Tax Analysts Blog

Legislative Limbo

Posted on Dec 1, 2017

I write this as the sun is rising on Capitol Hill. It’s a brisk Friday morning, the first day of December. Senators should already have flown home for their five-day weekends. But Elizabeth MacDonough and Tom Barthold have made that impossible. Elizabeth is the Senate Parliamentarian, the unelected but respected referee who rules on what is in and out of bounds of Senate rules. Tom, with a Harvard Ph.D. and 30 years of Capitol Hill experience, is the well-liked chief of staff of the Joint Committee on Taxation, which scores tax bills on their budget impact. Congress should provide them both with striped shirts and whistles (and now maybe Kevlar vests). 

Senators are flummoxed because Elizabeth won’t let them insert tax triggers into the special-procedure reconciliation bill. Triggers would have appeased Senators Bob Corker of Tennessee and Jeff Flake of Arizona who have promised not to vote for a bill if reputable sources estimate the legislation would increase the deficit. You can’t get a source more reputable than Barthold and his colleagues at the JCT. And now they’re saying—even when they include dynamic effects that Republicans have sought for over two decades—that H.R.1, the Tax Cuts and Jobs Act, reduces taxes too much and boosts the economy too little.

If I remember my Catholic school catechism correctly—and I proudly report I was an A student in this course—limbo is a place (not to be confused with purgatory) between Heaven and Hell. It is where unbaptized babies are sent because they still have original sin. Technically, they should go to Hell for that. But since they are innocents, they are granted an exception to the general rule.

Senators now are in legislative Limbo. Heaven is passing the bill. Hell is failure. Many of the senators seem so innocent. They have that proverbial deer-in-the-headlights look. They didn’t know the trigger was out of bounds. Nobody told them they easily could be overpromising revenue-neutrality by $1 trillion.

So now the all the majority leader’s horses and all of his men are trying to put this Humpty-Dumpty bill back together again. They say they might have it fixed by the time sun reaches its highest point on this December day. That would be a feat worthy of the record books. Please remember it’s not just deal making. It’s deal-making where every offer and counteroffer must be scored by the number-crunching JCT staff who are already numb with exhaustion. And, by the way, they are not allowed to make mistakes.

The challenges are formidable. Senate Republicans need $350-$500 billion to appease Corker and Flake on their deficit concerns (Why so “little”? It is, after all, a $1 trillion tax cut). They must find something like $200 billion to retain deductibility of at least $10,000 of property tax to appease Sen Collins, R-Maine, and the House of Representatives. They need more money for passthrough businesses that Sen. Ron Johnson, R-Wis., insists are being short-changed. And perhaps another $200 billion more to appease Sens. Marco Rubio, R-Fla. and Mike Lee, R-Utah, who want more tax relief for the middle class in the form of an expanded child credit.

I’m glad I’m not on that staff any more. Sleep deprivation is torture that was commonly used by the Soviets. We’ll have to wait and see--for how long nobody knows--for major changes, of what kind nobody knows. It seems like the process is a little rushed. Senators themselves admit they don’t understand what’s happening. We the people who pay the bills haven’t a clue. Maybe we should have had a hearing.

This blog—and so much more—is dedicated to my former editor and CEO at Tax Analysts Chris Bergin, who sadly has passed away. Chris, we are still fighting the good fight.

Read Comments (4)

Edmund DantesDec 1, 2017

"And, by the way, they are not allowed to make mistakes."

You are joking, right? We know one thing for certain, every single number from JCT is wrong. It's the best guess we can come up with, but it is only an educated guess. The number itself, whatever else it may be, is mistaken. History repeatedly proves this observation. If the numbers prove to be within 10% of accurate, it would be a miracle.

You know that unanticipated economic events are going to swamp all of these estimates. Remember a year ago when the CBO predicted that the DOW would cross 24000 in 2018? Me neither, no one made that prediction, not even the most ardent Trump supporter. But it happened, and so all of the prior tax estimates that failed to take that fact into account are now nothing more than waste paper.

This legislative process has moved from the absurd to the surreal. Why are we straining at gnats and swallowing camels?

Elliott J DubinDec 1, 2017

Try predicting the responses of households and businesses to the major changes in the tax code over the next ten years. If you have a better track record in making these predictions, you're welcome to do it.

Of course, your assumptions must be tested empirically, your model must be run using the more accurate of your assumptions to test for robustness, you should present a range of estimates to show that you know that there are errors and unknowables. You must also factor in a range of responses of the Federal Reserve Bank, changes in foreign exchange rates, future recessions, and wars. I probably left out stuff. Furthermore, you must do all this within the extremely short time frame granted to you by Congress. The best that can be hoped for in running these econometric models is reasonableness and a good faith effort.

Edmund DantesDec 1, 2017

I agree with you. No one does it better than the JCT, and they do it in good faith. But they are pretending to have a precision that is simply not possible, and the Senators are blindly accepting that precision as accurate. They should not do that.

Martin SullivanDec 1, 2017

You are correct. No rev estimate is correct ex post. But we hope that ex ante they are as accurate and as unbiased as possible. When I on staff estimated House bill I made $700 million mistake. When it had to be changed in Senate my correction was not well received to say the least.
What I was mostly thinking of - but did not explain clearly - was that mistakes are awful when they are made in drafting. I personally saw members agree to allow a $1 billion drafting error stand. Pressure on drafters and estimators are enormous. Especially when negotiations have reached a fevered pitch.
They are not pretending to have attained precision (even though members may treat estimates as gospel) but they do aspire to it.

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