Howard Gleckman’s criticism of temporary legislation (“The Tax Extenders Ride Again,” May 20, 2008) overlooks the impact of Congressional budget rules. When such rules are considered, a change in law on a temporary (rather than permanent) basis increases political accountability and arguably enhances fiscal restraint.
Consider, for example, the research credit, first enacted in 1981 for a temporary period and generally extended for only one or two years at a time ever since. By passing and continuing the program in temporary increments, Congress has had to take its cost into account for every one of its over 25 years of existence. Each year the credit has been due to expire, Congress has had to determine how to “pay for” its continuation. Even when Congress has simply let the deficit swell and not paid for the continuation, the cost of the program has no doubt crowded out other Congressional spending.
If, instead, the program had been first enacted on a “permanent” basis, the cost of continuation would have disappeared long ago off of the Congressional budget radar screen. The program’s cost, about $8 billion per year, would simply be part of the “baseline” cost of maintaining current law and not require any Congressional approval. No legislator would have to go on record as supporting using $8 billion of taxpayer money to pay for the program for another year. And there would therefore be no crowding out effect—legislators would feel free to support other spending initiatives because the research credit would continue “for free.”
The ability to hide the cost of new spending through enactment of permanent programs is well illustrated by the 2003 Medicare prescription drug legislation. Its cost was estimated to be about $400 billion during its initial ten years, the only period for which costs had to be accounted. Yet its true cost, meaning the present value of all future costs obligated by the legislation, was recently estimated by the Medicare trustees to be about $17.2 trillion. Thus, by passing permanent legislation whose effect extended well beyond the period for which costs were taken into account, Congress made a huge new commitment while taking political responsibility for only a small fraction of its total cost.
The deceptive accounting of a permanent program persists even if Congress subsequently changes its mind and terminates it. For example, suppose that after ten years and $400 billion of costs, Congress ends the prescription drug program because it is too expensive. A repeal of the law as of the beginning of the eleventh year would be accounted for as projected cost savings during the forthcoming ten years. This is because the initial permanent enactment changes the state of current law—the baseline—for all years subsequent to enactment. For programs with growing numbers of participants, the projected cost savings during years 11-20 would likely be greater than the $400 billion of costs for the first ten years. In other words, due to its initial enactment as a permanent law, the ten-year program would appear, for Congressional budget purposes, to have actually saved money.
In contrast, had the drug program been enacted as a temporary measure for only ten years and then allowed to expire, there would be no projected savings from the expiration. Barring estimation error, the temporary legislation would require legislators to take political responsibility for spending exactly the amount—$400 billion—that the program would cost during its ten-year existence.
It is also not clear that Howard’s other concern—that temporary legislation serves as a Lobbyists’ Relief Act—is valid. The basic point is that a temporary feature in a change in law devalues the legislation and therefore should reduce the amounts paid by the private sector to influence the legislative outcome.
None of this, of course, defends any particular change included in the Ways and Means Committee’s recent bill. Bad legislation is bad legislation, whether temporary or permanent.And there may conceivably be other reasons to prefer permanent laws over temporary ones. But if changes are going to be made, then at least from the standpoint of promoting political accountability and fiscal restraint, we should be thankful that the changes are temporary and not permanent.
A draft paper on this topic is attached.
