Republicans Are Appalled by Budget Gimmicks—Unless They're Funding GOP Priorities

by Danny Vinik | March 27, 2014

Whenever Democrats want to pass legislation in Congress—whether extending unemployment benefits or expanding the Earned Income Tax Credit—Republicans always have the same response: it needs to be deficit neutral. And not just deficit neutral, the offset must come from reduced spending elsewhere, not increased taxes. Also, that reduced spending cannot be from an accounting gimmick that Congress loves to use.

Those are the Republican rules—except of course, when Republicans need to pass legislation. Then those rules go out the window.

The clearest example of these hypocritical rules is on unemployment benefits. There are currently 3.8 million long-term unemployed Americans. Fifty five percent of them are male and 72 percent have at least a high school diploma. They would all collect federal unemployment benefits right now, except the program expired in December and Republicans have blocked an extension of it since then. Republicans have two main arguments against renewing the program: that unemployment benefits discourage work and, of course, that they need a spending offset. (That’s beside the two absurd arguments that Speaker John Boehner voiced last week.)

The academic evidence shows that unemployment insurance has, at most, a small disincentive effect on work. They also stimulate the economy, as the Congressional Budget Office has found. Democrats have offered multiple spending offsets to appease Republicans as well. One of them, as part of an 11-month extension of unemployment benefits, would extend until 2024 the cuts to mandatory spending in the sequester. It wouldn’t fly, because the cuts technically fell outside the CBO's 10-year budget window. Sanctimoniously evoking the bipartisan spirit of this year’s Ryan-Murray budget, Senator Jeff Sessions called it “an utter violation of the spending agreements that we have agreed to.”

Less than a month later, 41 Senate Republicans, including Sessions, voted to…utterly violate that spending agreement—in the exact same way they had rejected a month earlier. The issue that made Republicans willing to use an extension of the mandatory spending cuts as a spending offset? Rolling back cuts to working-age military pensions in the Murray-Ryan budget.

Despite that setback, Democrats have continued to fight for an extension of unemployment insurance and reached a deal with five Senate Republicans two weeks ago. One spending offset in that agreement is an accounting gimmick known as “pension smoothing” that allows companies to backload their pension contributions. This results in higher profits for those firms in the CBO’s 10-year budget window and thus higher revenues for the government. But outside of that window, firms must make their full contributions—reducing profits and government revenues. It’s a trick, but one that Democrats (and a few Republicans) will gladly accept if it allows them to extend unemployment insurance.

House Republicans have objected to it, of course, on the grounds that “pension smoothing” is a gimmick.  "In a multitrillion budget, we could find tens of millions of dollars that we could probably agree on,” Rep. Tom Cole, the deputy majority whip, said. "We've worked hard to cut the budget deficit as much as we have. I don't think we should be surrendering these gains for pie-in-the-sky plans coming out of the United States Senate…If they were remotely serious, if they were really concerned about these people, they'd help us find the savings.”

Fair enough. Pension smoothing is a gimmick and House Republicans will not accept accounting gimmicks as spending offsets. Except, that’s exactly what they did on Thursday with the so-called “doc fix.”

At issue: On April 1, a 24 percent cut to Medicare reimbursement rates kick in. Every year for the past 11 years, Congress has passed the doc fix to ensure this doesn’t happen. The Republican leadership snuck through the controversial bill, which needed a two-thirds majority because it was taken up under “suspension of the rules,” by a voice vote, meaning the votes of individual congressman were not recorded. For spending offsets, it included real Medicare reforms—but also a timing gimmick that shifted some savings from the second decade into the first to make it ostensibly deficit neutral. What happened to the “tens of millions of dollars” that Cole suggested Democrats use as a spending offset for unemployment benefits?

When an accounting gimmick is used to offset the cost of extending unemployment insurance to 3.8 million Americans, it’s unacceptable. When it’s used to stop payment cuts to doctors, it’s worth sneaking through. That’s the Republican rules.

Source URL: http://www.newrepublic.com//article/117178/republicans-accept-gimmicks-doc-fix-not-unemployment-benefits