Sometimes numbers are a bitch. Because they expose ugly truths that we either choose to ignore or don't understand. We better get this one straight in the next few months or the bi-partisan cuts just shoved down the throats of the American people will pale in comparison to what will come post 2012.
To start, it is inevitable, in my view, that the president will cave on the extension of the Bush tax cuts at the end of the year. That's his track record, as the Citizens for Tax Justice points out:
The so-called “Budget Control Act” that President Obama signed into law today to increase the federal debt ceiling and reduce the federal budget deficit marks the second time the Obama administration has capitulated on tax policy to the most extreme elements in Congress.[emphasis added]
And:
Citizens for Tax Justice has long pointed out that the United States is one of the least taxed countries in the developed world. We have demonstrated that the tax cuts enacted under the previous administration added $2.5 trillion to our national debt and disproportionately benefitted the richest five percent of Americans. Despite insisting that he would never extend these tax cuts for the rich, President Obama did exactly that at the end of last year when he signed into law a deal that extended all the Bush tax cuts for two years and which was heavily tilted towards the richest Americans.[emphasis added]
But, this post is about something more dangerous. The president, and a large segment of our elected leadership and the dutiful transcribers of press releases (formerly referred to as "journalists") have repeatedly misled the public--and continue to do so. Which brings me to the perhaps boring but deadly reality of the "budget baseline".
No doubt, if you listen to what the president says, and what the transcribers of press releases write, you believe that ending the disastrous Bush tax cuts would make the long-term debt gap smaller than what is being written about.
But, you would be wrong.
The reality is that we will save NO MONEY if the Bush tax cuts end.
We simply won't make the situation worse. In other words, if the Bush tax cuts are extended, the budget will look far worse--a point first amplified to me the other day by my colleague David Morris of the Institute for Local Self Reliance and made clear by the CTJ.
What is the "budget baseline"? CTJ has a clear explanation:
Whenever lawmakers propose a change in tax policy, the nonpartisan Joint Committee on Taxation (JCT) provides an estimate of how the proposal would affect revenue. JCT must compare the proposal against a baseline, which is essentially a set of assumptions about what would occur if the proposal is not enacted. JCT and the Congressional Budget Office (CBO) generally use the “current law” baseline, which is based on the tax laws currently on the books.[emphasis added]
If you are a regular consumer of economic legislative debates, you probably know this as the "scoring" of a budget proposal: how much it would cost or save.
The problem is: the current non-partisan scoring is based on the expiration of the Bush tax cuts at the end of this year.
From the Congressional Budget Office:
The extended-baseline scenario is based on the assumption that the provisions of current law remain in effect, which is the same assumption that underlies the Congressional Budget Office’s (CBO’s) 10-year baseline projections. Under that scenario, the tax cuts that were enacted since 2001 and most recently extended by the
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 tax act, Public Law 111-312) are assumed to expire as scheduled in 2012 or 2013. In addition, the exemption amounts for the individual alternative minimum tax (AMT) revert to their 2001 levels in 2012.[emphasis added]
And so CTJ points out:
Because the Bush tax cuts expire at the end of 2012, any extension of the Bush tax cuts beyond that date, even a partial extension, would be counted as a revenue reduction against the current law baseline.[emphasis added]
BUT:
On the other hand, the plan proposed by Obama to extend most, but
not all, of the Bush tax cuts, counts as a revenue increase compared to the current policy baseline, which assumes the Bush tax cuts are already permanent.
Get it.
The president is telling us something that is simply not true.
Even if he had the gumption to oppose the extension of the Bush tax cuts--none of which should be extended--he cannot continue to claim that he is providing more revenue than proposes because current law provides that the Bush tax cuts actually expire.
Extending the Bush tax cuts--which is NOT CURRENT LAW--would add $5.5 trillion to the nation's debt between 2012 and 2022.