House GOP Changes Rules to Facilitate Tax Cuts that Increase the Deficit

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On Wednesday, House Republicans voted to replace the chamber's "pay-as-you-go" or PAYGO rules with a new set of rules called "cut-as-you-go" that is based on the belief that government spending contributes to budget deficits but tax cuts, no matter how huge, do not.

CTJ sounded the alarm back in November, in an op-ed that explained how this would increase the (already significant) incentives for Congress to do all sorts of spending through the tax code at a time when lawmakers need to move in the opposite direction and close special tax breaks and loopholes.

PAYGO requires that the cost of any increase in mandatory spending or any new tax cuts be offset either with spending cuts or some sort of tax increase. Cut-as-you-go requires that the costs of increases in mandatory spending be paid for by cuts in other mandatory spending. Under cut-as-you-go, the House is not required to offset the cost of tax cuts, and it cannot offset the costs of increased spending by raising taxes.

Equally outrageous is that cut-as-you-go would allow the fast-track procedure known as "reconciliation" to approve tax cuts that increase the deficit. (Remember that reconciliation is the procedure that Republicans called a power grab when Democrats used it to enact part of health care reform.)

The reconciliation procedure was created to facilitate the enactment of laws that would help balance the budget, but in the early 2000s the rules were changed by the Republican Congress that went on to use reconciliation to increase the deficit with the Bush tax cuts. When Democrats took back Congress, they reinstated a more traditional PAYGO rule that barred the use of reconciliation for laws that increase the deficit.

It's important to remember that Republican lawmakers generally believe, or claim to believe, that tax cuts either pay for themselves or actually cause revenues to increase. Senate Republican Leader Mitch McConnell said over the summer, "That's been the majority Republican view for some time, that there's no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy." This idea has been thoroughly debunked by every credible economist who has ever given it a moment of thought, and yet it remains at the heart of the Republican philosophy.

Cut-as-you-go also explicitly exempts any and all costs associated with the repeal of health care reform. Because the health care reform law reduced the deficit, the repeal of it would, of course, increase the deficit. In fact, the Congressional Budget Office just found that repeal will increase the budget deficit by $230 billion over the first decade and more in the years after that. The House GOP's cut-as-you-go rule allows the chamber to ignore this cost.

Of course, cut-as-you-go may have more symbolic and political importance than any real impact on what laws get passed. Just like PAYGO, cut-as-you-go will be waived by a House that doesn't want to be bound by it. Reconciliation matters mostly in the Senate, because it gets around the bizarre super-majority requirement in that chamber, and the Senate is controlled by Democrats. (In the House, bills always just need a simple majority of votes to pass.)

Also, when the Democrats controlled Congress, they put two types of PAYGO in place. One was in the procedural rules of each chamber, and the other was in law (statutory PAYGO). Cut-as-you-go only replaces PAYGO in the House rules and is not itself a law. Statutory PAYGO, which is unaffected, still requires the administration to automatically cut spending to offset any increases in mandatory spending or tax cuts that are not paid for.

But cut-as-you-go will make it incredibly easy for the House Republicans to approve huge tax cuts that seem, on the surface, appealing to the general public. Even if such tax cuts do not become law during this Congress, they present a huge problem for lawmakers who are trying to take responsible positions on taxes. House Republicans will have absolutely no incentive to tell the public what the real fiscal impact of these tax cuts will be. Cut-as-you-go will also make it much less likely that the House could approve even modest improvements in essential programs, since these improvements could not be funded by the elimination of tax loopholes (of which there are plenty).

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