Politics Beware of budget gimmicks in push for massive spending deals
On The Money: Democrats reach deal on $3.5T target | Biden rallies Democrats: 'We're going to get this done'
Happy Wednesday and welcome back to On The Money, where we're probably going to be avoiding flights for a while. I'm Sylvan Lane, and here's your nightly guide to everything affecting your bills, bank account and bottom line.See something I missed? Let me know at email@example.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.Write us with tips, suggestions and news: firstname.lastname@example.org and email@example.com. Follow us on Twitter: @SylvanLane and @NJagoda.
WASHINGTON (AP) — Senators fashioning a pair of colossal bills that would deliver more than $4 trillion for infrastructure, health care, environment and other initiatives insist they will fully pay for both plans.
In a Washington ritual as reliable as panic-buying when light snow is forecast, both parties have long relied on toothless budget gimmicks to help finance their priorities. The contrivances let lawmakers claim they are being fiscally responsible while inflicting little pain on voters and contributors with tax increases or spending cuts.
Democrats launch immigration reform Hail Mary
The party has a prime opportunity to go around Republicans, but it involves another battle with the Senate rulebook.Top Democrats, with the support of the White House, are planning to tuck a handful of immigration measures into their forthcoming $3.5 trillion spending bill. The tactic — which just months ago seemed like a long shot even to liberals — is now widely seen as President Joe Biden’s best shot at confronting one of Washington’s policy leviathans and delivering on a decades-long party promise.
Here’s how they may do it again:
THE PRICE TAG
For political and procedural reasons, Congress’ Democratic leaders are slicinginto two bills. One is bipartisan effort providing about for roads, broadband and other public works projects. Bargainers hope to clinch a final deal and unveil this coming week.
The other bill would aimat expanding Medicare coverage, slowing climate change and providing free prekindergarten and community college. This expansive package, which would also fatten tax credits for children and health care and help immigrants become citizens, is a Democrats-only push expected to take months and draw unanimous Republican opposition.
On The Money: Five questions for Democrats on their $3.5T budget | Retail sales rebound in June despite rising prices
Happy Friday and welcome back to On The Money. I'm Sylvan Lane, and here's your nightly guide to everything affecting your bills, bank account and bottom line.See something I missed? Let me know at firstname.lastname@example.org or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.Write to us with tips, suggestions and news: email@example.com and firstname.lastname@example.org. Follow us on Twitter: @SylvanLane and @NJagoda.THE BIG DEAL-Five questions for Democrats on their $3.5T budget: Key Senate Democrats this week reached an agreement on a $3.
With Washington already projected to spend $63 trillion over the coming decade, an additional $4 trillion would be just a 6% boost. Even so, finding $4 trillion in tax increases or spending cuts to pay its costs would be prohibitively painful for politicians.
Some of the savings proposals are legitimate.
To pay for much of the $3.5 trillion package, Democrats led by Senate Finance Committee Chairman Ron Wyden, D-Ore., want to increase taxes on the wealthy, big corporations and companies earning income abroad.
Raising more would be tough. Lawmakers are boxed in between Biden’s pledge to not raise taxes on people earning less than $400,000 annually and GOP opposition to unraveling President Donald Trump's big 2017 tax cut. “It’s the perfect storm for not doing anything real on the revenue side,” said William Hoagland, a former top Republican Senate aide.
Schumer Sets Crucial Test for Action on Infrastructure, Spending
Senate Majority Leader Chuck Schumer has set up two major tests for himself and fellow Democrats in trying to force action this week on a bipartisan $579 billion infrastructure plan and a separate $3.5 trillion tax and spending proposal. © Photographer: Bloomberg/Bloomberg White House Agenda Gains Senate Ground With Big Hurdles Remaining Schumer put the legislative gears in motion by announcing he’ll take a preliminary step Monday that would lead to a first test vote on the infrastructure plan by Wednesday.
Also real are proposals toso it can collect more unpaid taxes and, perhaps, to claim the bills themselves would generate more government revenue by stimulating economic activity.
But either could go too far.
PICKING THE UMPIRES
No one doubts that a more muscular IRS would pry more taxes out of scofflaws. Bolstering programs that help people stay healthy, get educated and move goods more efficiently undoubtedly help the economy hum.
The question, though, is exactly how much federal revenue those two ideas would yield. Government agencies and outside analysts have widely divergent views, especially for forecasting legislation's impact on economic growth.
Lawmakers eager to claim they have fully financed their proposals could gravitate to the highest plausible numbers they can find, to critics' chagrin.
“In basketball, you don’t get to choose your own ref,” said Marc Goldwein, senior policy director at the nonpartisan Committee for a Responsible Federal Budget.
