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On Trimming the “Extenders” Bill Without Actually Trimming the Extenders

June 17th, 2010 . by economistmom

freaky-hair-extensions

The Senate is having a lot of trouble trimming the cost of a bill intended to continue expiring tax cuts–the so-called “extenders” bill.  Trouble is, they’re not willing to actually trim the actual “extenders.”  In fact, the “extenders” are such legislatively-sacred cows that they are used as a vehicle for other policies that are (oddly) not considered as sacred–like extension of unemployment benefits or even extension of the so-called “doc fix.”  What the Senate is tinkering with right now are these hitch-a-ride attachments to the extenders bill and the various revenue offsets designed especially to help pay for the extenders.  (Note that unemployment benefits would qualify as “emergency spending” and hence are allowed to increase the deficit, and the “doc fix” is explicitly exempted from deficit-neutral/”PAYGO” requirements under the now-statutory PAYGO law.)

So the House and Senate have both complained that extending the extenders is “too expensive.”  But both the House and the Senate have yet to contemplate this:  if we’re not willing to put up with the offsets required to pay for these tax extenders, then maybe this tells us these tax extenders are not worth their cost!

My boss Bob Bixby remarked on this oddity this week on Concord’s Tabulation blog (emphasis added):

Beyond economic efficiency and political cover there are more fundamental questions. Do the extenders really accomplish their goals and are those goals worth the cost? No one really knows because no one ever asks.

The only question that comes up with regard to the extenders is how they can be offset to comply with the pay-as-you-go law. That’s an important consideration — it is certainly better to have paid for waste than unpaid for waste — but it ignores the question of whether the extenders are wasteful to begin with.

As Congress is forced to dig deeper into its bag of tricks to pay for the extenders, this exercise is prompting even some in the business community to ask whether the extenders are really worth the trouble. For example, the current bills use almost $60 billion of permanent tax increases to cover just a one-year extension of the extenders. It will require even deeper offsets in the years ahead.

Before going through this painful exercise, it would be best to look more closely at the extenders. While most of them have a laudable purpose, such as encouraging investments in new technologies or in economically distressed areas, Congress has not taken the time to examine whether they have been successful enough to justify raising taxes elsewhere or cutting other spending programs.

I think we’re now seeing some “revealed preference” in Congress on this issue.  Perhaps these tax extenders aren’t all “good enough” to justify the offsets Congress clearly isn’t willing to make.

The trouble is, not being willing to pay for things hasn’t stopped Congress from continuing to spend on them, and like other “entitlements” that seem impossible to “trim” once we’ve been promised them, these “tax expenditures” are just like a whole bunch of mini entitlement programs that grow monstrous and uncontrollable over time.  (Like the monstrous hair extensions from the horror movie, Exte, shown above… in case you were wondering.  Talk about “unruly” hair…)

[UPDATE 10:30 pm: By the way, we re-live this "trouble with tax extenders" every year, and nothing ever changes--as my post from two years ago indicates.  If you've never read my story of the House Ways and Means member who years ago very plainly explained to me why these extenders must continually be extended (instead of being made permanent or allowed to expire), check it out.]

5 Responses to “On Trimming the “Extenders” Bill Without Actually Trimming the Extenders”

  1. comment number 1 by: AMTbuff

    This is all perfectly consistent with digging the fiscal hole deeper, spending money to buy votes. Republicans did the same with tax cuts.

    Here are two other recent examples of rushing to dig the hole deeper before voters are able to shift power in November:

    1. $50B to “stimulate” public employees:
    http://online.wsj.com/article/SB10001424052748704289504575312831328587168.html?mod=WSJ_Opinion_BelowLEFTSecond

    2. Adding $100B or more to future state and local liabilites to public employees:
    http://online.wsj.com/article/SB10001424052748703280004575309051437427896.html?mod=WSJ_article_LatestHeadlines
    The fundamental problem of unions for government employees is that the management side has an unavoidable conflict of interest when negotiating with the union. Even prohibiting political activity by unions (unconstitutional and unworkable) would not eliminate the inherent conflict that government employees work for both union members and taxpayers. In the private sector, management cannot be voted out by the employees or their union. This is why government workers were not allowed to unionize until JFK’s presidency.

