Committee for a Responsible Federal Budget
Concept_DC_Capitol Building

Marking Up the FY 2018 Senate Budget

Oct 5, 2017 | Budgets & Projections

The Senate Budget Committee is scheduled to mark up its Fiscal Year (FY) 2018 budget resolution, which would create a legislative vehicle for tax reform through reconciliation. As drafted, the resolution sets up a large deficit-increasing tax cut of up to $1.5 trillion over the next decade and relies on overstated economic growth to reduce deficits on paper.

Senators can amend the budget resolution in the committee markup and again on the Senate floor. We encourage senators to sponsor and vote for amendments to increase the fiscal responsibility of the overall budget and of tax reform in particular.

Below are a selection of filed committee amendments that would improve the budget and one amendment that would make it more irresponsible.

Many responsible amendments...

Striking the exemption for reconciliation from Senate PAYGO

The resolution includes a procedural step that would allow tax reform to add to debt: a reserve fund that allows the reconciliation bill if it complies with the instructions to bypass the Senate's Pay-As-You-Go (PAYGO) rule. This rule normally creates a point of order if a bill increases deficits over the first five or ten years, requiring 60 votes to waive.

Senator Mark Warner (D-VA) is proposing an amendment to strike this exemption, so if tax reform added to debt, it would need 60 votes. We support this amendment; the fact that lawmakers have to exempt their major priority from the Senate's rules reinforces how irresponsible the Senate budget is.

Other parts of the resolution strengthen the Senate PAYGO rule by adding a first-year test for deficit neutrality and making it permanent.

Reestablishing the Conrad Rule

The Byrd rule already prohibits legislation from increasing the deficit beyond the budget window without being subject to a 60-vote point of order. The "Conrad Rule" – repealed in the FY 2016 budget resolution and named after former Senate Budget Committee Chairman Kent Conrad (D-ND)  – extends the principle to apply inside the budget window as well.

Ranking Member Bernie Sanders (I-VT) is proposing to reestablish the Conrad Rule. Adopting this rule would help ensure that tax reform does not increase deficits.

We strongly argued against the removal of the Conrad Rule, and we strongly encourage its reinstatement.

Requiring informational scoring of temporary provisions as permanent

A common way to hide the cost of a provision is by sunsetting it – in other words, taking a provision intended to be permanent and adding an expiration date. As some aspects of tax reform may be too costly to maintain permanently, tax writers may be tempted to sunset certain tax proposals. For example, the Big Six tax framework proposed sunsetting expensing after five years, which reduces the apparent cost of that provision.

The use of sunsets to artificially limit the cost of tax breaks is a budget gimmick that could result in the full cost of tax breaks to disappear. It is especially egregious when combined with the current policy rationale that ignores the cost of extending temporary provisions.  Congress should acknowledge the full cost of new tax breaks without using sunsets to hide the true cost.

An amendment offered by Senator Warner would require the Congressional Budget Office (CBO) to provide an informational score of what would happen if the temporary provisions were permanent. This is a smart amendment: more information from CBO helps provide a better understanding of the consequences of a given policy, especially if the policy is being made temporary as a gimmick to hide its permanent cost.

Striking a reserve fund that threatens statutory budget controls

Currently, the statutory PAYGO law requires a sequester to reduce spending if during the year, Congress passed more legislation that would increase the deficit than decrease it. The law applies only to mandatory spending and revenues. The resolution contains a deficit-neutral reserve fund for legislation modifying statutory budgetary controls.  While the reserve fund by itself does not endanger the statutory PAYGO law or enforcement, it could accommodate future legislation that blocks or modifies a sequester.

Sequestration is an important budget control that both enforces the discretionary spending limits that Congress agreed to and statutory PAYGO. If Congress passed large tax cuts, statutory PAYGO would cause a mandatory spending sequester to offset the deficit increases. In the past, Congress has prevented this sequester from taking place after large deficit-increasing legislation. This reserve fund suggests Congress intends to do the same: pass large deficit-increasing tax cuts and then waive the budget controls that create consequences. 

