Washington Post: Congress Should Stop Relying On Gimmicks
The Washington Post editorial board came out today criticizing the use of gimmicks, saying the recent use of pension smoothing was a new low in terms of fiscal irresponsibility. Pension smoothing was recently passed as part of an 8-month patch to the Highway Trust Fund, which will now have enough funds to pay for federal transportation projects through next May.
Pension smoothing raises money in the short term by reducing the amount of money that companies are required to put into their defined-benefit pension plans. Since companies can claim a tax deduction for pension contributions, making fewer contributions means paying higher taxes. But over the long term, companies will need to replace those lost pension contributions, reducing revenue in the future. In the meantime, more companies will have underfunded or bankrupt pensions. This provision has been criticized from all sides as not actually reducing the deficit.
The editorial board criticized the fact that pension smoothing has become a normal provision used to pay for highways rather than a one-off policy. The bill extended pension smoothing for five years, which provided most of the savings to pay for the 8-month highway extension.
We call this a new low in fiscal irresponsibility not because pension smoothing has never been used as a “pay-for” previously. In fact, the bill Mr. Obama signed actually extends, by 10 months, a pension-smoothing provision that helped “fund” the two-year highway bill that preceded this one. But that is precisely the point: Pension smoothing has just crossed the line between exception and habit. Once a bit of an embarrassment, even to Congress, it’s becoming normalized.
Relying on a temporary provision to pay for a permanent program like highways is a perfect example of kicking the can down the road:
Pension smoothing might be acceptable, barely, as a one-off expedient to pay for spending that is itself temporary, such as extended unemployment benefits. Of course, House Republicans blocked a plan to do just that this year before they approved the use of pension smoothing in this highway bill. Exasperating as it is, though, hypocrisy is a secondary issue. The larger problem is the dysfunction of a federal government reduced to running one of its major infrastructure programs on a year-to-year basis, held together with the budgetary equivalent of chewing gum and bailing wire.
If Congress wants to address the long-term solvency of the Highway Trust Fund, our paper "Trust or Bust: Fixing the Highway Trust Fund" listed the three categories of options Congress could consider: cutting spending, raising more from current highway taxes, or raising new taxes. They should use the next highway bill to pass a long-term bill that uses these options, rather than passing another short-term extension.
Read the full editorial here.