Contrary to Speaker Boehner’s Claim, Budget Deal’s “Supercommittee” Can Consider Revenue Increases

[ProSense]

Contrary to Speaker Boehner’s Claim, Budget Deal’s “Supercommittee” Can Consider Revenue Increases

By James R. Horney

Speaker of the House John Boehner erroneously claims that the legislation implementing the new debt limit agreement does not allow the joint congressional committee it establishes to propose revenue increases to help reduce deficits. The legislation does no such thing. Rather, it is the speaker's adamant opposition to considering revenue increases — even the elimination of wasteful tax loopholes — as part of a deficit-reduction package that may prevent a balanced approach to reducing the deficit through a mix of program cuts and revenue increases.

The agreement calls for immediate enactment of legislation<1> that would create a two-step process to increase the debt limit and reduce the deficit.

• First, the legislation allows the President to increase the debt limit by up to $900 billion ($400 billion immediately, with an additional increase of $500 billion unless Congress enacts a joint resolution disapproving that increase) and reduces the deficit by about $1 trillion over ten years by establishing caps through 2021 on annual discretionary appropriations.
  
  
• Second, the legislation establishes a Joint Select Committee on Deficit Reduction that is supposed to report legislation by the end of this year that would reduce the deficit by at least an additional $1.5 trillion over ten years and would allow the President to further increase the debt limit by up to $1.5 trillion (unless Congress enacts a joint resolution of disapproval). If Congress fails to enact the full $1.5 trillion in deficit reduction, this further increase in the debt limit could be no more than $1.2 trillion, and automatic, across-the-board cuts will take place starting in January 2013 to reduce spending by $1.2 trillion.<2>

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Documents that Speaker Boehner circulated to his caucus yesterday claim that the legislation implementing the new debt limit agreement "requires baseline to be current law, effectively making it impossible for Joint Committee to increase taxes."

This claim is wrong, for two reasons. First, many tax proposals would raise revenues relative even to a current-law baseline. For instance, the President's proposals to eliminate preferential treatment of expenses for corporate jets and tax breaks for oil and gas companies would reduce the deficit relative to a current-law or "plausible" baseline. Most such "tax expenditures" are permanent and so are the same under current law and under a "plausible" baseline; reducing them would raise revenues and is clearly allowed under the proposed agreement.

Second, while it is true that tax reform of the sort that Bowles-Simpson, Rivlin-Domenici, and the Gang of Six proposed would not reduce the deficit relative to a current-law baseline, nothing in the debt limit legislation requires the use of a current-law baseline to determine how much the Joint Committee proposal reduces the deficit. Section 401(b)(3)(B)(i)(I) of the bill requires the Joint Committee's report to contain CBO's estimate of the savings that the proposal would produce. CBO's cost estimates typically reflect changes from its current-law baseline, but CBO on occasion produces estimates relative to alternative baselines if the House or Senate Budget Committees or leadership indicate that such estimates are necessary to help them enforce budget rules or targets.

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Did Boehner trick his caucus into voting for the deal?