Thursday, January 06, 2011

GOP in House Breaking Promises Already

Now, don’t get me wrong. I did not vote for any Republicans this past November. Nor did I support any of our local Tea gals and guys. I took the Republican promise to reduce our runaway national debt with a grain of salt (which certainly would ruin the flavor of most teas that I drink.) And, since I spent a good portion of my pre-maven professional career on federal budget matters, I knew that promising both to reduce the debt and to cut taxes was quite a large bottle of snake oil to swallow. But, a lot of people drank the oil and voted for our friends the Republicans and now they will awaken to a nasty hangover.

As we all know, Republicans hate to pay taxes. So reducing them is their number one priority. There is not a tax yet invented that would make a Republican happy. Not that Republicans don’t want a certain level of government services at the federal, state and local levels. They just want don’t want to pay for these services.

The leading lyric in the Republican campaign song is that the Democrats (to be pronounced L-I-B-E-R-A-L-S) only want to raise your taxes so that they can spend more and more federal dollars on wasteful and perhaps even socialistic programs. They sing this song over and over again and sing it louder and louder to make sure that the American people don’t realize that despite their rhetoric Republicans have been spending money at a rate higher than the Democrats. Republicans Sure Ain’t Conservative With Federal Checkbook. And, worse than that, because they would rather die than raise taxes Republicans pay for all their spending with borrowed money.

But wait, dear reader, I am being unfair. As my neighbor Eric Cantor pointed out in his recent book “Young Guns,” (coauthored by his fellow musketeers Paul Ryan and Kevin McCarthy) it was the old congressional Republicans who had this terrible borrow and spend habit. The new Republicans are different. They want to cut spending. They want to be fiscally responsible. They want to lower the outrageous national debt (a national debt that became that large because of the tax cuts and the large spending bills that the Republicans voted for when their president was in the White House). Yes, the Republicans have changed. And it’s not just their rhetoric. You can see the change in their behavior. Or, can you?

But first, a word from our sponsors: Now, for the first time, at an exceptionally low price, all you never cared to learn about early attempts by the Congress to stop the burgeoning annual budget deficit during the 1980s and 1990s. Lyndon Johnson began our deficit spending habit in the 1960s by insisting that he could pay for both the Viet Nam War and his Great Society programs without raising taxes. But it wasn’t until Ronald Regan’s 1981 tax cuts and increased federal spending early in his administration that the annual deficit and the resulting growth in federal debt became the way of life of the Federal Government.

The Congress tried to bring deficits under control with the Balanced Budget and Emergency Deficit Control Act of 1985 (popularly known as the Graham-Rudman law and subsequently as the Graham-Rudman-Hollings law (GRH)). The Congress was well-meaning, but GRH had no enforcement mechanism and federal deficits continued to increase between 1985 and 1990. In 1990, the Congress enacted the Budget Enforcement Act (BEA), which actually had teeth.

Under the BEA, federal programs fell into one of two categories—discretionary spending or direct spending. Discretionary spending programs were those that were funded by the thirteen annual appropriations acts. Direct spending programs (often referred to as entitlements) were funded by permanent appropriations contained in the legislation that created the programs. BEA set maximum annual appropriations amounts for discretionary spending and required that annual budget resolutions apportion these amounts among the thirteen appropriations bills. BEA provided that any appropriation bill that sought to exceed the annual allotment contained in the budget resolution was out of order in the House of Representatives.

For direct spending programs, BEA set up the requirement that all legislation affecting these programs and all tax legislation enacted in a budget year had to be deficit neutral. This requirement, known as pay-as-you-go (or PAYGO), meant that any legislation creating new or increased direct spending had to be offset in the same budget year with legislation eliminating or reducing spending in another direct spending program or by legislation increasing federal revenue. (Since there may be sensitive Republicans reading this, I did not use the “T” word). Further, any legislation cutting taxes (it is okay to use the “T” word when we are talking about cuts) had to be offset by legislation reducing direct spending or increasing other revenue. In short, under PAYGO, the aggregate of direct spending and tax legislation in any given budget year could not increase the federal deficit.

