Caught between soaring national debt and their tax-cut ambitions, Republicans are considering an accounting maneuver to sidestep the budgetary impact of their legislative agenda. Facing internal disagreements over spending cuts, the GOP may use a controversial method known as the “current policy baseline” to effectively sweep nearly $5 trillion in debt off the books.
At the heart of the issue is the extension of key provisions from the 2017 Trump tax cuts, which are set to expire in 2026. Under standard accounting rules—known as the current law baseline—the Congressional Budget Office (CBO) assumes these cuts will expire as scheduled, meaning any extension would officially add to the deficit. But under the current policy baseline, Republicans could pretend those tax cuts were always meant to be permanent, allowing them to renew the provisions without accounting for their cost.
PwC tax expert and former Senate aide Rohit Kumar described the maneuver as a “$5 trillion question.” If Congress directs the CBO to score the tax plan using the current policy baseline, the official deficit impact would appear much smaller, even though the real cost remains unchanged.
“It’s obviously a big deal,” said Jane Gravelle, an economic policy expert at the Congressional Research Service. “Everything having to do with the debt is a big deal, because we’ve got a big problem with the debt.”
Debt and Deficits on the Rise
The timing of this debate is critical. The national debt has soared to $36 trillion—about 120% of the U.S. economy—with the budget deficit hitting $1.83 trillion in 2024. Projections from the CBO indicate the annual shortfall could reach $2.7 trillion by 2035, with total debt skyrocketing to $59.3 trillion if no major policy changes are made.
Republicans argue that extending the tax cuts is necessary to keep the economy competitive, but fiscal hawks within the party worry about adding to the deficit. Speaker Mike Johnson (R-La.) has promised to find budget cuts to offset the cost, though GOP lawmakers have yet to agree on where those cuts would come from.
“We don’t want to blow a hole in the deficit,” Johnson said on Fox News, “but we’re definitely going to get [the tax cuts] extended.”
A Familiar Playbook
This wouldn’t be the first time lawmakers have played with accounting assumptions to make policies appear less costly. Republicans used budget reconciliation in 2017 to pass the Trump tax cuts with a simple majority in the Senate, which is why many provisions were designed to expire in 2026. Similarly, Democrats have also relied on optimistic projections—such as when the Obama administration assumed certain tax cuts would remain in place in 2012.
But some experts warn this approach is little more than a “gimmick.”
“If you assume a current policy baseline where everything is extended, then it looks better on paper,” said Alex Muresianu of the Tax Foundation. “It’s just a gimmick in terms of the actual fiscal position of the United States.”
The CBO has accommodated such requests before. In 2021, Republicans asked the agency to score Biden’s Build Back Better plan assuming all policies were permanent. The price tag jumped from $367 billion to $3 trillion, demonstrating just how much baseline assumptions can shift the perception of fiscal impact.
Debt Ceiling and Market Concerns
As Republicans debate their tax strategy, they also face another high-stakes challenge: raising the debt ceiling. The U.S. credit rating was downgraded by Fitch in 2023, following a partisan standoff over the debt limit. Some analysts believe the bond market’s recent volatility—where long-term interest rates have risen despite Fed rate cuts—suggests growing investor unease over America’s fiscal trajectory.
What’s Next?
With Republicans failing to reach a budget consensus at their recent Florida retreat, they may split their tax plan into two separate bills to improve its chances of passage. Speaker Johnson has pledged a vote on a budget framework by the end of February. However, deficit hawks like Rep. Ralph Norman (R-S.C.) remain skeptical of any plan that doesn’t include deep spending cuts, calling a proposed $500 billion reduction a “nonstarter.”
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