Still Feeling No Pain

(cross-posted at tpmcafe.com. Usually there are more comments there.)

From today's Congress Daily:

The devastation wrought by Hurricane Katrina is making GOP leaders think twice about moving ahead with a $34.7 billion [reconciliation] package of entitlement spending cuts outlined by the FY06 budget resolution, according to congressional aides and lobbyists. Democrats are hammering Republicans over he prospect of cuts in social programs while hundreds of thousands remain homeless....

More likely to proceed as planned is a $70 billion tax-cut reconciliation package -- due Sept. 23 -- as GOP leaders aim to salvage some of their campaign promises despite Katrina's wreckage.

In other words, the Republican game of separating tax cuts from their consequences in spending cuts will go on unabated.

But for those who need a quick refresher in congressional budget arcana (and that is, everyone), reconciliation is a special procedure used to bring taxes and spending in line with a budget plan. Strict time limits and limits on amendments apply to a reconciliation bill, so it cannot be filibustered, debate is tightly constrained and many amendments are not allowed. (For example, on any other bill, a senator could force a vote on an amendment to raise the minimum wage; not on reconcilation.) It is the only opportunity for the raw exercise of power by a party in narrow control of both houses and the White House. But reconcliation packages used to be infrequent, usually one once every three or four years. And until this year, they have always consisted of a single package of spending and tax changes. Never before this year have the spending and tax portions of a budget reconciliation been presented as two separate reconciliation packages. Doing so allows tax cuts to be treated in isolation from the spending cuts that they will make necessary, now or in the future.

In July, in The American Prospect, I predicted that the separation would allow Republicans to claim cheap credit for voting against Medicaid cuts, while still voting against the tax cuts that make those cuts necessary. And I predicted that the spending cuts might even disappear. I argued that the lesson Bush would take from the failure on Social Security was never, ever again to let connect the cuts or pain of the policies to their benefits. Keep it separate, always -- it's what worked for four years, and they only dropped the ball with Social Security.

And, of course Democrats and public interest lobbyists fall for it every time, saluting the defeat or shelving of Medicaid cuts as if something important had been accomplished, and the Washington Post editorial pages hands out medals for courage to the Republicans who speak up for Medicaid. But nothing has been accomplished. Another $70 billion in tax cuts is another $70 billion in Medicaid cuts and FEMA cuts and education cuts, period. Unless we have a massive increase in revenues, from 17% or so of gross domestic product to significantly above the postwar peak of 21.4% of GDP, we're going to face serious Medicaid and Medicare cuts anyway, because of demographics and health inflation. (Or, totally revamp the health system.) More tax cuts make those inevitable cuts even deeper and more painful.

And while we're on the budget issues, Stan Collender of the National Journal, in a subscriber-only column, predicts, "Hurricane Katrina will end up increasing the federal budget deficit by about $100 billion in fiscal 2006." He's basing that on assumptions of another $30-$40 billion in emergency assistance, the beginning of the rebuilding, aid that will be demanded by industries affected by the disaster, increased energy costs to the federal government, the cost of replacing oil in the Strategic Petroleum Reserve, and possible tax forgiveness to those directly affected. Collender knows what he's talking about, so this is probably as good an estimate as you can get right now. So that's $70 billion more in tax cuts in the face of a deficit that will substantially exceed $400 billion. Absolutely shameful.