CBO Deficit Report No Obstacle for Tax Cutters

A Congressional Budget Office report signaling trillion-dollar deficits is prompting GOP lawmakers to talk spending rollbacks as they push plans to extend tax breaks.

House Ways and Means Committee Chair Kevin Brady
AP Photo/Jose Luis Magana
Casey Wooten
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Casey Wooten
April 10, 2018, 8 p.m.

This week’s bruising Congressional Budget Office report on the federal deficit is having an impact on Capitol Hill, but it’s not deterring tax cutters from their next mission.

The CBO numbers aren’t good for deficit hawks. The federal government will hit trillion-dollar deficits again by 2020, two years ahead of estimates last June. The jump is driven largely by last year’s tax overhaul and the omnibus package Congress passed in March, which increased spending by $300 billion.

The report put the 10-year price tag on the tax overhaul at $1.9 trillion, or $900 billion more than some projected at the time of passage. Making permanent the temporary tax breaks in the bill and delaying some taxes created as part of the Affordable Care Act would inflate debt another trillion dollars by 2028, CBO said.

Extending those temporary breaks, many of which expire in 2025, is exactly what some lawmakers are proposing. The report comes as tax writers gear up to move a second tax bill before the midterm elections—this one potentially making permanent the first bill’s individual tax breaks or its full- and immediate-expensing provision for businesses, among other provisions. Either move would cost hundreds of billions of dollars without offsets.

But House Ways and Means Committee Chairman Kevin Brady isn’t deterred by those numbers.

“What CBO did was confirm what everyone knows—we don’t have a revenue problem in Washington, we have a spending problem,” Brady said, pointing to entitlements as an example.

That echoes the arguments of outside conservative groups, like Americans for Prosperity.

“The CBO’s projection of America’s rising deficit is a result of overspending, plain and simple, not the product of letting Americans keep more of what they earn,” AFP President Tim Phillips said in a Tuesday statement.

Republicans need another legislative lift for November’s midterms. Support for last year’s overhaul has been growing, but it hasn’t captured the voting public. In the run-up to a Pennsylvania special election in March, outside Republican groups scaled back their ads touting the tax bill, with the message failing to resonate in what had been a reliably red district.

And while a “Phase Two” tax bill isn’t likely to make it through Congress—especially the Senate, where it would need 60 votes—it could serve as a campaign messaging tool for the GOP.

“It’s certainly something that’s being discussed,” Barbara Angus, chief tax counsel for Ways and Means Committee Republicans, said Monday during a tax event at the Brookings Institution.

Opposing a bill making the individual tax cuts permanent could also be a tough vote for Democrats before the midterms, but the Ways and Means ranking member said he isn’t concerned.

“If it polls as badly as the last one, they can do whatever they want,” Rep. Richard Neal said before the Easter recess.

Senate Finance Committee ranking member Ron Wyden didn’t say he would vote against another tax bill extending the personal tax breaks, but he recalled his criticisms of the first bill and his view that it failed to help the middle class.

“The original pledge was that the bulk of the relief was going to go to the middle class,” Wyden said. “I haven’t seen any of their proposals, but I start the tax debate with, ‘They broke their promise to the middle class the first time.’”

The massive price tag looms over another big tax bill, and Congress doesn’t have many workable legislative solutions to the deficit before the midterms.

Republicans, stung by criticism from their base over last month’s spending package, are considering a vote on a balanced-budget amendment, and the administration is exploring legislation to claw back some of the omnibus spending.

White House economic adviser Larry Kudlow said on Fox News Sunday that the administration was considering an “enhanced rescission package.”

“I think the Republican Party on the Hill has finally figured out it’s really not a bad idea to trim some spending because after all, spending can lead to deficits,” Kudlow said.

Americans for Prosperity is also pushing Congress to strip some spending from last month’s omnibus. But as with the balanced-budget measure, passage is unlikely, particularly in the Senate.

“After creating a huge deficit with the tax bill, they want to pass a balanced-budget amendment?” Senate Minority Leader Chuck Schumer said Tuesday. “That means one of two things—(a) they’re not serious; (b) they want to cut Medicare and Social Security. And we will fight them tooth and nail on that.”

Schumer said it would be difficult for Republicans to pass a rescission bill on their side of the aisle.

For Democrats, the omnibus measure was a hard-fought deal, and some lawmakers say moving to rescind some of the spending could poison the well for other legislative dealmaking.

“It certainly won’t leave people feeling that there is a good-faith effort to be bipartisan,” Wyden said.

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