Watchdogs Are Needed to Stop Budget Score Manipulation
Budget gimmicks that hide the true cost of policymaking are a favorite of legislators everywhere. The problem is that Congress’s budget scorekeepers, the Congressional Budget Office and the Joint Committee on Taxation, have no choice but to take Congress’s word that tax breaks known as “tax extenders” will sunset every year. The CBO and JCT are difficult agencies to reform, but the tax extender debate shows that the scorekeepers’ rules need heavy scrutiny.
“Tax extenders” are crony tax breaks that are supposed to be temporary, but are in fact extended without fail every single year. They are usually targeted towards a particular industry and slated to sunset within a few years of enactment — almost entirely for the purpose of gaming the scorekeepers.
Let me explain. Budgetary scorekeepers, such as CBO or the JCT, generally operate on a 10-year budget timeline. That means one-year extensions of policy have a deceptively low budgetary “cost.” So relative to other policies that show the full 10-year score, tax extenders appear to have minimal impact on paper since they generally comprise just a year of tax relief, after which the break disappears and revenue rises for the last nine years of the window. Of course, in reality, they usually stick around longer than just one year, often getting extended annually to create what is effectively permanent policy. After all, it is far easier to pass a bill with $12.2 billion worth of “temporary” tax breaks than a bill with well over $100 billion worth of permanent ones.
Adding insult to injury is that most tax extenders are bad policy. Many extenders favor politically well-connected industries and create economic distortion. Moreover, the ease with which lawmakers can play games with budgetary scorekeepers such as JCT and CBO makes it less difficult for bad policies to sail through Congress with minimal backlash.
Extenders aren’t the only example of a budgetary scorekeeper being manipulated to produce a friendlier budget score. The recent Bipartisan Budget Act of 2018 (BBA) was scored by CBO as adding “just” $320 billion to the deficit over the next 10 years. Yet, thanks to gimmicks in the legislation, CBO’s score is likely only around a fifth of the total cost of the BBA.
The National Taxpayers Union Foundation (NTUF) analyzed the BBA, and found that it was designed to produce an artificially low score in multiple ways. The main offender is the tactic to “delay” spending caps that were previously put in place. Doing so allows the elimination of spending caps to be scored as having a negligible impact on the deficit, as the spending caps are technically just being pushed down the line. However, there is very little chance, in reality, that these delayed spending caps will ever be allowed to come back into place, CBO was required to score these savings unquestioningly. In total, NTUF estimated that the deficit impact of the BBA over the next 10 years will be $1.66 trillion — significantly more than the recent tax reform law over which there was much Democratic hand-wringing.
Of course, reform efforts can go too far. CBO and JCT have an important role to play in the legislative process as independent and non-partisan resources for information on legislation. Moreover, both CBO and JCT are staffed by talented and experienced employees. It is true that CBO and JCT have been guilty of using flawed assumptions in the past, as NTUF has pointed out. But the current system is such that they are effectively required to do so by Congress. Moderate reform can improve their ability to inform legislators and taxpayers about the impacts of legislation while encouraging the use of more realistic analysis.
As a first step, NTUF has created the Taxpayers Budget Office as a way of holding both the CBO and Congress accountable. The Taxpayers Budget Office aims to serve as a watchdog to provide more critical analysis at times when CBO does not provide the full picture. But lawmakers should also do their part by attempting to reform CBO to improve its methodology and make it more difficult for legislators to manipulate CBO processes.
Andrew Wilford is an Associate Policy Analyst with the National Taxpayers Union Foundation. Follow him on Twitter @PolicyWilford.