A Deal to Forget on the Hill

Update: The House has approved [4]the payroll-tax deal 293-132.

Just when you thought the conference committee might start agreeing on specific offsets for any extensions to expiring policies, they found something that too many folks in this town can agree on: deficit-financing. What is being reported [5] as a tentative deal would offset extensions of unemployment benefits and the doc fix, but would leave the payroll tax cut to be added to the debt. That means about two-thirds of the package will be added to the deficit. That's no reason to celebrate.

So far, we know that the UI and doc fix extensions are likely to be offset by increasing federal employee pension contributions, reducing Medicare payments to hospitals for bad debts, and cutting the Prevention and Public Health Fund from the Affordable Care Act. Also, the cost of the unemployment insurance extension will be reduced by decreasing the maximum number of weeks a person can collect benefits in high unemployment areas from 99 to 73. It is unknown how much these changes would save combined, but if the total offsets add up to their intended value, that would leave the $95 billion payroll tax cut to be fully deficit-financed.

Congress needs to fully offset the costs of any extensions [6], no if, ands, or buts. The logic behind doing that is perfectly clear: if certain tax cuts or spending increases are too important to both parties to let expire, then lawmakers should be willing to pay for those measures. Of course, in a world with true budget constraints and trade-offs, it should be easier for both parties to find offsets for high-priority policies that they can agree to. Unfortunately, that's not the world we're in with this deal.

We need to stop living beyond our means and address rising debt head on. As we said in a statement [7], "We cannot afford any more holidays from fiscal responsibility."

Clear here to read [6] CRFB's analysis on how lawmakers should responsibly deal with expiring provisions. There's still time.