If the proposed debt limit deal becomes law, it will charged with coming up with $1.5 trillion in deficit reductions by Thanksgiving. If the committee fails to do so or Congress does not pass its recommendations by the end of the year, there will be more than $1 trillion automatic spending cuts unless a balanced budget amendment to the Constitution is sent to the states.
The automatic spending cuts and the mandatory up or down vote on recommendations give the commission some teeth that many similar panels have not had. Which makes the question of how it will reach its $1.5 trillion in savings an important one. Specifically: Will it follow Republican demands from the current debt limit debate that it only include spending cuts? Or Democratic demands for a "balanced" approach that also includes revenue increases?
In an effort to win over skeptical fiscal conservatives, House Speaker John Boehner said in a PowerPoint presentation to his caucus Sunday that it will be "impossible" for the commission to raise taxes. The White House, seeking the backing of rank-and-file Democrats, says that the deal "100 percent" does allow for revenue increases.
So who's right?
The key factor in figuring that out is the notion of a "current law baseline." That sounds complicated, but it isn't: It just means that you are measuring the cost of spending against the existing law, not what might happen in the future if changes to that law are made.
The non-partisan Congressional Budget Office's current law baseline assumes two big things: That the Bush tax cuts will expire at the end of 2012, as the law now says they will, and that the government will not make any changes to the so-called Alternative Minimum Tax, which requires some taxpayers to pay at least some taxes even if they have many deductions that might otherwise exempt them from taxes. If the Bush tax cuts are allowed to expire and the AMT is not patched, the government will take in $3.5 trillion more than it would otherwise.
Here's where it gets a little tricky. Boehner says that the commission will have to follow the CBO's current law baseline. And he is arguing that unless the committee decides to increase revenues by more than that $3.5 trillion - which won't happen in a deal where you only need $1.5 trillion - its efforts won't be considered deficit reduction.
This is how a GOP aide explained it to the Washington Post: "With current law as the baseline to measure deficit reduction, efforts by this Joint Committee to increase revenue would not officially 'reduce the deficit' unless the proposed tax increases are in excess of $3.5 trillion -- in other words: tax hikes aren't going to be a part of this deal."
But that seems to be fiscal slight-of-hand. If the committee agrees to even partially extend the Bush tax cuts, for example, it could do all sorts of things to raise revenues. By the CBO's baseline, those revenue increases could actually count as tax cuts -- since they are offset by the partial extension of the Bush cuts. The scheduled expiration date on the cuts thus provides at least some cover for Republicans when it comes to possible increased revenues.
And there's another issue: According to the White House, the committee can use whatever baseline it wants. Pressed on Republican claims that the commission can't increase revenues at his briefing Monday, White House Press Secretary Jay Carney flatly called such assertions "false."
"Nothing in the legislation that's being considered by Congress specifies at all that the committee operate under any specific baseline," he said. Carney added that it is "certainly our expectation that that product will include revenue as well as other areas of finding deficit reduction." Asked about Carney's claim, Boehner's office told CBS News that using the current law baseline is required under the 1974 Budget Act.
If this seems confusing, don't worry: It's supposed to be. Boehner needs a deal he can sell to his members, and making the case that it doesn't allow for tax increases makes that easier; the White House needs to maintain to Democrats that revenue increases are in the cards, and it thus asserts that it expects the commission to include them.
This confusion over baselines allows the two sides to make relatively-plausible competing cases and thus improve the chances of getting the bill passed. But it doesn't mean there won't be a nasty fight on revenues in a few months.