The Bush tax cut time bomb, and David Waldman on reconciliation

George W. Bush and then-chief of staff Andrew Card

Howard Kurtz at the Daily Beast writes up how the Bushies laid the ultimate tax cut trap for Democrats, by “sunsetting” the Bush tax cuts. They knew, of course, that once enacted, they’d never go away. Meanwhile, Congress Matters’ David Waldman answers my question on budget reconciliation. First the Beast. Kurtz writes:

“We knew that, politically, once you get it into law, it becomes almost impossible to remove it,” says Dan Bartlett, Bush’s former communications director. “That’s not a bad legacy. The fact that we were able to lay the trap does feel pretty good, to tell you the truth.”

As the vote approached in the summer of 2001, the Senate had just flipped to Democratic control when Jim Jeffords defected from the GOP. Had the tax breaks been made permanent—or even extended beyond Sept. 30, 2011—the fledgling Bush administration would have had to muster a 60-vote Senate majority under the so-called Byrd Rule, named for master parliamentarian Robert Byrd. (The final version, cutting taxes by $1.35 trillion, garnered 58 votes.) And by moving up the expiration date by nine months, the Bush team saved $100 billion and made the bill’s deficit-busting impact appear smaller.

As an added bonus, the “sunset” provision, in Beltway-speak, was a political time bomb: At some point in the way distant future, Democrats could be accused of raising taxes if they tried to undo the Bush breaks and return to Clinton-era levels of taxation.

“I wish I could tell you I was that smart,” Andy Card, Bush’s former chief of staff, told me. But the approach wasn’t all that “Machiavellian,” he says. Rather, the Bushies wanted the law to be permanent but couldn’t muster the votes to trump the Byrd Rule. “I was doing a lot of shuttle negotiating between offices on the Senate side. There were many late nights.”

The financial finagling wasn’t exactly secret at the time. Paul Krugman pounced on the sunset maneuver in The New York Times, decrying the “accounting gimmicks” and declaring that “the tax bill is a joke. But if the administration has its way, the joke is on us.”

Meanwhile, I asked yesterday why the Democrats don’t simply push through a middle class only tax cut in the Senate using the same budget reconciliation use the Bushies used back in 2001 and 2003, and that Democrats used just this March to pass healthcare reform. To that, Congress Matters‘ David Waldman responds:

Using reconciliation in the Senate to pass the bill passed by the House today isn’t really available as an option.

Reconciliation was never supposed to be used for things like tax cuts, and after the Republican abuse of the process for that purpose in 2001 and 2003, the Senate adopted rules changes (offered by Dems) to essentially prohibit its use for bills that caused a net increase to the deficit.

A reconciliation bill that does increase the deficit is subject to a point of order that requires 60 votes to waive, and will kill the bill or the portion of it that increases the deficit without that waiver.

Technically speaking, other options are available, such as passing a bill to extend all the tax cuts, and then using reconciliation to repeal the extension for the top income bracket. Or combining the tax cuts with other measures that masked their effect so that the whole package came out as a net savings. But a reconciliation bill has to be designated as such and brought to the floor under that procedure from the beginning. I don’t think you can just declare a bill already passed in the House under regular procedures to be a reconciliation bill once it hits the Senate, even if there were no rule against reconciliation bills that increase the deficit.

So it’s still possible to make some use of reconciliation, but it would require moving very, very quickly, and on a different bill that would have to start from square one.

Meanwhile, Harry Reid has scheduled two largely symbolic votes for Saturday: one on the House bill, and one on Chuch Schumer’s “millionaires amendment.” Neither is expected to pass, and more likely, the votes are intended as “positioning” for Democrats right before they tell the base they’re caving on extending all of the tax cuts “temporarily,” which means that in two or three years, they’ll get extended again, if not made permanent.

This entry was posted in Bush administration, Politics, Tax Cuts, The Economy and tagged , , , . Bookmark the permalink.

One Response to The Bush tax cut time bomb, and David Waldman on reconciliation

  1. Pingback: Friday clicks, round 2: Dems and Obama down by the schoolyard : The Reid Report

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>