Is the Build Back Better Bill is fully paid for? It seems to be a never-ending dispute, doesn’t it?
On November 18, the Congressional Budget Office released its cost estimate for the Build Back Better Act, according to which the bill would spend $1.7 trillion over the years 2022 to 2031 and increase the budget deficit by $367 billion during that timeframe. At the same time, the Biden administration contended that the CBO was too conservative in its calculations of new revenue and that increased IRS tax enforcement would fully pay for the bill’s spending.
Immediately afterwards, the House passed the bill with a party-line vote.
In the meantime, Sen. Joe Manchin of West Virgina has been vocal about his concerns with the bill, both that “budget gimmicks hide the true cost of the bill” and that the bill risks exacerbating already-high inflation.
And, at the behest of Republicans in Congress, last Friday the CBO released a new analysis of the bill calculating the effect of the spending plan on the deficit if, at the time when provisions would otherwise expire, Congress were to extend them for the remainder of the 10 year period. This analysis found that a 10-year “permanent Build Back Better” would increase budget deficits by $2.75 trillion.
But President Biden has himself announced a commitment “to paying for every single program that extended, if any are, in future legislation.” White House press secretary Jen Psaki has called this alternative CBO score a “fake” score. Congressional Progressive Caucus Chair Rep. Pramila Jayapal labelled this “fictional scoring.” And on it goes.
Is it appropriate for the Democrats to tout their proposals as if they were permanent programs at the same time as they insist that they are not? Of course not. But this misses a larger point:
By the very nature of the bill, it increases deficit spending.
The Child Tax Credit expansion in the bill lasts (”mostly,” in the Committee for a Responsible Federal Budget’s phrasing) for but a single year, at a cost of $185 billion compared to a $1.6 trillion cost if it extended for the entire 10-year period. With respect to the portion of the tax revenues which fund this provision, then, the bill borrows from 2023 – 2031’s tax revenue to pay for spending in 2022.
The child care and preschool portions of the bill are funded through 2027 at a combined total of $381 billion compared to $752 billion if extended for the entire 10 year period. This means that, with respect to the portion of tax revenues funding this provision, the bill borrows from 2028 – 2031’s tax revenue to pay for 2022 – 2027 spending.
The expanded Obamacare/Affordable Care Act subsidies are funded through 2025 and 2026 (there are two different provisions), with $74 billion in spending vs. $220 if extended for the entire 10-year period. This means that the bill borrows from 2027 – 2031 to pay for 2022 – 2027 spending.
You get the picture. Fundamentally, this is not about the argument whether these are “gimmicks” or honestly designed spending programs.
The nature of Congress’s practice of reporting spending and revenue based on 10-year windows hide the fact that spending actually happens in real time. It may be true that when a spending program happening now, is intended to be made up for by new revenue later, the ultimate effect on the deficit in ten years (assuming no cost for borrowing money), could in theory be zero.
But in the meantime, real money has to be borrowed (or, let’s face it, printed), and whatever the effects may be of deficit spending, those effects will be felt. After all, inflation isn’t a spirit or a being which will restrain itself if it “knows” that eventually there will be more tax revenue coming in. Inflation is simply a measurement of price changes which occur as a result of economic circumstances as they are at the present time. And in that respect, 10-year budget windows simply mean nothing at all.
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