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Blog: A Response to Gene Sperling

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Moments ago, the President signed into law a significant bipartisan step forward in getting Washington's fiscal house in order. Relative to the magnitude of our budget challenges, the spending cuts are modest. But judged against Washington's dismal track record of fiscal stewardship over the years, the Budget Control Act marks a major change in the culture of spending that is driving our nation to the brink of a debt-fueled economic crisis.

While far from perfect, the Budget Control Act achieves two-thirds of the discretionary spending cuts called for in the House-passed budget and establishes in law binding caps on government agency spending. Both parties also worked together to establish a clear precedent that any future debt limit increases must be matched by an even larger cut in government spending. In addition to nearly $1 trillion in spending cuts signed into law, a process has been established to achieve even more savings later this year.

As we move this debate forward, it is critical that policymakers have clarity on the focus on additional deficit reduction efforts by the Joint Committee on Deficit Reduction created by this new law. Unfortunately, in a blog post yesterday at whitehouse.gov, Gene Sperling, one of the President's top economic advisers, advanced a misguided interpretation of the mandate given to this newly-created committee. Despite anemic economic growth and a painful lack of job creation, the White House appears eager to overcome bipartisan opposition to their efforts to impose tax increases on job creators.

Sperling wrote that the Budget Control Act does not "preclude [the new Joint Congressional Committee tasked with deficit reduction] from requesting [Congressional Budget Office] estimates based on alternative baselines and using those estimates for purposes of the certifying the deficit reduction achieved in the Committee."

In fact, the legislation explicitly instructs the Committee to use CBO projections and explicitly references current law requirements to estimate how the Committee's proposal "will affect the levels of such budget authority, budget outlays, revenues, or tax expenditures under existing law" (Section 401(b)(5)(D)(ii) of the Budget Control Act & Section 308(a)(1)(B) of the Congressional Budget Act).

The distinction is very important: Scoring the Committee's deficit-reduction proposals using alternative baselines, as the White House would prefer, would allow it to propose the kind of large, job-destroying tax hikes that the President tried so hard to get during this round of negotiations. By contrast, scoring the Committee's deficit-reduction proposals using existing law, which already assumes tax increases, would create significant structural impediments to raising taxes.

The Congressional Budget Office (CBO) scores legislation relative to a current law baseline based on longstanding estimating conventions and the law, including the Congressional Budget Act of 1974 and the Balanced Budget and Emergency Deficit Control Act of 1985. This baseline includes a number of assumptions about the future path of spending and revenue policy that, most all would agree, are highly unlikely. Nonetheless, that is the framework against which all legislation considered by Congress is measured, and it is the framework against which the Committee's proposals are required to be scored.

The Budget Control Act's requirement that the Committee use CBO estimates creates structural scoring impediments to imposing tax increases to meet its goal to achieve at least $1.5 trillion in deficit reduction. For any tax rate increases to be scored as "reducing the deficit" relative to current law, those tax hikes would need to overcome the size of the tax increases that would occur if current tax rates were allowed to rise in 2013, as they are scheduled to do under current law. CBO is required to use a baseline that assumes all current law policy changes will occur, even though House Republicans will make certain that these assumed tax hikes never happen.

Furthermore, letting tax rates expire (i.e., imposing massive tax hikes on American families and job creators) would not achieve any "savings" for this Joint Committee, and there's no reason the Committee would focus its attention on this futile effort.

This Committee should devote its efforts to achieving the additional spending restraints and reforms needed to create a better environment for economic growth and avert a spending-driven debt crisis.


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