GOP Gimmick To Extend Tax Cuts Could Expand Obamacare Too

Donald Trump’s first term began with an unsuccessful attempt to repeal Obamacare. His second term could begin with a successful attempt to expand it.

That’s one possible outcome from a strategy Senate Republicans are attempting to use to pass their budget and spending blueprint. The wonky accounting maneuvers could make it easier to pass a permanent extension of the 2017 Tax Cuts and Jobs Act (TCJA) provisions, but they could also make it easier to pass a permanent extension of enhanced Obamacare subsidies in the process.

Arcane Budget Procedures

At issue is Section 3004 of the budget resolution introduced in the Senate. This particular provision allows the Senate Budget Committee chairman to “revise the allocations of a committee or committees” for legislation “relating to using more realistic assumptions regarding current tax policy, which may include extending provisions” of the TCJA.

In plain English, as I have explained previously, this language would make it easier to pass a permanent TCJA extension by making it look like such an extension would cost nothing. Linking cost estimates to current policy — as opposed to current law, under which the individual tax cuts included in the TCJA will expire at the end of this calendar year — would yield no financial effect, at least on paper.

Senate Republicans came up with this tactic because, by and large, they are spineless. They could pay for a permanent TCJA extension by cutting an equivalent amount of spending, not least because the Biden administration left many programs and regulations spending money that Republicans could claw back. Alternatively, Senate Republicans could try to find 60 votes to overcome budget points of order.

Each of those options would require effort, however. Rather than making choices to pare back some (not even all, just some) of the Biden administration’s spending spree, Senate Republicans instead decided to conjure up an accounting gimmick to make it look like a TCJA extension costs nothing.

Obamacare Provisions

There’s a catch, however. Obamacare’s enhanced subsidies, most recently passed in the summer of 2022, also expire at the end of the current calendar year. If Section 3004 allows for budgetary adjustments “relating to using more realistic assumptions regarding current tax policy,” that could open the door to a Republican Congress extending the subsidies.

Republicans have generally opposed extending the enhanced subsidies, first because of their cost: $335 billion over a decade, plus another $48.3 billion in interest. Second, multiple reports have suggested that the enhanced subsidies, which in many cases ended out-of-pocket premiums for “benchmark” coverage, have resulted in numerous incidents of fraud, with people improperly signed up for “free” insurance. But while most Republicans oppose an extension, Sens. Lisa Murkowski, R-Alaska, and Thom Tillis, R-N.C., have publicly supported extending the higher subsidies. 

Granted, two senators do not a majority of Republicans make. But if the “current tax policy” baseline gambit Republicans are using to extend the TCJA also applies to the enhanced Obamacare subsidies, then the cost of extending those Obamacare subsidies would amount to zero — meaning a handful of Republicans, coupled with all Democrats, could vote to attach a permanent extension of enhanced subsidies onto the reconciliation bill.

Without the “current tax policy” gambit, subsidy supporters would have to either 1) come up with $335 billion in savings to pay for a permanent extension (or some smaller amount for a shorter extension) or 2) find at least 13 Senate Republicans (as opposed to merely a handful) willing to overturn a budget point of order to include the subsidy extension. To put it another way, what could pave the road for a TCJA extension could also pave the road for expanding Obamacare as part of the same bill.

Unintended Consequences

That said, it’s unclear how exactly this procedural gambit would work because it has never been tried before. A bipartisan group of budget experts opposing the “current policy baseline” maneuver wrote a letter saying it would lead Congress to “make budget provisions it favors appear free while making provisions it doesn’t favor appear expensive.” In other words, it’s possible the Senate Budget Committee chairman could allow a TCJA extension to “score” as costing zero dollars while not allowing an Obamacare subsidy extension to receive the same treatment.

But do conservatives really want to give Sen. Lindsey Graham, R-S.C. — I repeat, Lindsey Graham — the unilateral power to determine what is and is not fiscally responsible? More to the point, do conservatives want to set a precedent that would allow Democrats in a future Congress to pursue socialism on the installment plan — that is, pass costly but “temporary” government programs on a one-year basis, then turn around and enact permanent extensions on the grounds that such extensions cost nothing?

The fact that the “current policy baseline” gambit could also pave the way for a permanent extension and expansion of Obamacare subsidies speaks to the many unintended and harmful consequences of this gimmick.