With caveats, CBO says GOP bill would add $25.3B to deficit

by Erik Wasson - 12/09/11 8:05 PM ET

The House payroll-tax bill would add $166.8 billion to the deficit for fiscal year 2012 but could reduce spending over the next decade, according to the Congressional Budget Office.

The CBO released a score Friday saying the GOP bill would add $25.3 billion to the federal deficit over the next 10 years under the CBO’s traditional rules for scoring legislation.

But the GOP legislation also includes reductions in ceilings on discretionary spending that the CBO said would reduce spending by $26.2 billion over the next decade. If those new ceilings are considered, the GOP bill would reduce the deficit by about $1 billion over the next 10 years.

{mosads}The package includes a one-year extension of a payroll-tax cut that is President Obama’s top year-end priority as well as a one-year extension of federal unemployment benefits. A third key element of the package is the “doc fix,” which prevents a scheduled cut in physician payments under Medicare.

The CBO included the $25.3 billion figure in a letter to House Ways and Means Committee Chairman Dave Camp (R-Mich.) explaining its score.

It also referred to the $26.2 billion figure, but did not explicitly give the bill credit for reducing the deficit by $1 billion.

The CBO said under its rules, it could not consider the cuts to discretionary spending in its official score because they are contingent upon enactment of future legislation.

Republicans, however, contend that the most important number in the CBO letter is the reference to the $26.2 billion in reduced discretionary spending. They say this shows that when their package is properly counted, it would reduce the deficit by $1 billion.

The fight over the figures is important because GOP leaders are trying to win support from their conference for a package that includes measures many members are cool to.

Republican Study Committee budget guru Rep. Scott Garrett (R-N.J.), for example, said he wanted to see the bill be deficit-neutral in the first year.

The House could vote on the bill as soon as Tuesday.

The CBO letter to Camp also includes an analysis that assumes Congress will prevent the cut in physician payments going forward. The CBO was required to do this analysis under the pay-go legislation that became law in 2010. Under that analysis, it projects the GOP bill would cut $4 billion from the deficit.

Democrats argue that the GOP isn’t following its own, stricter “cut-go” rules put in place in 2011.

Cut-go specifies that spending must be offset only by spending cuts, and not by higher taxes and other revenue increases.

Democrats argue the payroll-tax holiday counts as spending because money is spent from the Treasury to pay into Social Security, which otherwise loses funds from the payroll-tax break. They argue this new spending isn’t offset.

Republicans argue it is offset with the reductions to discretionary spending ceilings and reforms to Social Security and the national flood insurance program.  

Democrats also argue that cut-go rules state that a bill must not add to the deficit in the five-year and 10-year budget windows.  According to the CBO, the bill increases spending by $34 billion in the first five years, and this is a cut-go violation, a Democratic aide said.  

According to the CBO, the $200 billion bill breaks down as follows over 10 years:

Costs:

Payroll tax reduction: $121 billion

Unemployment Insurance extension: $34 billion

Doc Fix: $39 billion

Small business tax expensing: $6 billion

Revenues:

Changes to Medicare and other healthcare provisions: $38 billion

Spectrum sales: $16 billion

Fannie Mae and Freddie Mac fees: $36 billion

Social Security change: $3 billion

Bar illegal immigrants from receiving tax credit: $9 billion