (I) a report that contains a detailed statement of the findings, conclusions, and recommendations of the joint committee and the estimate of the Congressional Budget Office…”
House Republicans say the reliance on CBO means that the Super-Committee’s hands will be tied.
To start, you have to understand that White House officials are hoping that the Super-Committee will explore options for both entitlement reform and tax reform. Tax reform might mean a new tax code where everyone’s rates are lowered, but deductions are limited or non-existent. This, Democrats hope, would raise overall revenue while also making it more palatable to the public.
The White House says that as an added incentive for the Super-Committee to act – in addition to the onerous “triggers” the legislation calls for – the president will veto any further extension of the Bush tax cuts for the top two brackets when they next expire in January 2013. The president’s argument is: make a new tax code that makes the Bush tax cuts irrelevant.
Republicans say since the Bush tax cuts are set to expire, the CBO is already anticipating and assuming $3.5 trillion in new revenue.
“Extending any current tax rates – even for the middle class – would be scored as a tax cut by CBO and therefore ADD to the deficit,” one House GOP leadership aide emails, “Since the mission of the committee is deficit reduction – as scored by CBO – anything that would score as a tax cut would require the committee to find even more in spending cuts. Essentially, they would have to raise taxes by more than $3.5 trillion before even reaching the point of ‘deficit reduction.’ That ain’t gonna happen, so they’re not going to touch personal tax rates.”
White House officials call this hogwash.
“First, the suggestion that it is impossible for the Joint Committee to raise tax revenue is simply false,” one senior White House official emails ABC News. “If the Joint Committee decides as part of a balanced deal to eliminate tax subsidies for oil and gas companies or corporate jets, or if they decide to limit the value of itemized deductions for high income earners and the President has called for, these measures would raise revenue – completely independent of any baseline assumptions. They can absolutely be part of a balanced agreement, and the President will be encouraging the Joint Committee to consider them.”
The senior White House official says that “nothing in the legislation specifies that the Committee operate under any specific baseline. Any suggestion otherwise is false. Under the terms of the statute, the Joint Committee could decide to use whatever baseline they want. If they want to operate under the baseline used by the Fiscal Commission, that assumed the expiration of the Bush high income tax cuts, they are free to do so. Likewise, if they want to operate under a current policy baseline, which is what Speaker Boehner was relying on when he said he had agreed to $800 billion in revenue from tax reform, they are free to do so as well.”
The senior White House official insists that the legislation “is no obstacle to revenue-raising tax reform. And the President will be making the case that this should be part of a balanced deal coming out of the Joint Committee.”
One bottom line of this debate is that it seems that the baseline the Super-Committee uses will also be a point of contention.
Experts on the CBO scoring process say Republicans are making a flimsy argument. There's nothing in the legislation that would prevent the Super-Committee from proposing revenue increases. Nothing. And anyone in Congress can ask for alternative benchmarks.
The truth is the CBO is often called to score bills in different ways, and anyone on the Super-Committee could certainly request that it be done in a certain way with any assumptions.
Given Congress's reluctance to raise taxes, it might not make much sense to ask CBO to assume the Bush tax cuts expire in January 2013.
Rep. Paul Ryan, R-Wisc., for instance, requested that CBO score his "Roadmap" against an "alternative fiscal scenario" that assumed extension — not expiration — of the Bush tax cuts. "As you requested, the analysis in this letter compares the Roadmap with the alternative fiscal scenario…” the CBO wrote to Ryan.
And the House GOP at the time used that alternative fiscal scenario — not the CBO one. In fact, last month, after Senate Majority Leader Harry Reid, D-Nev., claimed more than $1 trillion in savings from the wars in Iraq and Afghanistan from being drawn down, Democrats pointed out that the same savings appeared in Ryan's Roadmap.
Actually, it appeared in the CBO scoring of the Ryan Roadmap — not Ryan's "alternative fiscal scenario" — and House Republican leadership staffers pushed back on the Reid argument by saying the CBO wasn't the baseline they were using, since it assumed the Bush tax cuts would expire. They used a different baseline, one that also didn't count that war "savings."
Bottom line: the Super-Committee can do whatever it wants, there will be many baselines used, and Republicans have certainly asked for alternative baselines before.