Three Names Hold The Answer To Bush’s Success

Posted January 28, 2003 at 6:29pm

The Final “Jeopardy” category is “Politics for Junkies.” The answer is “Douglas Holtz-Eakin. Alan Frumin. A player to be named later.”

Alex, the correct response is: “Who are the three most important figures for President Bush when it comes to taxes, Medicare reform and prescription drugs, drilling in ANWR, and perhaps a host of other issues?”

[IMGCAP(1)] No, I’m not kidding. Douglas Holtz-Eakin is the incoming head of the Congressional Budget Office. Alan Frumin is the Senate Parliamentarian. The player to be named later refers to the future chief of staff of the Joint Taxation Committee. All three would cringe at the public use of their names in this column.

Why are they so important? As the past couple of weeks have made clear, the president’s new tax cut package, not to mention his Medicare reform and prescription drug ideas, has been met with a, shall we say, less-than-enthusiastic reception on Capitol Hill. Or to use former President George Bush’s term, they are all in “deep doo-doo.”

With Republicans in full charge of Congress, stiff opposition by 40 Democratic Senators to the president’s proposals in the Senate would mean their doom, given the power to filibuster and the 60-vote hurdle to overcome it.

But the filibuster does not apply under certain parliamentary circumstances in the Senate, including budget resolutions and the catchall, powerful process known as reconciliation. So if Republican allies of the president can incorporate their wish-list items in a reconciliation bill, their hurdle in the Senate drops to 50 votes. With 51 Republicans (52, including the reliable vote of conservative Democratic Georgia Sen. Zell Miller), Republicans don’t need Democrats to prevail. This gives them a potential opening to include otherwise controversial proposals, such as oil drilling in the Arctic National Wildlife Refuge and a tough presidential prescription drug benefit, in an up-or-down package that can bypass all liberal Democrats, and maybe all Democrats entirely.

Reconciliation is a process that goes back to the Budget Act of 1974. It was designed as a narrow procedural device to be used at the end of a budget process to pull together various spending and taxing programs mandated by the year’s Congressional budget and build in necessary legislative teeth to make sure that the authorizing and tax committees made their laws conform to them. It was not used at all for the first several years of the budget process; it was first employed on a smaller scale in 1980, during the Carter presidency, to bring some extra fiscal discipline. That opened the way to the Reagan administration’s daring use of the process in a sweeping fashion to obtain expedited up-or-down votes on the Reagan budget and tax cuts. Reconciliation has been employed many times since, but usually fairly narrowly.

In 1985, when deficits were soaring, Sen. Robert Byrd (D-W.Va.) changed the procedure for the Senate, adding to the budget process what has become known, not surprisingly, as the Byrd Rule. I don’t have the space in this column to describe in detail the Byrd Rule. So here is the gist: If any provision in reconciliation is extraneous to the budget resolution, or adds to deficits (through more spending or lower revenues) in the years beyond the budget resolution, it is subject to a point of order, and three-fifths’ support, not simply a majority, is required to incorporate it. Some provisions are plainly subject to the Byrd Rule; others are more ambiguous. Is allowing oil drilling in ANWR enough of a revenue measure to keep it from being ruled extraneous? On issues of this sort, the Parliamentarian has some considerable leeway to determine when the Byrd Rule actually applies. Republicans have the majority but they cannot suspend the Byrd Rule — it is permanent. (Other tough Senate rules that restrain deficits and require 10-year cost projections — the so-called pay-as-you-go provisions — expire on April 15 and are in small-jeopardy.)

Enter Bush 43. He used reconciliation to obtain his tax bill in 2001. When it appeared as if Senate Parliamentarian Bob Dove was going to rule liberally about points of order under the Byrd Rule as applicable to the Bush tax bill, Senate Majority Leader Trent Lott (R-Miss.) fired Dove. Even so, Republicans were still forced to do contortions to make the tax bill fit under reconciliation rules, making the overall tax cut end after 10 years and adding the absurd provision that the estate tax would go down gradually to zero in 2010, and then be fully reinstated in 2011 so there would be no revenue loss in the out years.

The White House, and Senate Republican leaders, are eager to use reconciliation again in 2003. It won’t be easy. They have shown distaste for 10-year cost projections, preferring the five-year variety, because the longer projections have shown huge deficits. After emphasizing the long-term benefits of structural change in the dividend tax, they will have a hard time explaining why their tax cut package once again dies after five or 10 years, instead of being made permanent. And any projections of growing structural deficits in the years to come, as the White House claims the mantle of fiscal responsibility, will be embarrassing.

Now enter the three names that opened this column. One way to reduce the embarrassment, make the explanations more feasible, extend the life of the tax cuts and continue to employ 10-year projections is to change the method for calculating the costs and benefits of budget and tax measures. For years, conservatives have demanded that economists use “dynamic” scoring, insisting especially that a dollar of tax cuts does not mean a dollar of lost revenue, that tax cuts spur economic activity, bringing in more tax revenue. (As budget guru Stan Collender has pointed out, when they rail against profligate government spending, they rarely suggest that a dollar in a spending program, say for child care for welfare-to-work recipients, might also spur economic activity.)

No previous director of the Congressional Budget Office, Republican or Democrat, including the most recent occupant, Dan Crippen, has bought this argument as a reason to change the CBO’s budget estimates. No previous staff director of the Joint Taxation Committee, given responsibility for the official Congressional revenue estimates for tax bills, has been willing to do so either. But Douglas Holtz-Eakin, picked by House Budget Chairman Jim Nussle (R-Iowa), may be different. And the player to be named later for JCT will be chosen by some combination of Ways and Means Chairman Bill Thomas (R-Calif.) and Senate Finance Chairman Chuck Grassley (R-Iowa) — they are squabbling over who has the power — will be under some pressure to adopt dynamic scoring for the president’s tax bill. Actually this person, and Holtz-Eakin, will be under pressure to adopt aerodynamic scoring.

If they do, the tax bill may, miraculously, cause little net drain on revenue and have little negative impact on deficits. And the budget — despite large increases in defense and homeland security, and a generous prescription drug plan — may itself have miraculously little negative impact on deficits. Thus the Byrd Rule could be less of a potential impediment. But if it still is, Frumin, the Senate Parliamentarian who replaced Dove and stayed in office under the Democrats because he is a cool and competent professional, may find himself in a Dove-like predicament.

Now none of this would guarantee big political and policy victories for the president. He may not be able to get 50 votes for his tax cuts — a number of Republican Senators have joined all the Democrats (save Miller again) to express deep reservations or outright distaste for the dividend tax provision, among others. And if the White House and Senate leaders decide to heap every item on their wish list onto a reconciliation bill, it may collapse of its own weight.

The amateurs will watch and write about the surface dynamics of the Bush tax bill —what Bill Thomas says and does, how the business interests respond, and so forth. Savvy budget-watchers and political observers will also be keeping a close eye on Holtz-Eakin and on his extraordinarily able career professional staff. They will keep a close watch on the internecine battle between Thomas and Grassley over who picks the new staff chief for JCT, and what litmus tests are involved in that choice. They will wait for a Bob Novak column to see if the choice meets the test of the supply-side, no tax cut is too big contingent he leads. And they will watch to see if Alan Frumin can navigate through the minefield that caught his predecessor, Dove.