We can’t control what others do and we can’t stop misfortune from striking. But we can control our own actions. Those who are financially prudent will most likely enjoy success, even if events don’t always go their way.
As the House and Senate work to land on a concurrent budget resolution, Congress may consider trying to measure their reconciliation bills relative to a “current policy baseline” in order to mask the debt impact of deficit-financed tax cuts. Assuming this is allowed under budget rules, this would represent a massive budget gimmick that would justify and allow trillions of dollars of new borrowing.
A sad state of affairs
A current policy baseline assumes that all policies in place in the current year will continue regardless of scheduled expirations or phase-outs. Advocates argue that a current policy baseline better reflects reality, enables permanent policy that would maximize growth, doesn’t impede Congress’s ability to cut spending, and would remove a bias in favor of spending cuts. These claims are highly problematic.
In this piece, we explain that adopting a current policy baseline would:
Allow an extra $3.4 to $4.6 trillion of deficit increases through Fiscal Year (FY) 2034.
Not reflect reality and instead reflect an unsustainable debt outlook that cannot continue.
Undermine the economic gains of tax reform, which would be strongest from permanent and fully offset tax reform rather than trillions of dollars of growth-inhibiting debt.
Reduce the incentive to cut spending by making extensions seem costless and removing the need for pay-fors.
Create a bias toward deficit-financed tax cuts rather than removing a bias toward spending increases.
Set a dangerous and costly precedent that could be used to justify tens of trillions of dollars in future borrowing.
A Current Policy Baseline Would Justify Trillions of Borrowing
See full article at the Committee for a Responsible Federal Budget. (CRFB)
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