Our guest blogger is Michael Linden, director of tax and budget policy at the Center for American Progress Action Fund.
Despite the president’s clearly stated intention last night to provide a jobs plan that includes measures to fully offset the costs of his proposed job creation measures, the Associated Press posted a surprising “fact-check” story that managed to come to the strange conclusion that his plan will not, in fact, be “paid for.” The AP story confuses several different issues, misunderstands the budgeting process, and generally misses the forest for the trees.
Here’s what bothered the AP about the president’s contention that, “Everything in this bill will be paid for“:
Essentially, the jobs plan is an IOU from a president and lawmakers who may not even be in office down the road when the bills come due. Today’s Congress cannot bind a later one for future spending. A future Congress could simply reverse it…there is no guarantee that programs that clearly increase annual deficits in the near term will be paid for in the long term.
They’re not wrong that future Congresses could, theoretically, undo the savings that are passed to pay for the American Jobs Act, but that’s true of every piece of legislation ever. Future Congresses always have the power to reverse the decisions of previous ones, whether the issue is fiscal or otherwise. To say that president’s plan isn’t paid for just because some hypothetical Congress in the future might change the law is to say that anything Congress ever passes means nothing for the same reason. That’s just silly.
But it seems like the AP fundamentally misunderstands how the budget process works. It seems — though, admittedly it’s hard to tell exactly — like the authors believe that future Congresses have to routinely review all prior spending decisions. While it is true that each year, Congress has to approve a budget, and appropriate funding for federal agencies, that appropriated money makes up only about one third of all federal spending in a given year.
The other two-thirds is spent on programs like Social Security, Medicare, and veteran’s benefits, that have been previously set-up and don’t require congressional appropriations on a year to year basis. If the president’s plan makes changes to these “mandatory” programs — and his speech suggested that it would — it won’t be necessary for future Congresses to approve those changes to realize the savings.
And of course, the AP completely forgot about the other side of the ledger. Changes in the tax code today can produce more revenue in the future, and again, future Congresses don’t need to approve those changes each year.
The AP also objects to the president’s contention that his plan will not add to the deficit because, as they correctly point out, the plan will almost certainly add to this year and next year’s deficit. “Deficits,” say the AP fact-checkers, “are calculated for individual years.” True, but budget experts also calculate them over a period of years, often over five years and 10 years, to get a sense of how the budget will look over a broader time frame.
It seems highly unlikely that the president was talking about any one individual year when he said his plan wouldn’t increase the deficit. In fact, he specifically said that in order to pay for his jobs proposals, Congress should increase the amount of deficit reduction that is mandated by the recently passed Budget Control Act. That legislation requires a special Committee to come up with $1.5 trillion in deficit reduction over 10 years. In other words, it seems fairly obvious that the president’s plan is designed such that it won’t increase the ten-year deficit.
The president is offering a plan that costs money in the next two years — in the form of tax cuts and investments to create jobs — but those costs are fully offset in later years by spending cuts and revenue increases. That is the very definition of plan that is paid for. And that’s a fact.