Congress’s To Do List: OMG
With the mid-term election behind us, the current Congress still has work to do. Lawmakers may address a huge number of issues when they return in two weeks. And it all will cost money.
Here is what lawmakers are likely to address in the next two months:
|Expiration||Estimated 1-Year Cost (Billions)||Estimated 10-Year Costs (Billions)|
|Any extension of the 2001/2003 tax cuts, including the Estate Tax*||December 31, 2010||$100 - $130||$2,500 - $3,300|
|12 Appropriations Bills to fund many government programs**||CR expires December 3, 2010||$1,114 - $1-121||N/A|
|Alternative Minimum Tax Patch||December 31, 2010||$72||$583|
|Medicare Payments to Physicians||November 30, 2010||$9||$276|
|Tax Extenders Package||December 31, 2010||$197||$2,204|
|$250 payment to seniors||N/A||$13 - $14||$13 - $14|
|Unemployment Benefits^||November 30, 2010||$60||N/A|
|Total||$1,565 - $1,603||$5,576 - $6,377|
* Assumes either a full or partial extension, and includes interaction affect between tax cuts and AMT. Assumes Estate Tax Extension will be at 2009 levels as proposed by President Obama.
** House Appropriations Committee has $1,121 and Senate Appropriations Committee has $1,114 billion in new discretionary budget authority.
^ Rough estimate for a one-year extension.
Sources: Estimates from CBO, JCT, and authors calculations.
- The Tax Cuts. This is the 800 pound gorilla in the room. A full extension of the 2001/2003 tax cuts could cost, according to CBO, about $3.3 trillion over the next ten years, whereas a partial extension for individuals earning under $200,000 and couples earning under $250,000 would cost roughly $2.5 trillion (excluding the AMT). Either scenario would add trillions to our debt. PAYGO at least requires lawmakers to pay for any tax cut extension for people earning over $200,000/$250,000, so a full extension would have to offset costs for upper-income earners.
- Appropriations Bills. Congress has yet to pass any of the pending twelve appropriations bills that will determine funding levels for all discretionary programs during the current. If lawmakers are unable or unwilling to pass the appropriations bills (which would likely occur through an “omnibus” or “minibus” measures), they could choose to pass a Continuing Resolution (CR) that would extend government funding for the current fiscal year at FY 2010 levels. In either case, how can federal agencies reasonably plan for next year when they don’t even know what they’re getting this year? Or worse yet, if no CR is passed; many federal agencies will quite literally turn off the lights.
- AMT Patch. If lawmakers do not enact an annual patch for the AMT—indexing its parameters to inflation—with some government experts saying as many as 25 million taxpayers will face higher taxes. Patching the AMT will cost about $72 billion this coming year.
- Medicare payments to physicians. If lawmakers do not act, Medicare payments to physicians will fall 21 percent on December 1, according to the sustainable growth formula. It will be critical in the future to address the doc fix along with continued growth in health care costs, but a sudden and significant cut in reimbursement rates could lead doctors to stop accepting Medicare patients. A one-year doc fix is expected to cost $9 billion.
- Tax Extenders Package. On December 31, many tax deductions, exemptions, and credits—including business expensing provisions—will expire if lawmakers do not extend them. Several of these provisions were included in the 2009 stimulus legislation (including Making Work Pay and American Opportunity credits), and also include the HIRE Act passed earlier this year to help spur hiring. While the tax code undoubtedly needs to be scrubbed clean of many special credits, doing so when the economic recovery is fragile and business uncertainty is high may not be the most prudent economic choice. Lawmakers will have to decide. (Check out CRFB’s plan for individual tax expenditures.)
- $250 Payment to Seniors. Well, you know how we feel about this one (hint: it’s a terrible idea! See here and here). Because there will be no automatic COLA for Social Security benefits next year, some lawmakers have called for a one-time $250 payment to seniors to “hold them over”—an idea supported by some lawmakers and President Obama. House Speaker Nancy Pelosi even has promised a vote on it. Given inflation changes in the past two years, such a proposal is not warranted. But still, there’s still plain ‘ole pandering to be done.
- Unemployment benefits. The period in which long-term unemployed workers can receive benefits has been increased to up to 99 weeks, and the 2009 stimulus act increased weekly unemployment benefits by $25 (although this increase was eliminated this summer). This extended period, however, is set to expire at the end of this month unless lawmakers continue it The current six-month extension applies from June through November, at a cost of $34 billion. With unemployment expected to stay elevated during the next few years, a one-year extension could cost somewhere in the vicinity of $60 billion.
Lawmaker decisions over the next few months could cost roughly $6 trillion in increased spending and decreased revenue over the next 10 years. Is this any way to do business? Or should Congress make well-considered decisions in the context of a larger fiscal plan?