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Warren Fiske
By Warren Fiske August 29, 2011
By Sean Gorman August 29, 2011

Scott says debt-limit deal pays for half of Bush tax cuts

U.S. Rep. Bobby Scott, D-3rd, was not pleased with the debt limit deal that became law earlier this month.

He said the measure will lead to deep cuts to programs that help needy families, students and seniors while keeping George W. Bush-era tax cuts that benefit the middle-class and wealthy. Scott has long called for ending the tax reductions.

"The estimated savings of this deal only pay for half of the cost of extending all of the Bush-era tax cuts for another decade," Scott said in an Aug. 1 news release.

Do the savings in the debt deaI come to half the price of keeping the Bush tax cuts? We decided to check.

First some background. The deal passed by Congress earlier this month expanded the nation’s debt limit to $16.4 trillion -- a $2.1 trillion increase the will give the federal government enough money to pay its bills until early 2013.

The measure requires Congress to cut $2.4 trillion out of the budget over the next 10 years in order to meet or exceed the size of the debt ceiling increase.

The deal calls for $900 billion in cuts up front. A recently appointed bipartisan deficit reduction panel is charged with finding an additional $1.5 trillion that could come from spending cuts and revenue hikes, though House Republicans could still block any move to increase taxes.
If the committee deadlocks, there’s a trigger in the legislation that would enact $1.2 trillion of cuts to domestic and defense spending.

So the total reduction would be at least $2.1 trillion and could as much as $2.4 trillion.

Scott, in a phone interview, said he used the $2.1 trillion figure in his comparison of spending reductions to the 10-year cost of extending the Bush tax cuts.

Jason Peuquest, a policy analyst with the Committee for a Responsible Federal Budget, said Scott is justified in using the lower figure. "It seems the $2.1 (trillion) is what people are focusing on most because the goal of the super committee is backed up by this automatic trigger," he said.

Norman Ornstein, a resident scholar of the conservative American Enterprise Institute, agreed. He said there is "at least an even chance" that the deficit panel will not reach an agreement, forcing the total of $2.1 trillion in spending reductions.

The Bush tax cuts were enacted in 2001 and 2003 and scheduled to expire in 2010. Congress, at the end of last year, extended them through 2012.

Scott pointed us to Congressional Budget Office reports that say the total cost of keeping the tax cuts through 2020 is $3.9 trillion.  Of that amount, $3.3 trillion comes from lost revenues and the cost of interest payments needed to service the additional debt caused by the tax relief.

The remaining $600 billion is the cost of maintaining adjustments to the Alternative Minimum Tax. The Bush tax cuts required many Americans who had once itemized their  returns to pay the more expensive AMT. As a result, about 20 million Americans lost part or all of the benefits of the tax relief. Congress came to their aid by increasing AMT exemptions.

Three analysts said it’s legitimate to lump together the expense of extending Bush tax cuts for 10 years with the costs related to increasing the Alternative Minimum Tax exemptions.

"Back when the (initial Bush) tax cuts were in play, a lot of people thought they wouldn’t be given any of the benefits of the tax cuts because more people would be subject to the Alternative Minimum Tax," Peuquet said.

So let’s sum this up.

Scott says spending cuts required by the recent debt-limit deal pay half the cost of maintaining the Bush tax cuts through 2020.

Scott figures $2.1 trillion in spending reductions will result from the agreement. That’s the smallest amount of cuts Congress is required to make under the deal, but it’s a widely-used number because its set in stone.

The CBO says the total cost of extending the Bush tax cuts through 2020 is $3.9 trillion.
That means the spending cuts would equal 53.8 percent of the Bush tax cut costs through the end of the decade.

It’s questionable whether the divided Congress will agree on a bipartisan package of spending cuts and revenue increases to achieve the maximum $2.4 trillion goal in debt savings. If it does, the savings over the decade would equal 61.5 percent of the cost of extending the Bush tax cuts.

But three analysts said Scott’s use of the $2.1 trillion figure is solid. His claim lands close to a moving bull’s-eye and we rate it True.

Featured Fact-check

Our Sources

U.S. Rep. Robert C. "Bobby" Scott office, "Scott votes no on Budget Control Act," August 1, 2011.

Inteview with Bobby Scott, August 24, 2011.

Congressional Budget Office, "The budget and economic outlook: an update," table 1-7, August 2010.

Congressional Budget Office, "The budget and economic outlook: an update," table 1-8, August 24, 2011.

Interview with Roberton Williams, senior fellow at the Urban-Brookings Tax Policy Center, August 25, 2011.

Interview with Jason Peuquet, policy analyst at the Center for a Responsible Federal Budget, August 25, 2011.

E-mail from Jason Peuquet, August 24, 2011.

Washington Post, "Fearing a soaring deficit, many analysts favor letting Bush tax cuts expire,"  September 21, 2010.

Pew Fiscal Analysis Initiative, "Decision Time: the fiscal ffects of extending the 2001 and 2003 tax cuts," May 2010.

PolitiFact Ohio, "Rep. Dennis Kucinich says Bush tax cuts caused a substantial part of the deficit," April 29, 2011.

PolitiFact, "Eric Cantor said, ‘there are no tax increases in this debt limit bill. Period," August 2, 2011.

Email interview with Norman Ornstein, resident scholar at the American Enterprise Institute, Aug. 28, 2011.

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