The Fiscal Gambit at the Center of the Shutdown

A political party with total control of Washington wants to put more money back in the pockets of Americans. Doing so is expensive, and so the lawmakers vote to put a new policy in place for only a few years to hold down the cost. The hope is that once it is actually set to end, even lawmakers who initially opposed the policy will want it to continue, fearful of taking a benefit away from voters.

Sound familiar?

This is the strategy at the heart of the government shutdown. Democrats used it when they passed expanded health insurance subsidies three years ago, scheduling the benefits to expire this year so they had to pay for them only temporarily. Now they want the subsidies continued as part of a deal to reopen the government.

It is a tactic with a long history. Republicans have repeatedly used it to transform what were initially temporary tax cuts into permanent reductions in government revenue. Indeed, much of the nation’s current fiscal predicament is a result of lawmakers’ hesitation to let policies expire as scheduled.

“This has been going on steadily,” said Doug Holtz-Eakin, a former director of the Congressional Budget Office and a former Republican budget aide. “You back the expiration up against an election, and if you’re not in power, you force the other party to deal with it or suffer negative consequences.”

“This is designed for games of chicken and a standoff,” he added, “and we’re living through that now.”

Republicans pioneered the modern approach under President George W. Bush, when the party passed sweeping tax cuts and scheduled them to expire a few years later. When the tax cuts were set to end during the Obama administration, Democrats, nervous about letting taxes go up, struck a deal to permanently continue them.

The next time Republicans had full control of Washington, in 2017, they again cut taxes only temporarily so that the cost estimates at the time would be lower. Taxes for many Americans would have returned to higher rates at the end of this year if Republicans had not passed a sweeping law this summer making many of the 2017 cuts permanent.

“As a tactic, it’s been immensely successful,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, a group that seeks lower deficits. “This game of limping along and pretending in fake expirations with the expectation that they will get extended anyway has been utilized in numerous ways.”

Many Democrats would have supported passing the health insurance subsidies for the longer term, but the party was also trying to reduce the recorded cost of the overall piece of legislation. So the 2022 law, the Inflation Reduction Act, created the cliff that lawmakers are now facing, which threatens to raise insurance premiums by more than 100 percent for the average consumer in the Affordable Care Act market.

“What the Democrats did on the Affordable Care Act subsidies is a smaller-scale version of what Republicans have done both in 2017 and 2001, 2003,” said Aviva Aron-Dine, who worked on tax policy for the Biden administration.

Republicans have blasted Democrats for insisting that they will support government funding only if it includes extending the health care subsidies. Yet some G.O.P. lawmakers also seem wary of letting health care costs skyrocket in a midterm election year. Republicans in the House and Senate have signaled support for extending the insurance subsidies.

But it is not inevitable that lawmakers will extend an expiring policy, even if failing to do so raises costs or claws back a benefit for many Americans. Under the Biden administration, for example, Democrats had also approved a temporary, one-year expansion of the child tax credit. The policy sent monthly checks to many American families with children, helping to significantly reduce child poverty in the United States. But continuing the larger child tax credit was expensive, and Senator Joe Manchin III, Democrat of West Virginia and a pivotal vote, opposed continuing such a huge outlay. The benefit ended after one year without any visible political backlash.

Given that history, Ms. Aron-Dine said it was still unclear whether the current attempt on health care would pan out. “If the theory was that you could run this play on policies targeting health care for moderate and middle-income people, the jury is still out on whether it’s going to work,” she said.

It is this risk that prompted Republicans to make many of the 2017 tax cuts permanent this year, rather than extending them only temporarily. Achieving that meant bypassing a decades-old rule in Washington that barred lawmakers from increasing the deficit over the long term without bipartisan support.

To do so, Republicans argued that extending the existing tax cuts should not be counted as a new cost to the budget, even if the tax cuts had been scheduled to end. Republicans used this accounting gimmick to wipe away the $3.8 trillion cost of keeping the tax cuts over 10 years, roughly 10 times the $350 billion cost of extending the health insurance subsidies over a decade.

At the same time, they also piled on a set of new tax cuts, including Mr. Trump’s campaign promises to cut taxes on tips and overtime. But the new cuts are temporary, with several of them set to end in 2028, setting up another political fight over expiring policies that could raise costs for many Americans in just a few more years.

“This is a damaging way to make policy,” said Doug Elmendorf, a former director of the Congressional Budget Office and the former dean of the Harvard Kennedy School. “It makes the true costs somewhat hidden when policies are being discussed, and it makes projections of the federal budget misleading in important ways. And so we would be better off if our elected leaders would honestly face and discuss the cost of the policies they are proposing.”