Republicans win crucial vote for tax cuts with new gimmick, but there’s a catch

A "backstop" sounds reasonable, but will never happen.

Credit: (AP Photo/J. Scott Applewhite, File)
Credit: (AP Photo/J. Scott Applewhite, File)

The Senate Budget Committee voted the GOP Senate plan out of committee 12 to 11 Tuesday afternoon.

Senate Republicans, scrambling for the votes to even get their tax bill out of committee, needed something to win over Sen. Bob Corker (R-TN) a “deficit hawk” whose support was uncertain in recent days. Both Corker and Sen. James Lankford (R-OK) have both suggested a backstop, or trigger, which would reverse some tax cuts in the case the economy won’t grow as quickly as Republicans are promising (and most analysis of the plan suggests it won’t).

“That way you’re in a situation where you’re not creating deficits, should the projections laid out not be real,” Sen. Bob Corker (R-TN) explained to reporters Monday night. “We’ve been working throughout the entire Thanksgiving break on it, working closely with the administration, and some members of the Finance Committee to design a trigger or a backstop—in the event the revenues are not there, there’s a way to recoup them.”

And it was the inclusion of a backstop that eventually won Corker over.

The backstop details, like so much of the tax plan, are currently unknown. It isn’t known what would trigger the backstop, what kinds of taxes would be raised or size of the tax increases. But by ceding to Corker and Lankford’s concerns, Senate Republicans are, in effect, admitting the plan that they’ve touted as being a boon to both the middle class and the economy won’t actually do all that they said it will.

While President Donald Trump has claimed in the past that the GOP tax plan would deliver three percent growth, the Committee for a Responsible Federal Budget predicts the GOP tax proposals will generate no more than 0.1 percent in additional annual economic growth and the non-partisan Tax Policy Center found that even with the predicted economic growth, the tax bill would still increase the deficit by more than $1.2 trillion.

The backstop would theoretically go into effect if the economy grows slowly. The reality is that if the economy is doing poorly, the last thing Congress would want to do is increase taxes and could easily cancel the increase. In this sense the details of the backstop do not matter because, practically speaking, it will never happen.

There is, however, already a backstop in place in the form of statutory pay-as-you-go (PAYGO), which could trigger deep spending cuts, including a $25 billion dollar cut to Medicare.

PAYGO rules require broad spending cuts of mandatory programs for any legislation that doesn’t pay for itself. Under these rules, the government would have to make $150 billion in mandatory spending cuts every year for the next 10 years. The programs at risk of getting cuts include Customs and Border Patrol, the Student Loan Administration and the Military Retirement Fund, among others. 

Lawmakers have found ways to navigate PAYGO rules since 2000, by simply adding a line in the legislation that says it doesn’t apply, however, that isn’t permitted under reconciliation, meaning Congress would need to pass a second bill with 60 votes to bypass PAYGO rules. Considering Congress has had difficulty passing basic legislation at a 51 vote majority, this is very unlikely.