The enforcement mechanism in BEA was the requirement that if any of the annual thirteen appropriations acts exceeded the budget resolution allotments or if the aggregate of PAYGO legislation resulted in an increase in the deficit, the president was required to sequester (or rescind) sufficient amounts to cure the BEA violation. The threat of sequester was so potent that I can only remember one actual sequester during the period of BEA. BEA worked quite well. During its operation the annual federal deficit went from a high of about $290 billion in 1994 to a low of $22 billion in 1997, and there were actually budget surpluses in the remaining years of the Clinton Administration.

Then came the Bush Administration, accompanied by Republican control of the Congress. BEA was allowed to expire. The Congress enacted tax cuts in 2001 and 2003. On September 11, 2001, the United States was attacked beginning the War on Terror. Concern over annual budget deficits evaporated and the total debt of the Federal Government has doubled since 2001.

In 2010, the Democratic controlled Congress and the Democratic president enacted the Statutory Pay-As-You-Go Act of 2010. With a number of significant exceptions, the 2110 PAYGO Act restored the PAYGO requirements of the BEA. As described by the White House:

If Congress enacts PAYGO bills cutting taxes or increasing mandatory expenditures without fully offsetting the costs, the Act specifies a penalty, called "sequestration." If Congress adjourns at the end of a session with net costs – that is, more costs than savings - on the scorecard, the Office of Management and Budget (OMB) is required to calculate, and the President is required to issue a sequestration order implementing, across-the-board cuts to a select group of mandatory programs in an amount sufficient to offset the net costs on the PAYGO scorecard.

Because of the exceptions contained in the 2110 PAYGO Act it will not be as significant factor in controlling budget deficits as was the BEA. In fact, an exception in the Act allowed the enactment of tax cuts in the recent lame-duck session of Congress that will increase deficits by hundreds of billions of dollars.

I now return you to our scheduled program: Despite the fact that it has the potential to reduce budget deficits, no Republican, in either the House or Senate voted in favor of the 2110 PAYGO Act. Why? That is quite simple. The Republican addiction to tax cuts is so powerful that they cannot agree to any legislation that might block such tax cuts. So, in the Republican hierarchy of governing philosophy, tax cuts are far more important than deficit or debt reduction.

But, again, I am being unfair. It’s the old Republicans that had the addiction to tax cuts and spending supported by borrowing. Eric Cantor’s young studs-er-guns are responsible. They will reduce the annual deficit. And to prove it, the new Republican masters of the Congress have issued their proposed rules for the 112th Congress. I am sure that they have included the PAYGO provisions of the 2010 Act. Anything less would just increase the federal debt. Well, let’s look at House Resolution 5, which contains the new House rules.

Well, this is a surprise. The new rules drop the concept of PAYGO and replace it with “Cut-as-you-go,” which only applies to the spending side of direct spending programs. CUTGO requires that any increase of spending in a direct spending program be offset by a reduction of spending somewhere else. Under CUTGO, legislation cutting taxes gets a free ride despite the fact that it will add significantly to the national debt.

Another surprise: If tax reduction legislation is designated as an “emergency,” it does not count for budget purposes.

And, an additional surprise: For the purposes of estimating the budgetary effects of certain legislation, the Chair of the Budget Committee shall not count deficit increases made by:

  • Extensions of the 2001 tax cuts
  • Extensions of the 2003 tax cuts
  • Repeal or adjustment of the health care or educational affordability acts enacted in the 111th Congress
  • Adjusting alternative minimum taxes or extending the recently enacted estate tax exemptions.

Additional surprises? I will leave them to you, reader. This piece has already gone too long, and I am sure I have missed my deadline.

With all due regard for Mr. Cantor and his other musketeers, it appears to this maven that the Young Gun Republicans are just like the old Republicans. They are more than willing to add trillions of dollars to the national debt for the sake of tax cuts. Their election promise to cut the national debt lasted only until their first official act of the new Congress. But, as I have pointed out many times before, don’t ever accuse Republicans of being fiscally responsible. For you millions of Americans who were swayed by the Republican promise to reduce federal debt: Take two aspirins and call me in 2012.

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