Ranking Member Bernie Sanders's (I-VT) amendment strikes this reserve fund from the budget. Adopting the amendment would show commitment to the existing statutory PAYGO law.

For more on statutory PAYGO, see our explainer.

Re-establishing and strengthening the 28-hour rule

The resolution unfortunately repeals the rule that requires a CBO score be published for at least 28 hours before a vote on the Senate floor on legislation reported out of committee. While the Congressional Budget Act already requires a CBO score before voting on legislation, this rule – added in the FY 2016 budget – would require 60 votes to override the point of order if a bill did not abide by the 28-hour period.

A few amendments, offered by Senators Patty Murray (D-WA) and Tim Kaine (D-VA) among others, would restore the 28-hour rule to the resolution. The rule would be further strengthened by applying to other legislation, including amendments in the nature of a substitute and reconciliation bills. We are supportive of amendments that increase the availability of CBO scores before a vote.

Requiring the use of the CBO baseline

The Congressional Budget Act requires lawmakers to use CBO's current law baseline, so spending and revenue changes are measured against what would happen if laws generally remain unchanged.  However, there is a lot of discussion around using the current policy baseline for tax reform, a gimmick which could add nearly half a trillion dollars to the debt by instead measuring laws against a hypothethical scenario where Congress already extended certain tax breaks.

A current policy baseline should not be used for scoring or enforcement. Congress should rely on estimates using longstanding budget scoring rules developed on a bipartisan basis.

Senator Warner is offering an amendment reiterating the requirement to use CBO's current law baseline. This amendment is worthwhile and should be adopted.

Removing the reconciliation instructions

The current budget resolution includes reconciliation instructions that allow the Senate to pass legislation increasing the deficit by up to $1.5 trillion (earmarked for tax reform) and save $1 billion (likely for opening up drilling in the Arctic National Wildlife Refuge). These reconciliation instructions recklessly increase the debt and run counter to a budget that reduces deficits on paper.

An amendment by Senator Ron Wyden (D-OR) would strike those reconciliation instructions – eliminating the ability for tax reform or other legislation to be passed using the reconciliation process during FY 2018.

While reconciliation instructions do not need to be removed from the budget entirely, they should not be used to add more to the currently unsustainable debt – particularly when reconciliation is a process originally intended to improve, not worsen, our fiscal situation.

Removing the deficit-increasing instructions is a step forward. Ideally, they should call for more savings and enable tax reform that doesn't increase the debt, like the House budget.

Restoring the current law revenue floor

One of the important parts of the budget sets the amount of federal revenues over the next decade. The resolution currently sets a revenue floor below current law to accommodate the $1.5 trillion tax cut.

An amendment from Senator Wyden would add $150 billion per year to these amounts – totaling the $1.5 trillion. This would essentially cancel the ability of the reconciliation instructions to lower revenue below current law, as any legislation that reduces revenues below the floor is subject to a 60-vote budget point of order.

...And one irresponsible amendment

Striking the point of order against OCO above the President's request

The budget resolution includes one strong step towards fiscally responsible war spending: it establishes a point of order against overseas contingency operations (OCO) funds in excess of the President's request. Many times over the past few years Congress has opted to use OCO funds as a backdoor increase in defense (and even non-defense) discretionary spending, increasing war spending above what the Pentagon and the President have requested. This budget gimmick allows for spending above the discretionary spending caps established in the Budget Control Act of 2011.

An amendment filed by Senator Lindsey Graham (R-SC) would remove this improvement from the resolution. The amendment should not be adopted.

* * *

The Senate budget resolution, as written, is not fiscally responsible. It enables $1.5 trillion in deficit-financed tax cuts through reconciliation, while only asking for $1 billion in mandatory spending cuts. It relies on vastly overstated economic growth numbers to reduce deficits on paper, but the actionable parts of the budget actually increase deficits. In contrast, the House calls for revenue-neutral tax reform and some mandatory spending cuts – a down payment on the amount of deficit reduction that will ultimately be needed.

The amendment process is an opportunity for Senators to change the budget to make it more fiscally responsible.