  2. comment number 2 by: Jim Glass

    if we’re not willing to put up with the offsets required to pay for these tax extenders, then maybe this tells us these tax extenders are not worth their cost!

    Come, come. To say the extenders are “not worth their cost” plainly requires actions to be prioritized.

    Yet Stan Collender just published a lecture on how Congress simply cannot do that — and how unreasonable it is to expect Congress should.

    So don’t be unreasonable!

    After all, as Stan tells us, in politics “there is no agreement on what 2+2 equals”, so one can hardly expect politicians to say this program is worth more than that one, or is or isn’t worth such-and-such a cost.

    (He didn’t even bother to mention the logrolling ethos — “we all can’t possibly get the goodies we want separately enacted by themselves, but if we all agree to vote for each others’ goodies we can get everything for all of us!” — creating everything from Lousianna Purchases and Cornhusker Kickbacks on down … and up).

    From there he also tells us we can’t even reasonably expect the govt to finance the long-term debt it is running up, up, up, by borrowing long at today’s historically low long-term rates, because “elected officials typically think in the two-, four- and six-year time frames during which they will be judged by voters”. So get that bargain short-term rate today! And let the future rate reset, well…

    The surprising thing about Stan’s piece to me is I never expected a guy like him to make the libertarians’ case so clearly.

    How does one go so niftily from saying “Congress can’t agree on what 2+ 2 equals” to sucb positions as “I want Congress taking over management of the nation’s health care system”, and such?

    Is there some congitive dissonance there, or is it just me?

    Anyhow, I see no more reason than Stan does to believe Congress will ever be able to prioritize political actions and costs as you wish (though I draw rather different policy conclusions from this than Stan does).

  3. comment number 3 by: SteveinCH

    AMT,

    You’re missing the fact that ACA is going to save the government trillions of dollars over the coming decades….unless of course it doesn’t

  4. comment number 4 by: JustMe

    To cut off unemployment benefits is not quite as simple as it sounds. With those benefits, folks who have been unable to find work have often been able to keep paying their mortgages. Now they won’t so the Foreclosure snowball will continue to grow.

    And without unemployment benefits many of these folks will not only loose their homes and stability, but they will join the ranks of those needing Welfare, Food Stamps and Medicaid. Gee, and the women can go to college on the taxpayers’ dollars.

    What concerns me is that no one ever bothers to look at the true costs involved in what in this case looks like a very cruel chess game that exempts all those civil “servants” whose numbers seem to rise in spite of the fact that they make no products or profits for WeThePeople.

    Unemployment in this government led depression may be the most cost effective and decent way to handle the mess that this administration has wrought.

    Maybe we don’t need half a million bucks for flowers in the White House and maybe Ms. Pelosi could fly commercial albeit first class of course. How about a nice pay cut for all of those civil “servants” and why are they not being forced to participate in these theoretically cost saving medical plans of the President?

    These guys couldn’t run a candy store and make a profit and how they have gotten away with sinking the non governmental workers ships is downright amazing and disgusting.

  5. comment number 5 by: JustMe

    To cut off unemployment benefits is not quite as simple as it sounds. With those benefits, folks who have been unable to find work have often been able to keep paying their mortgages. Now they won’t so the Foreclosure snowball will continue to grow.

    And without unemployment benefits many of these folks will not only lose their homes and stability, but they will join the ranks of those needing Welfare, Food Stamps and Medicaid. Gee, and the women can go to college on the taxpayers’ dollars.

    What concerns me is that no one ever bothers to look at the true costs involved in what in this case looks like a very cruel chess game that exempts all those civil “servants” whose numbers seem to rise in spite of the fact that they make no products or profits for WeThePeople.

    Unemployment in this government led depression may be the most cost effective and decent way to handle the mess that this administration has wrought.

    Maybe we don’t need half a million bucks for flowers in the White House and maybe Ms. Pelosi could fly commercial albeit first class of course. How about a nice pay cut for all of those civil “servants” and why are they not being forced to participate in these theoretically cost saving medical plans of the President?

    These guys couldn’t run a candy store and make a profit and how they have gotten away with sinking the non governmental workers ships is downright amazing and disgusting.