House Republicans are having a lot of trouble figuring out what to demand from President Obama in exchange for raising the debt ceiling.
It’s not going to be to repeal Obamacare or the individual mandate or huge spending cuts. They’ve learned their lesson from last Fall and want to make a “realistic” demand.
But their newest potential plan increases the deficit with a fake spending offset that their Senate colleagues just rejected yesterday.
Let me explain.
So far, they’ve considered (and rejected) repealing Obamacare’s risk corridors and approving the Keystone XL pipeline. Since Democrats won’t vote for anything except a clean debt ceiling increase, the Republican leadership cannot lose many votes no matter what they decide. Neither the risk corridor repeal or approval of the pipeline had enough Republican support to pass.
Now, House leadership is considering undoing the changes that the budget agreement made to the cost-of-living-adjustment (COLA) for military pensions. Of course, doing that costs money – you didn’t think that Republican debt ceiling extortion actually had something to do with the deficit, did you?
So, how are they going to offset the cost? Nothing has been settled on, but Politico’s Jake Sherman and Burgess Everett report that they may use a budget gimmick known as “pension smoothing” to do so. Pension smoothing allows companies to underfund their pensions in the next few years, boosting their profits, and thus increasing government revenues. Thus, the Congressional Budget Office (CBO) shows this as reducing the deficit over the next decade. But beyond that, it increases the deficit, because those firms eventually have to make those pensions contributions, reducing their future profits and therefore government revenue as well. This chart from the Committee for a Responsible Federal Budget demonstrates this:
It also increases the chance that the government will need to bailout companies in the future that can’t meet their pension obligations.
Basically, it’s a budget gimmick that doesn’t save money and makes the pension system more unstable.
This is what Republicans want to use as an offset for restoring the COLA changes to military pensions.
I wrote about this last week when Senate Democrats planned to use it to offset the cost of a three-month extension to unemployment benefits. Yesterday, they tried that, but Senate Republicans filibustered it. Democrats would rather add the cost of the UI extension to the deficit so if Republicans require a budgetary gimmick to make that happen, that’s fine. Unfortunately, only four Republicans joined with the Democrats, so the bill fell one vote short. Republicans correctly pointed out that it’s a gimmick.
But if that’s the case, then the potential House debt ceiling bill should be DOA in the Senate even if every Democrat were to vote for it. If the remaining Senate Republicans think pension smoothing is a gimmick when used to offset the cost of unemployment insurance, surely it still is if it is used to offset the cost of restoring changes to military pensions.
Of course, no Senate Democrat will vote for it out of principle that the debt ceiling cannot be used as an extortion device. This is all going to end in a clean debt ceiling increase anyways.
But the current (reported) House Republican strategy is still incredible: They cannot agree on a debt ceiling demand and the one they are currently considering increases the deficit. To offset the cost, they may use a budgetary gimmick that Senate Republicans just filibustered yesterday. What a mess.
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