Charges Against Murray Budget on Deficit Reduction and Spending Cuts Don’t Stand Up Under Scrutiny
Posted by: Robert Greenstein
Posted in: 2001/2003 Tax Cuts, Alternative Minimum Tax, Congressional Action, Deficits and Projections, Estate Tax, Federal Budget, Federal Tax, Individuals and Families, Taxes and the Economy
Some Congressional critics of Senate Budget Committee Chairwoman Patty Murray’s budget, which her committee approved last week, claim it double-counts spending cuts and boosts spending rather than reducing it. An examination of these issues suggests, however, these charges are politically driven and don’t stand up well under scrutiny.
The main charge is that Senator Murray cannot legitimately say that spending cuts that help replace sequestration contribute to deficit reduction. Sequestration is current law, the critics argue, so repealing it represents a spending increase — and replacing it with a combination of spending cuts and revenue increases results in higher, not lower, spending.
This charge may seem plausible at first blush, but it’s a classic example of moving the goalposts to secure political advantage. For many years, both parties, every bipartisan budget commission, and virtually every budget watchdog group has agreed that deficit-reduction plans should not be measured from a “current-law” baseline — because such a baseline assumes highly unrealistic budget cuts or tax increases that are very unlikely to occur — and should instead be measured from a more realistic “current-policy” baseline. Indeed, recognizing the shortcomings of its “current-law” baseline, the Congressional Budget Office has routinely provided a number of adjustments for policymakers so they can construct more realistic projections (and it did so again with its most recent budget outlook report in February).
For these reasons, the bipartisan budget negotiations that Vice President Biden headed in early 2011, the Obama-Boehner negotiations of both July 2011 and December 2012, the congressional “supercommittee” deliberations, the Simpson-Bowles and Rivlin-Domenici budget commissions, the Committee for a Responsible Federal Budget, the Concord Coalition, and the Center on Budget and Policy Priorities all have used a current-policy baseline, not a current-law baseline.
Until recently, Republican Congressional leaders themselves insisted on using a current-policy baseline. They argued that the current-law baseline, under which President Bush’s tax cuts all would have expired on schedule, was unacceptable.
When, just a few weeks ago, Erskine Bowles and Alan Simpson released their new budget plan, they continued to use a current-policy baseline. Most independent budget analysts, such as the Committee for a Responsible Federal Budget and ourselves, continue to use such a baseline as well. That’s because the current-law baseline still reflects an unrealistic scenario. First, it assumes massive cuts in Medicare payments to physicians that no one believes policymakers will allow to occur. Second, it assumes that the federal government will continue spending at current levels for Iraq, Afghanistan, and Hurricane Sandy in every year for the next ten years, with no drawdowns in operations or reductions in costs; none of that’s going to happen so, in these cases, the current-law baseline overstates likely spending.
The current-law baseline also assumes that sequestration will occur in every year through 2021. While sequestration may remain in effect for fiscal year 2013, I know of virtually no one in Washington who believes it’s likely to remain in effect for the nine scheduled years. The history of past sequestrations is that, unless they’re quite modest in size, policymakers either don’t let them take effect or don’t let them remain in effect. Most observers expect the current sequestration eventually to follow the same course.
From 1992 through 2012, no sequestration occurred, even when Congress violated budget targets and triggered sequestration. While the current polarized political atmosphere may make it harder than normal for policymakers to reach agreement on turning off the current sequestration, history doesn’t support the notion that sequestration will stand — especially through 2021 — or that a realistic budget baseline should include it.
The Murray budget appropriately uses a current-policy baseline that assumes sequestration will not remain in effect. Bowles and Simpson received no criticism when they did the same thing for their new budget plan of a few weeks ago. Nor did the Committee for a Responsible Federal Budget when it published such a baseline earlier this year. That highlights the political nature of the current attacks on Chairwoman Murray’s baseline.
Finally, House Budget Committee Chairman Paul Ryan’s budget plan does not use a pure current-law baseline, either. Instead, it removes the unrealistic spending that’s built into the current-law baseline regarding future spending for Iraq, Afghanistan, and Hurricane Sandy.
The Ryan budget is selective in its adjustments. In fact, Chairman Ryan essentially built a baseline with the smallest possible starting deficits. For example, it retains the deep sequestration cuts and also assumes that Medicare reimbursements to physicians will be slashed nearly 30 percent on December 31. That eased his task in producing a budget he describes as reaching balance in ten years.
Some Members of Congress want to use a baseline that builds in the sequestration savings for an obvious reason — it locks in these spending cuts. In doing so, it also makes it nearly impossible to restore policy balance to the overall deficit-reduction effort. Policymakers have already achieved about $1.6 trillion in spending cuts and $700 billion in revenue increases since Simpson and Bowles issued their original plan in late 2010 (even without counting any of the resulting interest savings as a spending cut). When the effects of sequestration are also included, the ratio of spending cuts to revenue increases achieved to date stands at almost 4 to 1 (and almost 5 to 1 if the interest savings are counted as a spending cut, as Simpson and Bowles, among others, do).
These Members not only insist that we use a baseline that starts from the post-sequestration level, but they also argue that no one should view any policy as a budget cut unless it cuts spending below that level. Such an approach would be virtually certain to produce an overall budget package under which total deficit reduction is highly unbalanced — and highly regressive.
Maybe that’s the point.