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Democrats are mounting a new counterattack to the GOP’s tax plan that has potentially sweeping consequences: trying to stop Republicans’ argument that extending expiring tax cuts should not count as increasing the deficit.
The two parties were set to make their cases Tuesday to the Senate parliamentarian, the chamber’s nonpartisan rules referee, ahead of a potential ruling on Republicans’ bid to declare that extensions of President Donald Trump’s 2017 tax law should not be counted as deficit spending. That case is a linchpin of the GOP’s strategy to make Trump’s tax cuts permanent — one of his top priorities.
But a scheduled bipartisan meeting was abruptly canceled on Tuesday afternoon, according to Democrats, as Republicans sought an alternative strategy to get their tax cuts made permanent using a gambit that’s known as the “current policy baseline” on the Hill. Republicans said they don’t need a bipartisan meeting to move forward and said no such meeting was even scheduled.
Democrats can’t stop the underlying tax bill, regardless of the strategy used by the GOP. But they do have an opportunity to drive a wedge between Republicans’ stated desire to balance the budget and the reality of what permanent tax cuts might cost.
“If we want to go to a world in which you throw all fiscal responsibility to the wind, then the Republican strategy is the way to do it,” Sen. Jeff Merkley of Oregon, the top Democrat on the Budget Committee, told Semafor on Tuesday. “Create deficits as far as the eye can see, and can try to hide those deficits and the resulting $37 trillion in additional debt over 30 years from the American people.”
Merkley is leading the effort to scuttle Republicans’ plans. His staffers have met with the parliamentarian’s office in recent days to try to dismantle their opponents’ strategy, arguing that “that this is absolutely inappropriate under the law,” as he put it.
Merkley said the 1974 law that created the rules for passing fiscal legislation along party lines is clear. Democrats attempted in the past to get creative with the so-called budget reconciliation rules, but they’re hoping to at least contain Republicans’ tax cut plan, even if they can’t stop it.
While it seems wonky, the fight could resonate for years to come: The GOP’s push to make the Trump tax cuts permanent could further erode Senate constraints on party-line legislating and potentially absolve Congress from working with a 10-year budget window for major bills.
If Republicans implement more of Trump’s promised tax breaks for overtime or tips this year, for example, those breaks would be more easily extended in the future without the need to find corresponding spending cuts or new revenues.
And if the GOP prevails, Democrats almost certainly would be able to utilize the new precedent to establish and fund new government programs once they reclaim power in Washington. Merkley isn’t yet predicting how he might approach the issue as the possible future budget committee chairman.
He’s more focused on winning both the procedural war — and the messaging battle.
“I can say I have absolute conviction that our argument that throwing out current law so you can hide massive deficits is 100 percent inconsistent with the Budget and impoundment Control Act that has guided us for 50-plus years,” Merkley said.
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Republicans aren’t forecasting victory yet, either. The parliamentarian frequently puts restraints on both parties; Democrats, for one, lost their bid four years ago to add immigration changes to former President Joe Biden’s marquee party-line bill, now known as the Inflation Reduction Act.
Senate Majority Leader John Thune, R-S.D., said this week that conversations with the parliamentarian are “ongoing.” But on Tuesday Thune said it’s also “very clear” that Senate Budget Chairman Lindsey Graham, R-S.C., can unilaterally decree that he can set the current policy baseline.
Merkley said that “would be a massive abuse that destroys any sort of fiscal restraint in the budget process.” And Senate Minority Leader Chuck Schumer likened that move to the going “nuclear” or changing the Senate’s rules.
Everything isn’t fully sewn up yet on the Republican side, either. Some Senate Republicans are a bit uneasy with their party’s budgetary maneuvering, although GOP leaders are optimistic their members will come around to exempting the extended tax cuts from deficit math.
Sen. Jim Banks, R-Ind., said there could be a defection or two from his side, “but it won’t be enough to stop it. I wouldn’t want to be the Republican who votes to increase taxes on working-class voters and small businesses.”
Democrats are still holding out hope that fiscal hawks in the House might protest the Senate Republicans’ bid to extend the Trump tax cuts permanently. (When the House passed its initial budget in February, it notably did not use the current policy baseline.)
“There’s many House members who have deep convictions about fiscal responsibility, who basically are singing our tune,” Merkley said.
Burgess’s view
As boring as the words “current policy baseline” sound, the topic might be the week’s most seismic action in Washington. If Republicans are unable to use this strategy, their hopes of making Trump’s 2017 tax cuts permanent look increasingly out of reach.
If Republicans are able to use their preferred approach, they’ll be able to skirt some tough choices about slashing spending to pay for more tax cuts — which is particularly helpful given how many of them are leery of touching Medicaid. However, they’d also almost certainly embolden Democrats in ways they might regret the next time they’re out of power.
In today’s tit-for-tat Senate, which continues to gradually erode its own age-old traditions, that regret might be par for the course.
Room for Disagreement
Many conservatives don’t see the matter as a cut-and-dry question of which approach is more fiscally responsible. That’s in part because they’re highly skeptical of the Congressional Budget Office, the Hill’s nonpartisan economic scorekeeper.
Even Sen. Rand Paul, R-Ky., who otherwise opposes Republicans’ current budget framework out of distaste for its debt ceiling hike and its level of spending cuts, said he’s fine with using the “current policy baseline.”
“Elected officials have allowed themselves to be controlled by bean-counters who count the beans in a way that no ordinary citizen would understand,” Paul told Semafor recently. “For five years, we had a tax rate level based on the tax rates of 2017. Almost nobody believes that you would count it, every time you continued it, as a new tax cut.”
Notable
- The New York Times gathered a bunch of experts to explain the wonky budget baseline issue.
- The Wall Street Journal editorial board is backing Republicans’ strategy.