DUELING IRS NUMBERS
The Congressional Budget Office, lawmakers' nonpartisan accountant, estimated last year that Congress could collect $61 billion more in taxes over the next decade by giving the IRS an additional $20 billion.
The huge Democratic bet on 'bricks and butter'
The spending proposals that Senate Democrats plan to begin advancing this week amount to a massive gamble that the party can simultaneously advance two of its longest-standing economic goals without generating a political backlash or overheating the economy. © Saul Loeb/AFP/Getty Images President Joe Biden speaks with Heather Zaccagnini, right, Applied Technology Department co-chair, and college president Dr. Clint Gabbard during a tour of a manufacturing lab at McHenry County College in Crystal Lake, Illinois, on July 7, 2021, part of a trip to tout his infrastructure proposals.
Others are more generous, which could help Democrats eager to finance their $3.5 trillion proposal.
The Penn Wharton Budget Model, a nonpartisan research group, projected that Biden's proposed $79 billion boost for the IRS would produce $480 billion more revenue. The Treasury Department pegged the revenue increase under Biden's plan at $779 billion.
AN OLD, UNRELIABLE FRIEND
Documents show the bipartisan infrastructure proposal and Democrats' separate $3.5 trillion measure may both claim savings from long-term economic growth the bills would supposedly spur.
That concept is called dynamic scoring, and Republicans have long embraced it to paint their tax cuts as cost-free. That's not happened.
“The tax cuts will pay for themselves," Steven Mnuchin, Trump's Treasury secretary, said repeatedly about the 2017 tax law. Instead, The CBO estimated that even including increased economic activity, that measure will drive up federal deficits by $1.9 trillion over a decade.
Democrats have long mocked dynamic scoring as a Republican ruse for claiming savings that may never materialize to hide the true cost of their tax-cutting agenda. Among its most virulent critics has been Senate Budget Committee Chairman Bernie Sanders, I-Vt., who in 2015 called it “voodoo economics." Sanders' office declined comment for this story.
Democrats’ spending bill bigger than advertised
Two centrist sources, one of them explicitly Democratic, provided further reasons why Congress should reject the Democratic Party's massive $3.5 trillion “reconciliation” spending bill. © Provided by Washington Examiner The best new reason to oppose Democrats' massive, $3.5 trillion reconciliation spending bill is that even its outlandish price tag represents an exercise in budgetary sleight of hand. In other words, it is a lie. The Committee for a Responsible Federal Budget — a respected, non-partisan arbiter — notes in a statement that its true cost "could exceed $5 trillion.
Yet Democrats argue that if tax cuts can spawn economic growth, so can fortifying productive programs such as education and transportation. That's legitimate if you don't put “so much spin on the ball that you’re basically closing a budget gap with magical thinking," said Sen. Brian Schatz, D-Hawaii.
Citing past GOP support for dynamic scoring, Sen. Roy Blunt, R-Mo., said, “Maybe on this topic I would just say, ‘Welcome to the team.’”
The CBO has provided some dynamic scoring estimates but cautioned that the projections are uncertain.
REPEALING A GHOST REGULATION
Both bills' negotiators are ready to claim savings by assuming Biden will repeal Trump administration regulations on drug rebates. The CBO projected those rules would cost the government $177 billion over a decade, so blocking them would reduce expected spending.
But Trump's rule has never been implemented. With Washington running record-setting budget deficits annually, claiming savings by repealing the rule and using that money to finance spending bills would be like a deeply indebted family canceling a $50,000 vacation and using those “savings” to buy something else.
OTHER QUESTION MARKS
Senate Democrats say some proposed tax credits and spending in their $3.5 trillion bill may last less than the measure's full 10 years. That would constrain the legislation's price tag.
Both parties have a history of putting early expiration dates on programs that, like some of these, are so popular that a future Congress will likely renew them. Republicans did that with much of President George W. Bush's 2001 tax cut, which was mostly extended.
The Committee for a Responsible Federal Budget says the full 10-year cost of the policies in Democrats' $3.5 trillion plan is $5 trillion.
Other questionable proposals include selling oil from the government's Strategic Petroleum Reserve, which inevitably gets refilled, sometimes at higher cost, and taking credit for proceeds from the federal auction of 5G spectrum airwaves, which is happening anyway.
5 Reasons Biden Got His Bipartisan Infrastructure Deal .
Mitch McConnell is poised to hand the president a big win. Here’s why.Biden had campaigned on his (putative) gifts for brokering compromise. But savvy observers knew that the candidate was singing paeans to a long-dead deity: The God of Bipartisanship had forsaken Congress shortly after Barack Obama took office. As the ideological gap between the parties widened, the scope for common cause narrowed. Meanwhile, McConnell had discerned that the voting public blames the president’s party for government dysfunction, even if that dysfunction emanates from the opposition.