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The Towel in the Budget Resolution

April 29th, 2009 . by economistmom

Here’s a closer look at the ($2 trillion) towel being thrown in–in the congressional budget resolution that’s being passed in Congress today.  From the text of the “joint explanatory statement” which came out of the House-Senate negotiations (conference)–emphasis added:

The revenue level in the conference agreement is $764 billion below the levels under current law over 2009-2014.  Revenue legislation is subject to House and Senate pay-as-you-go rules. In the House, section 421 of the conference agreement allows the chairman of the Budget Committee to make current policy adjustments before evaluating the costs of tax legislation for compliance with House budget rules and procedures, assuming the condition stated in that section is met.

Translation:  tax cuts have to be paid for (offset by increases in other taxes or cuts in spending) unless: (i) in the Senate, you have 60+ senators willing to avoid paying for them; and (ii) in the House, the budget committee chairman (Chairman John Spratt) resets the starting point to already include some tax cuts deemed “current policy” (even though not part of current law).  (I’ll elaborate on the “condition” for that “reset” sometime later this week.)  If you’re a glutton for punishment, see section 421 of the legislative text of the resolution (pages 36-38) to see which tax cuts, exactly, get this special treatment.  You’ll recognize most of them as the “middle-class” pieces of the Bush tax cuts, with a 10-year cost of nearly $2 trillion.  It falls short of $2 trillion only because the resolution builds in only three years worth of relief from the Alternative Minimum Tax, unlike what President Obama proposed in his budget, which was permanent relief.

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