As lawmakers continue to prepare for using budget reconciliation to enact their priorities, some continue to suggest that they should use a “current policy” baseline for the budget resolution, in which policies like the 2025 expirations of the Tax Cuts and Jobs Act are assumed to continue indefinitely. Doing so would be the first time Congress has ever used a current policy baseline for reconciliation and would potentially paper over $4 to $5 trillion of additional new borrowing over the next decade.
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
Adopting a current policy baseline in reconciliation would be a dangerous and reckless move, especially given our near-record debt, exploding interest costs, and out-of-control borrowing trajectory. Our deficit is projected to total almost $2 trillion this year, and we’re on course to borrow $22 trillion over the decade before any tax extensions. Any new legislation enacted by Congress should improve that trajectory, not make it worse.
While employing a current policy baseline may be tempting to justify the current tax extensions, it would set a dangerous precedent for future actions. For example, if the temporary measures of the American Rescue Plan had been characterized as current policy, lawmakers could have extended them and added trillions of dollars to the debt with a $0 score.
Adopting a current policy baseline for TCJA extension would allow lawmakers to borrow $4 trillion or more without ever recognizing the impact, and using it in reconciliation would be a clear accounting gimmick to end-run the choices required in budgeting. Remember, the original 2017 tax bill was made to be temporary to keep its reported deficit impact down. Since the impact of extension wasn’t accounted for back in 2017, it needs to be accounted for now.
Pretending the TCJA is permanent now wouldn’t reduce its price tag; it would just hide it. The money still has to be borrowed.
Showing a $0 impact on paper by changing the rules doesn’t actually prevent the $4 to $5 trillion of additional borrowing from taking place. And it doesn’t stop that borrowing from pushing up interest rates, slowing economic growth, and putting our debt sustainability at risk.
Instead of relying on gimmicks and sleights of hand, Congress should ensure any tax extension is truly paid for and that overall we are reducing our debt, not adding to it. There are plenty of ways to improve the tax bill and incorporate offsets that keep the important parts of the TCJA in place while reducing overall borrowing.
