No Offsets? No Deal
It's no secret that the conference committee tasked with finding solutions for the expiring 2-month fix for the payroll tax cut, unemployment insurance, and the doc fix is having a difficult time agreeing on how to offset the costs of any extensions. But just because coming to an agreement isn't easy doesn't mean it's time to abandon offsets altogether.
However, that is what the House is planning to do as a backup option to no agreement being reached in the next two weeks. Leadership in the House is reportedly looking to allow the payroll tax cut to be extended for ten months without offsets, but unemployment insurance and the doc fix would still have to be paid for. Unfortunately, they managed to pick by far the most expensive policy to deficit-finance this year, with a cost of $94 billion according to the estimate contained in the President's budget.
The inability to find palatable offsets should not be a reason to give up. Instead, it should push both sides to bring more options to the table in order to find common ground. They could, for example, take another look at all the low hanging fruit that has developed over the past several months. It should be clear by now that whichever policies are important enough to lawmakers that they have to continue them should be important enough for them to come together to find offsets.
But, as we said in our policy paper on the descisions in front of the conference committee, "Ideally, the Committee should view the extensions of these policies within the broader economic and fiscal context, using them as an opportunity to advance a comprehensive fiscal plan."