Mitch McConnell’s claim that the Democrats plan a $1.5 trillion tax hike
“Their budget will do more to harm the economy than to help it, and it will let Medicare and Social Security drift closer to bankruptcy. And then there’s the Democrats’ $1.5 trillion tax hike. Trillion with a T. Let me just repeat that: Any senator who votes for that budget is voting for a $1.5 trillion tax hike, the largest in the history of our country.”
— Senate Minority Leader Mitch McConnell, speech on the Senate floor, March 14, 2013
Shortly after McConnell (R-Ky.) made these comments, Democrats cried foul. The budget plan, they said, has $975 billion in higher taxes, not $1.5 trillion. They point to the summary tables of the budget resolution unveiled by Sen. Patty Murray (D-Wash.), who chairs the Budget Committee. Sure enough, there’s a line showing $975 billion in new revenue.
But nothing’s ever easy with the budget process in Washington. In fact, it’s a morass, with many things open to interpretation, as we discovered as we went back and forth between the Democrats and Republicans — and then consulted with various budget experts.
Let’s take a tour through the numbers.
There are two key parts to this discussion — the actual text of the legislation and what in effect is a glossy marketing document (“Restoring the Promise of American Opportunity”). The legislation does not have many numbers, whereas the marketing document does.
In the marketing document, Murray describes how she will use $480 billion of the tax revenues to reverse part of the automatic spending cuts in the sequester, and another $100 billion for new spending on infrastructure.
The text of the legislation, meanwhile, establishes a bunch of “deficit neutral reserve funds,” including one labeled as “to replace sequestration” and the other “to promote employment and job growth.” But there are no numbers attached to those funds. Meanwhile, the legislation also includes instructions (known as “reconciliation”) to the Finance Committee to boost revenues by $975 billion.
Deficit neutral means you need a mix of taxes and spending cuts to fulfill your goals. Republicans assumed that since Murray in her marketing document had said she would boost revenues by $480 billion to pay for the sequester and $100 billion to spend on infrastructure, the language meant that those funds would come from additional taxes. (Depending how you read the document, the $975 billion in new revenues is also slated for “deficit reduction,” and the same money in theory can’t be used twice.)
Thus $975 billion plus $580 billion equals more than $1.5 trillion.
Democrats say this is ridiculous. They argue that they will apply the $975 billion in new tax revenue to the goals outlined in the document, including applying $480 billion to replace the sequestration cuts. (Another $480 billion to alter the sequester would come from spending cuts.) They cast the reserve funds more as a device to avoid legislative points of order, which would require a 60-vote threshold to overcome, rather than just the 50 votes generally required for a budget resolution.
The whole discussion reminded The Fact Checker of the budget headaches frequently experienced when he covered the budget process many years ago. Fierce battles are often waged over highly arcane matters.
We consulted with a variety of budget experts, and things became even more murky. The consensus was that Republicans have a point — that this was a theoretical possibility — but it was not likely.
G. William Hoagland, senior vice president of the Bipartisan Policy Center and long-time budget sage for Senate Republicans, said the GOP scenario was possible but “unlikely,” as the Democrats have “a clear intention to raise $975 billion in revenues.” He said that such reserve funds are more to send messages to fellow party members — in other words, to garner votes — as opposed to being substantive items. “It’s grease to make the wheels go around,” he said.
In sum, he said, he viewed the legislation’s reserve-fund language as “a clumsy way to avoid directly addressing offsetting the sequester.”
Jason Delisle, another former GOP staff member on the Budget Committee now at the New America Foundation, said that “Republicans are right to say that the wiggle room means the official number is not the official number — that it could be higher if the reserve funds are used. Fair point.”
But Delisle added: “The Republican argument rests on the assumption that the Democrats bring up a tax-and-spend bill in addition to a reconciliation bill for each and every reserve fund in the budget resolution; thus there are more tax increases in the budget resolution than what they say. I think the Republicans are overstating the likelihood of that scenario.”
Ed Lorenzen, who was a budget policy adviser for House Democrats and is now at the Committee for a Responsible Federal Budget, agreed with Delisle and added that he viewed the reserve funds as “primarily for procedural accounting purposes to adjust internal budget allocations for points of order.” He said that “the reserve fund doesn’t require an additional $100 billion in revenues to pay for the $100 billion in stimulus spending; rather it allows the budget committee chairman to adjust the allocations to accommodate $100 billion for stimulus spending in the resolution if the revenues already assumed in the resolution to offset it have been adopted.”
Keith Hennessey, another former GOP budget expert who now teaches at Stanford University, took a darker view.
Democrats, he said, “want to say the budget [plan] includes $100 billion in new spending for jobs and infrastructure by pointing to the assumption in the non-legislative document, but then say that nothing in the legislative text of the budget resolution requires $100 billion in extra taxes.” He was especially suspicious of the fact that reserve funds do not have limits — as is sometimes the case in budget resolutions — and said it was perfectly acceptable to argue that the budget “also allows for another $580 billion in tax increases to offset additional spending increases she [Murray] assumes and promotes aggressively.”
He added: “If anything I'd argue that even the $1.5 trillion number understates the tax increases allowed by the Murray budget resolution. She's requiring $975 billion in tax increases to reduce future deficits, and allowing for unlimited amounts more to pay for new spending. I find that terrifying.”
The Pinocchio Test
Clearly, we’re in a bit of an expert muddle here, with even Republican-leaning budget wonks lacking a consensus. But let’s step back a moment and look at the big picture.
Democrats have repeatedly said they plan to seek $975 billion in additional revenue and would task the Finance Committee to come up with the precise closing of loopholes and such. There may be something vague and suspicious about the reserve funds, but under the GOP scenario, Democrats would also have to vote for even more taxes — which isn’t very likely.
Budget resolutions, after all, are basically like a blueprint for a house, with the details filled in later. Both sides try to score political points with the votes that are cast on such documents, but in sum, many of these votes are relatively meaningless.
McConnell could have raised serious questions about what Democrats intended to do with these reserve funds and how they intended to fund them. But instead he has taken a theoretical possibility and turned it into a hard fact: “Any senator who votes for that budget is voting for a $1.5 trillion tax hike, the largest in the history of our country.”
That’s going a step too far.
Check out our candidate Pinocchio Tracker