Alternate Budgeting

One of the things you’ll hear — for example, from Ross Douthat today — is about the difference between projected deficits based on current law, and much lower deficits based on an “alternate” version. This gives rise to the claim that if only Congress would do absolutely nothing, the deficit problem would melt away.

Perhaps I’m only nitpicking, but I really think this is misleading.

There are four things (or at least four significant things) that CBO puts into it’s long-term budget scenario, the one that shows Congress acting (and therefore making the deficit situation worse. But these things are not all alike. Two are, I think, absolutely consensus policy: the doc fix, and the alternate minimum tax. As far as we know, both parties are fully committed to doctor reimbursement rates higher than those in current law, and to prevent middle-class taxpayers from the reach of the AMT. The only reason the law differs from the clear policy of both parties is an artifact of budget rules; those rules impose costs for permanently changing the law that can be ducked by year-to-year fixes.

The other two items, however, are very different. CBO’s calculated scenario assumes that (contrary to current law) the 2001 and 2003 Bush tax cuts will continue to be renewed, while the taxes included in ACA will not survive beyond 2020. Unlike the first two items, there’s no consensus at all on these two. Republicans would make the Bush cuts permanent, and repeal ACA (entirely, and immediately); most Democrats, however, would preserve the ACA taxes, and virtually all Democrats would modify or eliminate the Bush tax cuts.

I’m not really sure how CBO goes about choosing which things to put in the alternate scenario, and which not to. The common-sense reason to include something would be if current policy deviates from current law, and there’s good reason to believe that the law will get changed to match policy. But I’m not sure I believe that’s the case with regard to at least some of the 2001 and 2003 tax cuts, and I don’t at all think it’s the case with ACA taxes. Those are contested, not current, policy; it seems to me that CBO is guessing the outcome.

Regardless, it’s the first two items above that are problems for those who claim that “if only Congress doesn’t act” the deficit problems will clear up. Because in either of those cases, Congressional inaction would be a significant policy change, one that there’s apparently no appetite for in Congress (nor, as far as I know, among the pundits who suggest it.

Now, one can qualify this a bit…Ezra Klein is correct when he points out that Congress could continue, say, AMT policy and pay for it (either through spending cuts or tax increases), thereby keeping the deficit in check. But I’d argue that paying for either the doc fix or the AMT fix would be policy changes, not policy status quo — the (fixed) AMT is just as much a part of everyone’s real-world calculations going forward as any other portion of the budget. Projecting it to continue is no different than projecting discretionary spending (which also must be passed by future Congresses). After all, if Congress stops passing appropriations bills the deficit would be reduced (well, sort of, if it didn’t destroy the economy).

Add all that up, and I think it’s just unhelpful and misleading to say that inaction is a plausible route to fiscal control.

[Cross-posted at The Monkey Cage]

Jonathan Bernstein

Jonathan Bernstein is a political scientist who writes about American politics, especially the presidency, Congress, parties, and elections.