NEWS AND ANALYSIS NEWS ANALYSIS budget failures could result in a reexamination of the federal government’s accounting practices. (C) Tax Analysts 2004. All rights reserved. does not claim copyright in any public domain or third party content. Budget Process Broken, but And then again, maybe not. Consider that Re- publican leadership is counting on an entirely dif- Few Fixes Pass GOP Litmus Test ferent set of numbers — 55 Republican senators, 233 Republican House members, and 1 Republican By Dustin Stamper — [email protected] and president. Wesley Elmore — [email protected] After canvassing many individuals involved in the congressional budget process both past and Any lawmakers still unsure whether the congres- present, Tax Analysts uncovered one consistent sional budget process needs some serious tinkering theme: Don’t expect the Republicans to tie their may want a quick lesson in budget statistics. They own hands with any rule changes that could block can start by looking at the last 10 years’ worth of an ambitious 2005 agenda. If budget process reform figures. is possible, Republicans want that reform to accom- Since 1995 Congress has failed to clear the yearly modate efforts to permanently extend the 2001 and budget resolution three times, passed more than 75 2003 tax cuts, repeal the estate tax, fix a growing short-term funding extensions, shut down the gov- problem with the alternative minimum tax, and ernment for 27 days, been forced to finish the possibly add private accounts to the Social Security appropriations process in an omnibus package nine program. times, and transformed historical budget surpluses into record-setting deficits. ‘At the end of the day, it’s Congress’s In the heat of the latest appropriations debacle, job to control spending. We shouldn’t outspoken conservative Sen. John McCain, R-Ariz., be looking for ways to save us from declared, ‘‘This process is broken.’’ ourselves,’ Spicer said. And he was not alone. Yearly appropriations have increasingly been ‘‘They’re not serious about fiscal discipline, turned into huge, last-minute omnibus packages they’re serious about moving their agenda,’’ said that are forced through Congress with little time for one Democratic House Ways and Means Committee analysis. Members of both parties became exercised aide. over this year’s omnibus spending package when a Democratic member identified a single clause in the Without even accounting for a change to Social almost 14-inch-thick document that would have Security, GOP tax proposals alone could cost up- loosened tax return disclosure rules. In protest, ward of $1.5 trillion over 10 years, according to House Minority Leader Nancy Pelosi, D-Calif., some estimates. Any budget reforms designed to postponed a vote to strike the sentence while law- curb the deficit — from ‘‘pay as you go’’ rules to makers criticized the budget process to an extent mandatory deficit reduction targets — would likely not seen since former President Bill Clinton and a make such Republican efforts more difficult. Republican Congress were shutting down the gov- ‘‘My guess is that one reason the administration ernment in the 1990s. won’t push for budget reform is that they don’t know how to accommodate that massive agenda ‘‘It is a terrible way to do business,’’ said Senate within a budget that appears to be moving to Appropriations Committee Chair Ted Stevens, balance,’’ said House Budget Committee ranking R-Alaska. minority member John M. Spratt Jr., D-S.C., in a ‘‘I do not know if there will ever be a better recent interview with Tax Analysts. example of what can go wrong with this nefarious process,’’ said Sen. Robert C. Byrd, D-W.Va., the Veto Power Appropriations Committee’s ranking minority If anything, President Bush is eyeing a reform member. that would make his job easier. ‘‘I would like to see the president have a line- ‘It is a terrible way to do business,’ item veto again, one that passed constitutional said Stevens. muster,’’ Bush announced just days after his reelec- tion. Both House and Senate Budget Committee chairs With the possible exception of the tax code, few have indicated they would be willing to move government processes receive as much criticism as line-item veto legislation if Bush could find consti- the budget. The groundswell in the last year of tutionally acceptable language, but neither is look- negative opinion, mounting deficits, and recent ing to champion the cause. 1610 TAX NOTES, December 20, 2004 NEWS AND ANALYSIS ‘‘Right now we’ve got our hands full dealing ‘‘It’s a great theory, but in reality it’s not going to with the budget,’’ said Sean Spicer, spokesman for happen,’’ Spicer said. ‘‘How can you plan two years (C) Tax Analysts 2004. All rights reserved. does not claim copyright in any public domain or third party content. House Budget Committee Chair Jim Nussle, ahead when it’s hard enough to plan one?’’ R-Iowa, in an interview with Tax Analysts. ‘‘At the Spicer pointed out that budget projections often end of the day, it’s Congress’s job to control spend- change dramatically in a matter of just months. ing. We shouldn’t be looking for ways to save us from ourselves.’’ Line-item veto power was first given to Clinton The only thing a biennial budget in 1996. It allowed the president to sign a bill into would produce, Greenstein said, is ‘a law and then cancel in whole any dollar amount of plethora of supplementals and a discretionary budget authority, item of new direct budget less attuned to needs.’ spending, or limited tax benefit. The Supreme Court struck down the measure just two years later. ‘‘You exchange one set of problems for another,’’ ‘‘If the Line Item Veto Act were valid, it would said Robert Greenstein, executive director of the authorize the president to create a different law — Center on Budget and Policy Priorities. The only one whose text was not voted on by either house of thing a biennial budget would produce, he added, Congress or presented to the president for signa- is ‘‘a plethora of supplementals and a budget less ture,’’ the Supreme Court decision read. attuned to needs.’’ Washington policy analysts interviewed by Tax ‘‘If they have two years to fight about the budget, Analysts largely agreed that not only would a they’d fight for two years,’’ said William G. Gale, constitutionally acceptable line-item veto be impos- codirector of the Tax Policy Center. ‘‘There’s noth- sible to create, it wouldn’t even be effective in ing inherently wrong with the budget calendar we controlling the deficit. have now.’’ Robert Bixby of the Concord Coalition said a Appropriators are also unlikely to give up the line-item veto would give the president more po- power to dole out goodies to their districts each litical leverage, but because it can only be used to year. strike earmarks, ‘‘you probably wouldn’t get a huge saving from it.’’ Pay-Go Again ‘‘As Judge Robert Bork said, if the constitution If biennial budgets and the line-item veto are to permitted a line-item veto, somebody would have be ignored next year, the focus would again return noticed it in the last 220 years,’’ Spratt told Tax to a familiar battle over the pay-go rules that were Analysts. ‘‘I think it’s a lot of power to give to a allowed to expire in 2002. president. It could be used politically.’’ First adopted in 1990 under former President George H.W. Bush, traditional pay-go rules require Freeing ‘Legislative Logjam’ any spending increases or tax cuts to be offset by a With the line-item veto an unlikely engine to decrease in spending or increase in taxes. This past drive budget reform next year, former Senate Bud- year’s budget resolution failed when several Re- get Committee Chair Pete V. Domenici, R-N.M., is publican senators balked at the administration’s trying to resurrect biennial budgeting. plan to enact pay-go rules that would have applied Domenici sent a letter to his colleagues in No- only to spending. The disagreement is no closer to vember calling for two-year budgeting to free up a being resolved now. ‘‘legislative logjam.’’ According to Domenici, nearly A few Republican lawmakers continue to agree 70 percent of all votes in 2000 were spending- or with the Democratic insistence that any one-sided budget-related. (For the letter, see Doc 2004-23325 or budget enforcement rules are impractical. 2004 TNT 237-21.) ‘‘It’s pointless. Almost any form of spending you ‘‘With what we’ve gone through for the third can turn into a tax cut,’’ a Democratic Ways and time in a row — no blame on anybody — wouldn’t Means aide said. ‘‘The reality is you’ll end up with you think it would be time to take up the very more spending through the tax code, which means important issue of two-year budgets and two-year more complexity and more unfairness.’’ appropriations?’’ he asked. But Republicans remain resolutely opposed to Biennial budgeting has drawn a substantial mea- blocking their own tax agenda with full pay-go sure of support in the past. Domenici’s 1999 bill on rules. An aide for Senate Finance Committee Chair the issue attracted 36 cosponsors, although it never Charles E. Grassley, R-Iowa, said the senator be- reached the floor for a vote. lieves a fix for the alternative minimum tax and But despite Domenici’s renewed aspirations, it permanent extensions of the 2001 and 2003 tax cuts appears the effort still lacks momentum. should not need to be offset. TAX NOTES, December 20, 2004 1611 NEWS AND ANALYSIS The current structure of the AMT is wrong and unintended, the aide said, and permanent exten- (C) Tax Analysts 2004.