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New pay-go rules reveal GOP's misplaced priorities

Sunday, January 2, 2011; 6:55 PM

ARE HOUSE Republicans serious about dealing with the deficit? You could listen to their rhetoric - or you could read the rules they are poised to adopt at the start of the new Congress. The former promises a new fiscal sobriety. The latter suggests that the new GOP majority is determined to continue the spree of unaffordable tax-cutting.

The ominous signs come in the wording of the new majority's version of its pay-as-you-go rules, which normally require that new programs or tax initiatives be covered with cuts to other programs or new revenue. In the GOP concept, pay-as-you-go applies only to spending programs. When it comes to tax cuts, it's all go, no pay. Taxes can be cut, and the national debt increased, without any offsetting savings.

If you thought the sticker shock of the latest tax deal served as a useful reminder that tax cuts cost the Treasury money, think again. Deficit financing is fine, it seems, when it comes to tax cuts. But that's not all. Under the new rules, not only are tax cuts exempted from the pay-go concept, but the only way to pay for spending increases is with spending cuts elsewhere. No tax increases allowed - not even in the form of eliminating loopholes or cutting back on tax breaks. Of course, if you wanted to expand the loopholes, no problem. No need to pay for that.

Having made clear that no tax cuts need be paid for, the rules then take the extra step of specifying which deficit-busting tax cuts the new majority has in mind. They assume the continuation of all the Bush tax cuts; extension of the new version of the estate tax; and the creation of a big tax break to let "small businesses," which can be expansively defined, take a deduction equal to 20 percent of their gross income.

Tax cuts for the wealthiest are fully protected. But tax help for those at the other end of the income spectrum? Forget it. The expansion of the Earned Income Tax Credit and the Child Tax Credit, programs that help keep low-income working parents and children out of poverty, are not assumed to continue and would have to be paid for - with, of course, spending cuts. This is about as upside-down a set of priorities as can be imagined.

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