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Bad Timing and Budget Gimmicks

Summary:
I wrote a column for Creators yesterday where I noted that while for me more spending is always too much, for some politicians, it will never be enough. In fact, to pass a gigantic .5 trillion spending bill, which is facing opposition from Senators Manchin and Sinema, some legislators are ready to resort to budget gimmicks. In fact, they are quite open about it. But now I am thinking that I underplayed the budget gimmick part of the argument. For some backgrounds, Mr. Manchin has said for months that he wouldn’t vote for a reconciliation bill that’s more than .5 trillion. Incidentally, I hope that people manage to keep some perspective here: .5 trillion is called a compromise, but it is still a massive and oversized amount of spending. Back to budget

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I wrote a column for Creators yesterday where I noted that while for me more spending is always too much, for some politicians, it will never be enough. In fact, to pass a gigantic $3.5 trillion spending bill, which is facing opposition from Senators Manchin and Sinema, some legislators are ready to resort to budget gimmicks. In fact, they are quite open about it. But now I am thinking that I underplayed the budget gimmick part of the argument.

For some backgrounds, Mr. Manchin has said for months that he wouldn’t vote for a reconciliation bill that’s more than $1.5 trillion. Incidentally, I hope that people manage to keep some perspective here: $1.5 trillion is called a compromise, but it is still a massive and oversized amount of spending.

Back to budget gimmicks. Here is President Biden a few days ago on how to ultimately make his new entitlements permanent even if now he has to compromise on size:

“every major fundamental shift that has taken place in the American economy has seldom ever come with one single piece of legislation at the — at the beginning.

For example — you’ve heard me say this before, but it’s relevant — when Roosevelt passed Social Security, it didn’t bear any resemblance to what it is now.  And so, the idea that we’re going to — everything that is — gets passed is going to be the totality of what it’s going to end up being remains to be seen.

And my message this morning was: Look, it’s very important to establish the principle — the principle that is contained in the amendment, such as childcare, the Child Tax Credit.  Well, it may be that the Child Tax Credit gets altered in terms of amount.  But once it’s put in place, even though it’s only for several years, it gets harder and harder to take it out.  And that’s my point to people.  We don’t have to get everything all at once.”

Here is House Representative Alexandra Osario Cortez on Meet the Press explaining how to make a $3.5 trillion bill look like a $1.5 trillion one:

“Washington math is notoriously funny … one of the ideas that is out there is fully fund what we can fully fund, but maybe instead of doing it for 10 years, you fully fund it for five years.”

Here is Representative Jamie Raskin a few days ago:

“Rep. Jamie Raskin (D., Md.) told liberal activists on a call Monday night that he wanted to include a long list of programs that he hoped would prove popular enough that lawmakers in the future would feel compelled to continue them.

Let’s plant a flag on everything that we need and everything that we want and we will prove to America how important it is, how vital it is to our people and then we will live to fight another day,” he said.”

The bottom line is that if 10-year budget projections were ever a meaningful budgetary tool, they have lost all its meaning. Democrats used an early expiration budget gimmick to make their new entitlements look less expensive, in hope here to fool the reluctant Senators who have made the mistake of setting a cost limit rather than say “no” to new programs. The Republicans use this trick for budget related issues too, but more recently to pass large tax cuts in 2017 when they had some of the provisions expire in 5 years as opposed to making them permanent.

The use of budget gimmicks isn’t either new or limited to early expiration. In fact, early expiration is one of many timing gimmicks that rest on the manipulation of the budget year in which items of revenue or expenditure are reported. Some of them involve simply accelerating receipts or delaying payments into alternate budget years or taking advantage of the fact that the federal budget operates under a fiscal year, which begins on October 1, while many government activities are based on a calendar year or some other time period.

Then you have the emergency gimmick, a favorite of the Bush administration, which labelled the cost of the war in Iraq as “emergency” spending for each year so it wouldn’t count under the budget caps.

You also have the keeping off-budget gimmick. Technically speaking, the term “off-budget” only refers to entities explicitly excluded from the budget by statute.  According to the United States Senate glossary, “At present, off-budget entities include the Social Security trust funds and the Postal Service.” Obviously, the distinction between what is called “on-budget” and “off-budget” doesn’t change the fact that its spending like any other spending. That said, lawmakers keep other spending items off-the-record informally.

Some time ago, I wrote a paper on the issue. But the reason I bring it up today is that budget gimmicks have consequences beyond letting lawmakers get away with spending money. These budget numbers are meant to inform policymakers about the best policies to adopt, and here these budget gimmicks slant important policy choices. As legislators manipulate numbers for political purposes, they rarely stop to think or are forced to explain whether or not the policy they want to adopt serve genuine social and financial policy objectives.

This is why budget gimmicks matter.


Veronique De Rugy
Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. Her primary research interests include the U.S. economy, the federal budget, homeland security, taxation, tax competition, and financial privacy. Her popular weekly charts, published by the Mercatus Center, address economic issues ranging from lessons on creating sustainable economic growth to the implications of government tax and fiscal policies. She has testified numerous times in front of Congress on the effects of fiscal stimulus, debt and deficits, and regulation on the economy.

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