A ‘current policy’ budget baseline would have disastrous consequences

Some Republicans in Congress have proposed changing the budget reconciliation process to begin using a “current policy” baseline that ignores expirations under law, instead of the traditional “current law” baseline.  

This would be a serious act of fiscal irresponsibility, making it easier for either party to circumvent important budgetary guardrails, thereby accelerating the growth of our national debt by many trillions for years to come.   

The budget reconciliation process enables Congress to change certain parts of the budget with only a 51-vote majority in the Senate. This legislative process includes a key fiscal guardrail under the Budget Act, commonly known as the Byrd Rule, which Congress established 35 years ago to prohibit long-term fiscal damage to the U.S. 

The issue is the “before” picture. What are you comparing proposed policy changes to? Should the baseline comparison assume this year’s policies continue indefinitely, which is “current policy,” or should it reflect changes that are scheduled to happen automatically, which is “current law”?   

This battle may seem deep in the technical weeds, but it actually has an enormous impact on fiscal policymaking because it affects how many trillions of dollars in the budget are treated under the rules. 

The proponents’ stated rationale for seeking current policy is a claim that it’s “unfair” that spending is treated “differently” from taxes in the current law baseline because some programs are assumed to continue even though they are not permanent, allegedly making it “easier” to increase spending than to cut taxes.   

This argument has little validity and is wholly insufficient to justify such a significant budgetary process change.     

First, discretionary spending cannot be changed through the budget reconciliation process. Therefore, whatever baseline assumption is used, from zeroing it out completely to growing it by leaps and bounds, is entirely irrelevant because this part of the budget can only be changed through the appropriation process. 

Second, of those programs that are eligible to be changed through reconciliation, the vast majority are already permanent under law, so their future estimates are exactly the same in both the current law and current policy baseline.  

So what’s left? The reality is that there are very few reconciliation-eligible programs that are not permanent, but are assumed to continue in the current law baseline.

In fact, the Peter G. Peterson Foundation’s estimate of figures released by the Congressional Budget Office in January concluded that these programs represent only 1.7 percent of total spending. (One of us is an executive vice president at the Peterson Foundation.) Their baseline treatment was established through a bipartisan change in law in 1985.  

The fact that a tiny portion of spending is treated differently is certainly not sufficient cause to change the budgetary treatment of tax provisions that affect many trillions of revenue. Those wanting to fix this discrepancy should amend the 1985 act rather than deteriorate the entire baseline projection. 

It’s also important to remember that there are legitimate policy reasons for many of the expiration dates under law, for example, temporary tax relief provided during natural disasters or the COVID pandemic. 

It would make no sense for a budget baseline to assume all of these continue forever simply because they are “current policy” in a single moment. Further, in many cases, provisions were time-limited to make them more affordable, which simply gets ignored if you later assume away the cost of extending them. 

While it’s important to debunk the stated rationale for the current policy baseline, the devastating impact would be to conceal significant growth in the national debt by circumventing a point of order under the Budget Act in order to extend all of the 2017 tax cuts permanently.   

But changes in the legislative process have lasting effects. For example, letting this change happen would enable any future Congress, from either party, to do a dangerous “two-step” debt dance that adds trillions of permanent deficits.  

Step one would be to pass a new spending program or tax cut provision that expires in a year, appearing to add very little to deficits. Then, in step two, Congress would permanently extend their “newly-created current policy” because it is now included in the baseline, appearing to cost nothing to extend, thereby avoiding the Byrd Rule’s point of order.  

With this gimmick, the permanent costs of the policy are never accounted for because the policy is only temporary in step one, and then it’s assumed to be already permanent in step two. In seeking to do away with this fiscal guardrail, Republicans should be careful what they wish for.  

Imagine a Democratic-controlled Congress passing a temporary Medicare for All bill in step one and then easily making it permanent in step two. Are Republican leaders sure they want to enable this type of policymaking? Similar to eliminating the filibuster, this is the kind of institution-altering idea that’s tempting when your party is in control, but has the opposite effect when the other party is in power. 

The best way to make policies permanent within the budget rules is simple: pay for them. There are many trillions of available spending and revenue offsets, so lawmakers have no shortage of options to implement their desired reforms in a responsible way. 

 In fact, this is what was done in 2017 for many of the Tax Cuts and Jobs Act provisions — they were made permanent because they were fully offset and thus complied with the reconciliation requirements.  But extending the remaining provisions of the act that expire is no small fiscal matter: The Congressional Budget Office projects their permanent extension without offsets would double annual deficits over the long run.   

Changing the baseline would be a blatant circumvention of foundational budget process rules and should be rejected by the Senate parliamentarian and all fiscally responsible members of Congress. With $36 trillion in debt and $22 trillion already being added over the next 10 years, we simply can’t afford to weaken our budget process any further.  

Republicans should set a positive fiscal example by complying with the Budget Act and the Byrd Rule and governing by making real and responsible fiscal choices. Congress has already proven that it has an easy enough time adding to our debt — changing the baseline policy would set a precedent that we would all surely regret. 

Brett Loper is executive vice president of policy for the nonpartisan Peter G. Peterson Foundation, and is a former deputy chief of staff to House Speaker John Boehner from 2011 to 2013. G. William Hoagland is senior vice president at the Bipartisan Policy Center and a former Senate Budget Committee staff director.