Policymakers in both parties often want to take credit for responsibly offsetting the costs of popular tax cuts or spending increases, but without actually making the hard choices necessary to do so. That would require higher taxes or lower spending in other parts of the budget. So politicians frequently employ budget gimmicks designed to hide the true costs of their decisions. For our leaders to address the nation’s fiscal challenges, these gimmicks need to stop.
One common gimmick is using arbitrary expiration dates to hide the true long-term costs of policies designed to be permanent. For example, if a member of Congress wanted to cut taxes by $10 billion a year without voting to increase the deficit by $100 billion over 10 years (the scoring window used by the Congressional Budget Office), he or she might write the bill so that the cuts theoretically expire after one year.
The CBO would score this bill as costing only $10 billion over 10 years, because the law only cuts taxes in the first year. In the other nine years, CBO would be required to assume the tax cut would no longer be in effect.
But when that expiration date nears, the same lawmaker would push for it to be extended for another year. This continues year after year, with lawmakers never being held accountable for adding $100 billion - or more - to the national debt.
This timing gimmick was used by Republicans to enact major tax cuts in 2001 and 2003. The cuts were originally set to expire after 10 years, but the tax cuts for all but the wealthiest Americans are now permanent.
Democrats have used the gimmick as well, making permanent some policies that were only meant to provide temporary economic stimulus in the aftermath of the 2008 financial crisis. Both parties also made liberal use of the gimmick on an annual basis for over a decade by approving annual “tax extenders” bills to prevent dozens of ostensibly temporary tax provisions, as in the previous example, from actually expiring.
A similar timing gimmick is used when a hard choice is written into law to take effect on a delay and then never actually allowed to take effect. This allows law supporters to claim credit for making a tough decision but then escape any actual consequence from the policy. This happened during passage of the Affordable Care Act (ACA) with the law’s “Cadillac tax” on high-cost insurance. The tax was the primary policy in the ACA designed to be scored by the CBO as lowering long-term health care costs and was originally written to take effect in 2013. However, there were numerous objections from interests in both political parties and as the ACA passed, the date was moved to 2018. Then in 2015, Congress and the president signed legislation to again delay implementation to 2020.
Another common gimmick is to move spending from one category of the budget with relatively strict budget controls to another without them. For example, the Overseas Contingency Operations (OCO) account is meant to be used exclusively for military conflicts. After the creation of defense spending caps in the 2011 Budget Control Act, however, lawmakers and the Pentagon shifted billions of dollars in what should be considered ordinary defense spending each year to OCO, lessening the effectiveness of these caps.
Similarly, appropriators frequently allot themselves additional authority in discretionary spending by claiming phoney savings from mandatory spending programs not subject to the same budgetary controls. These changes in mandatory programs, often referred to as CHIMPS, rescind money that was already not going to be spent or delay a payment to the next fiscal year to create the appearance of budgetary savings. In reality, total costs remain unchanged.
Economic assumptions are another area in which policymakers can make use of gimmicks. Assuming economic growth levels well above those predicted by most independent experts allows future deficits and debt to appear as if they are growing slowly or declining, when in reality they are likely to continue growing at an accelerated pace.
Another version is to make policy proposals appear as if they would pay for themselves by claiming they induce large rates of economic growth. While it is true that some policies may increase economic growth, thereby increasing tax revenue from rising incomes, this effect is rarely large enough to actually allow the policy to pay for itself. Furthermore, accelerated growth rate projections must be earned through well-designed policy backed up by empirical evidence, not merely assuming they will materialize for the sake of political convenience.
These are just a few examples of the many dishonest gimmicks that policymakers in both parties have used over the past 25 years. The first step in addressing our nation’s fiscal challenges is to be honest with ourselves about the problems and the costs of our decisions.