Republicans buck the CBO, argue their payroll tax bill would lower deficit

House Republicans are breaking with the Congressional Budget Office's analysis of their bill to extend the payroll tax holiday, by saying the bill would reduce the deficit, not increase it.

The CBO said Friday that the bill, H.R. 3630, would increase the deficit by $25.3 billion.

But Republicans say the CBO did not count the $26.2 billion in reduced spending that would occur as a result of provisions to lower the future discretionary spending caps. Both parties agreed to those caps in the summer debt-ceiling talks. But the cuts were not included in the final score, though the CBO did estimate the savings in its analysis.

According to an aide to House Budget Committee Chairman Paul Ryan (R-Wis.), the CBO cannot technically include those cuts to future discretionary spending in its analysis until the appropriations bills are enacted for those years. But if these cuts are included, the bill would reduce the deficit by $953 million over 10 years, the aide said.

That is why Republicans are saying the bill is "fully paid for," while CBO says it would create a deficit.

"As a technical matter, discretionary spending is not 'scored' until the appropriations for that year are enacted, but the statutory caps that are enforced through 'sequesters' (across-the-board cuts) ensure those caps will be met and the savings are achieved," the aide said in an email to The Hill.

Democrats have indicated they will oppose the GOP's bill for several reasons, including language that would speed up the process for deciding whether to permit the Keystone XL oil sands pipeline. But the GOP proposal to lower the discretionary spending caps over the next decade will likely prove to be another significant hurdle. Democrats have said those caps should not be seen as the maximum amount of money available but rather the minimum guaranteed spending levels.

The GOP proposal would cut about $30 billion from these caps over 10 years. For example, the current cap on discretionary spending for 2013 is $1.047 trillion, but the bill would cut that to $1.044 trillion. Similar $3 billion or $4 billion cuts would be made to each year through 2021.

The Ryan aide also noted that reforms to the federal flood insurance program would cut another $4.9 billion over 10 years; CBO also did not include this in its final calculation. The aide said CBO is assuming that the higher insurance premiums required under the bill, part of the reform of the flood insurance program, would simply lead to higher spending under the program.

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