Budget Process, October 1, And Tax Cuts

With the expiration of key Senate budget rules on October 1, tax cuts will get easier to pass.

With Sen. Phil Gramm (R-TX) vowing to bring permanent repeal of the estate tax back to the Senate floor this session, and the House voting one by one to make each element of last year’s tax cut (which expires after 2010) permanent, attention turned last week to budget process and budget rules. Permanent repeal of the estate tax did not succeed in the Senate, even though 54 Senators voted for it, because the rules currently in place require a 60 vote "supermajority" for passage (see this related article). However, on September 30, 2002, various budget rules under the Budget Act will expire, and estate tax repeal, for example, would only require a simple majority, or 51 votes, to succeed, if it were to come to the Senate floor.

While the budget process is difficult to comprehend, and is hidden behind the substantive debates, it has very important implications for policy and legislation.

Last week, Sens. Kent Conrad (D-ND) and Russ Feingold (D-WI) introduced an amendment to the Department of Defense authorization to extend the expiring Senate budget rules in order to insure that there is a high threshold of support before passage of additional tax cuts beyond anything specified in the budget resolution (if one is passed this year). Specifically, the amendment would have:

  • Extended, for five years, the 60 vote Senate supermajority requirement to waive budget points of order in the Senate, including those protecting Social Security, limiting total spending including tax cuts, and enforcing spending caps. For example, the estate tax vote on June 12 was not actually a vote on making the estate tax permanent, but a vote on waiving the budget rules of order, requiring 60 votes to succeed. Since it failed, the underlying substance was never voted on. With the expiration of the 60 vote supermajority requirement, a point of order would only take 51 votes to make repeal of the estate tax, or any other expiring or new tax provisions, a reality.
  • Extended, for five years, budget enforcement act provisions, including rules to enforce discretionary caps.
  • Extended discretionary spending levels, or caps, for two years, setting the caps at $768.1 billion in 2003 and $786.5 in 2004.
  • Extended the Senate pay-as-you-go rule that disallows using any of the so-called Social Security surplus to pay for new tax cuts or new mandatory spending.
  • Provided for the allocations among the thirteen appropriations bills from the total discretionary cap.

Since Republicans objected to the Conrad-Feingold amendment, it, too, needed 60 votes to pass. Unfortunately, it was defeated on June 20 by only one vote. What does this mean? Given a tight election year, the desire to avoid public backlash over filibustering, and the Republican obsession to pass more and more tax cuts, the expiration of the budget process rules on October 1 allows more room for tax cuts. More tax cuts, when there are so many other pressing priorities, are a really bad idea. While OMB Watch has never supported unrealistic caps on discretionary spending, the potential that the expiration of the budget rules would make it easier for the Senate to cut taxes seemed to be a worse outcome than two more years of discretionary spending caps.

It is possible that cooler heads will prevail and the Senate will once again extend the budget rules that help it remain the "greatest deliberative body." It could do so on a must-pass bill such as debt ceiling extension or anti-terrorism supplemental appropriations. We will keep you posted about other attempts to extend the budget process rules, as well as the continuing threat of more tax cuts.

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