At the end of this month, over 80 tax and spending policies are set to expire. How lawmakers deal with any extensions of these policies has important implications for the federal budget and could represent either a step forward for fiscal sustainability or else a step backward.

The long list of expiring policies includes often renewed policies such as the Alternative Minimum Tax (AMT) patch, so that the AMT does not hit middle-income families; the "doc fix" meant to prevent a 27 percent cut in Medicare physician payments; economic recovery measures such as extended unemployment insurance benefits and a temporary two percent payroll tax cut; as well as a number of so-called "tax extenders" such as the research and experimentation tax credit.

Lawmakers need to address these expiring policies in a fiscally responsible way. Absent offsets, these extensions could add hundreds of billions of dollars to the debt from a one-year extension and trillions over the longer-term.

Ideally, lawmakers would address all of the expiring provisions within the context of a comprehensive fiscal plan that stabilizes and reduces debt relative to the economy this decade. However, since they only have a few weeks to address the expiring provisions, lawmakers must fully offset the costs of any extensions with real, gimmick-free savings.

Lawmakers can no longer afford to add to the nation's already dire fiscal outlook, which could deliver a blow both to the future strength of the economy and to the confidence that credit markets have about the United States' commitment to fiscal restraint and ability to finance its debt.

At the same time, lawmakers need to avoid steps that move the fiscal debate backward, including:

1. Deficit-financing the costs of extensions or using gimmicks to artificially inflate the offsets. Paying for the costs of any new policies should be a minimum requirement, and not achieving real offsets -- either through providing no offsets or relying on gimmicks -- must be avoided. Ideally, any permanent fixes should occur only if accompanied with a plan to put the debt on a sustainable path.
2. Dismantling the sequester or otherwise adding to the deficit in exchange for the extensions. Unable to reach political consensus on offsets, politicians may instead start trading additional deficit-increasing policies, such as extending the 2001/2003/2010 income tax cuts or weakening the sequester now in effect as a result of the Super Committee's failure, so that a package is a short-term win for both parties but a loss for the next generation. This is unacceptable, particularly in the cases mentioned above which represent two of the central motivators for continued negotiations on deficit reduction.

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