Budget reconciliation hindered by policy debate

The Senate’s New Budget Blueprint Triggers Dispute Over Tax-Cut Extensions

The Senate’s approved budget blueprint is now the cause of a disagreement regarding the benefits of eliminating the cost of tax-cut extensions to make them permanent. This contention could slow down the progress on a GOP reconciliation package in the near future.

Democrats have criticized Republicans’ choice to use a “current policy” baseline that assumes extending the 2017 tax cuts expiring after this year has no cost as they are merely maintaining the status quo. Pennsylvania Rep. Brendan F. Boyle, a leading Democrat on the House Budget Committee, bluntly dismissed this reasoning.

House Republicans have also expressed concerns, albeit more subtly. The lack of substantial spending cuts in the Senate’s reconciliation instructions is a contributing factor, even though Senators claim they aim to reach the House’s $2 trillion-cuts target.

Senate Majority Leader John Thune, R-S.D., defended the use of a current-policy baseline in a floor speech, pointing out that it is not a new concept and has been employed by both parties over the years.

Thune referred to the 1974 budget law, governing the reconciliation process, to argue that Republicans could select whichever baseline they prefer. The decision rests with the chairman of the Senate Budget Committee, South Carolina’s Lindsey Graham, rather than with the Senate parliamentarian, who hasn’t provided an opinion.

“Determining the baseline is my job, not anybody else’s,” Graham stated. He acknowledged that Democrats will likely challenge his decision on the floor, but added, Republicans can prevail with a simple-majority vote. “As long as our people stick together, we’re fine,” he assured.

However, Senate Minority Leader Charles E. Schumer, D-N.Y., accused Republicans of being prepared to “detonate the Senate rules” by overriding decades of precedent without the parliamentarian’s blessing.

Impact of Different Baselines on Deficit

The difference between a current-policy and a “current law” baseline, the latter being the official scoring method used by the CBO for 40 years, is significant. This impact is evident in the contrasting tax instructions in the new budget blueprint.

The blueprint would allow the House Ways and Means Committee to increase deficits by no more than $4.5 trillion over 10 years, using a standard current-law baseline. None of the costs would be permitted to spill over into the second decade under the Senate’s “Byrd rule”, meaning provisions would have to expire or require offsets in those later years.

However, the Senate’s instructions would bypass this issue after Graham set the baseline for expiring 2017 provisions at zero, erasing $3.7 trillion in potential revenue losses. Consequently, a Senate-drafted tax package could make those provisions permanent without any offsets beyond the 10-year window.

Policy Baseline: A Realistic Benchmark?

Thune argued that Democrats were essentially the inventors of the use of a current-policy baseline as far back as 1977. He alluded to then-Senate Budget Chairman Edmund Muskie, D-Maine, who “used the current budget baseline because he thought it represented a more realistic benchmark”.

However, a Democratic Senate aide countered that while some Muskie-authored budget resolutions set spending levels based on “current services,” the resulting legislation was scored under a traditional current-law baseline.

Recent Precedent: The Head Start Fix

A recent example of a similar strategy was attempted on a smaller scale via reconciliation. This was with the Democrats’ inclusion of language in their fiscal 2022 budget resolution unlocking reconciliation for the so-called “Build Back Better” bill, later referred to as the “Inflation Reduction Act.”