GOP Should Avoid Budget Tricks to Extend Trump Tax Cuts

Will Congress actually take steps to reduce federal spending or try to fob off the tough decisions on the Department of Government Efficiency and the Trump administration? That’s the gist of a wonky debate going on inside the Beltway, and specifically within the corridors of the Capitol, about how to consider the renewal of the 2017 Tax Cuts and Jobs Act (TCJA) provisions that expire at year’s end.

The question is whether Congress, in considering a budget reconciliation bill extending the TCJA, should adopt a “current policy baseline” or a “current law baseline.” The “current law baseline” — the standard way most legislation gets scored — assumes the TCJA provisions expire on Dec. 31 and that extending them will cost upwards of $4 trillion, including interest costs. The “current policy baseline” assumes the TCJA gets extended — on the grounds that Americans should not face a massive tax increase next year — making the cost of an extension $0, at least on paper.

According to recent reporting, President Trump has expressed support for the latter approach. But when the federal government has $36 trillion of debt and rising, putting trillions more on the national credit card will have long-run implications, few of them positive.

Would Increase Debt and Deficits

A recent Congressional Budget Office report requested by Joint Economic Committee Chairman David Schweikert, R-Ariz., shows the long-term damage this accounting gimmick could create. The analysis shows that extending the tax provisions would significantly increase federal debt over the long term, particularly if doing so leads to an accompanying increase in interest rates:

Granted, while it doesn’t say so explicitly, the CBO analysis likely doesn’t take into account dynamic scoring — that is, the economic growth, and increased revenue from that growth, resulting from the extension of tax relief. But while such revenue may pay for some of the cost of extending the tax provisions, it wouldn’t under any reasonable assumption pay for all of it. And with federal debt spiraling ever higher even under baseline projections (i.e., assuming TCJA expires at the end of the year), the country cannot afford to make an already bad situation even worse.

Precedent for Democrats to Grow the Welfare State

According to The Hill, Treasury Secretary Scott Bessent recently expressed his support for the accounting maneuver by “criticiz[ing] congressional reconciliation rules, which avoid the Senate filibuster and under which the current Republican tax extensions are being advanced, for requiring that revenue changes need to be renewed while ‘spending never has to get renewed.’” However, he’s incorrect on both counts.

For starters, the Senate’s “Byrd rule” on budget reconciliation doesn’t delineate between taxes and spending. Instead, it states that a provision is subject to be stricken from a reconciliation bill “if it increases, or would increase, net outlays, or if it decreases, or would decrease, revenues during a fiscal year” outside the budgetary window.

The Senate rules apply to both taxes and spending. The problem lies first in that CBO’s scoring models don’t adequately capture the added revenue tax relief can create via economic growth, which, as noted above, would cover some but not all of the revenue loss. Second, members of Congress in both parties are so eager to spend more money that they don’t need to use budget reconciliation because there are often 60 votes to break a filibuster. That’s not a problem with Senate rules; that’s a problem created by spendthrift senators.

And contrary to Bessent’s claim, some spending provisions do expire. Enhanced Obamacare subsidies are scheduled to sunset at year’s end along with the TCJA, precisely because Democrats only paid for a three-year extension when passing the Inflation (Reduction) Act via budget reconciliation in 2022.

But if Senate Republicans decide to use this accounting gimmick to pass a TCJA extension, you had better believe Democrats would utilize it when they retake the majority. Recall that Democrats’ full Build Back Bankrupt bill in 2021 was estimated to cost over $5 trillion, but that cost was largely hidden from view because various budget gimmicks sunset most of the spending programs after a few years to hide their full cost.

Democrats would use a Republican precedent for tax relief to expand the welfare state instead. They could enact all the programs in Build Back Bankrupt (and then some) for as little as one year, then turn around the next year and extend the trillions in spending for “free.” It would make a mockery of budget reconciliation, which was originally created to expedite legislation that would reduce the deficit, not expand it.

Probably Won’t Happen

For these reasons, the Senate parliamentarian could well decide not to bless Republicans’ proposed accounting maneuver. If she does not view it as consistent with the “Byrd rule” governing budget reconciliation, then Senate Republicans could only pass the bill on a party-line vote by overturning her guidance, a move many senators in both parties would view, not without reason, as effectively abolishing the legislative filibuster.

Abolishing the legislative filibuster would have long-run consequences that conservatives would come to regret — allowing Democrats to easily codify abortion-on-demand, immigration amnesty, the admission of new states, and welfare state expansions up to and including single-payer health care, to list but a few. Adopting the “current policy baseline” gimmick would have similarly damaging long-term effects.

Better for Congress to do what it has failed to do for decades: put on its big-boy pants and finally get serious about lowering spending. Given all the government giveaways under the Biden administration, lawmakers have a target-rich environment where they can generate the savings necessary to pay for a permanent TCJA extension — provided they have the spine to do so.