The House and Senate are in the midst of a budget process that is tremendously important for taxpayers and the fiscal health of our country. Congress is tasked with making the 2017 Trump tax cuts permanent while getting our runaway federal spending under control. As an organization that has advised and advocated for pro-taxpayer policies for over 50 years, we understand how difficult this process can be.
Earlier this week, the Senate Budget Committee released proposed amendments to the House-passed FY 2025 budget resolution, aiming to start the budget reconciliation process. Compared to what the House passed a few weeks ago, the Senate amendments would more than double the amount of borrowing, while requiring less than 1% of the spending cuts listed in the House budget proposal. An analysis by EPIC notes that the Senate resolution is “internally inconsistent,” providing different reconciliation instructions to House and Senate committees, while providing two different debt limit increase instructions that differ by $1 trillion.
We understand the significant pressure that senators have faced as they developed these amendments. The Senate Budget Committee had to both attempt to fully incorporate the President’s campaign-trail tax proposals while extending all provisions of the successful “Trump tax cuts” of 2017, more formally known as the Tax Cuts and Jobs Act (TCJA). These items are being paired with new spending proposals by the Administration, mainly in the Defense and Homeland Security departments. This by itself is an expensive proposition (estimated to be almost $6 trillion over 10 years). Implementing spending reductions to offset expenditures of this magnitude is undoubtedly very challenging, but the current economic circumstances make it necessary. The national debt is now nearly $37 trillion and growing, and letting TCJA tax cuts expire at the end of the year would yield historically high tax increases on virtually all Americans.
As a result, the Senate has decided to use a current policy baseline to make TCJA provisions permanent. This maneuver allows for approximately $4 trillion in expiring tax expenditures to be treated as having no impact on deficits. While this will achieve the vital goal of making the TCJA permanent, it could create problems in the future. By indirectly weakening the filibuster, this approach creates a precedent that Democrats could use the next time they are in control of Congress and the White House. This could open the door to permanently enacting incredibly expensive legislation such as single payer healthcare or a universal basic income.
In return, the Senate promises to pass a reconciliation bill that will notch some real spending reductions to pay for these costs. While the current framework has very low spending targets, they note that this was done to provide needed flexibility to meet the rules of reconciliation down the road, allowing for the 50-vote threshold to be maintained. Thankfully, many senators involved in the process have demanded appropriate spending reductions in the future reconciliation legislation.
It is incredibly important to taxpayers for the future reconciliation bill to include spending reductions that at least approximate what the House included in its budget—especially with the federal debt now eclipsing the size of our economic output. With trillions of dollars of projected deficits on the horizon and both the Medicare and Social Security trust funds going insolvent in just a few years, it is past time to get the federal government’s spending on the right track.