President Joe Biden’s Build Back Better Act is likely to end up costing taxpayers about double what the official price tag suggests, and much of that hidden cost will end up being added to the national debt.
That’s the conclusion from two independent analyses of the proposal released in recent weeks. Both rely on a key assumption that did not figure into the Congressional Budget Office’s (CBO) analysis of the bill: that the Build Back Better plan’s various policies will be in place for at least the next 10 years.
“The Build Back Better Act relies on a number of arbitrary sunsets and expirations to lower the official cost of the bill,” explains the Committee for a Responsible Federal Budget (CRFB), a nonprofit that advocates for balanced budgets. The group’s newly updated analysis of the Build Back Better plan finds that the package will cost an estimated $4.8 trillion over 10 years if all provisions are made permanent—double the price tag applied by the CBO last month.
As Reason has repeatedly pointed out, several key parts of the bill are designed to game the CBO’s method for scoring the cost of legislation by setting arbitrary expiration dates even though lawmakers obviously intend for those policies to be permanent fixtures. Probably the best example is the expanded child tax credit, which would expire after just a single year. Other parts of the bill, including the universal pre-K funding and new subsidies for child care, would expire after six years. Expanded subsidies through the Affordable Care Act would last until 2025.
With all those gimmicks in place, the CBO assessment of the bill projects that it will cost about $1.8 trillion and add about $367 billion to the deficit over the next decade.
If all the Build Back Better plan’s proposals were made permanent, however, the final price tag would be $4.8 trillion, and the bill would add about $2.8 trillion to the deficit, according to the CRFB.
“To be sure, lawmakers may choose not to extend some or all of these provisions,” the CRFB analysis states. “However, if they do, they would need to more than double current offsets in order for the bill and the extensions to be paid for. The alternative would be a substantial increase in the debt.”
The CRFB’s projections closely match a similar analysis of the bill conducted in November by the Wharton Budget Model, a number-crunching project housed at the University of Pennsylvania. Making the temporary provisions of the BBB plan permanent, the Wharton analysis found, would raise the overall cost of the package to about $4.6 trillion.
The Wharton analysis also provides a useful illustration of why policy makers engage in this sort of budget gimmickry to pass big spending bills—and, to be sure, this is a game that both Republicans and Democrats are adept at playing.
As currently written—with all those early expiration dates and temporary provisions—the Wharton Budget Model projects that the BBB proposal would add about $274 billion to the deficit over the next decade. It would also result in a 0.2 percent reduction in GDP (relative to expected GDP growth in a reality where the bill does not pass).
Those figures change dramatically when the full scope of the spending package is revealed. If all provisions in the BBB plan are made permanent, “federal debt increase by 24.4 percent and GDP would fall by 2.9 percent relative to current law.” The decline in GDP is due to the fact that higher levels of debt will likely sap future economic growth, because the government will have to pay larger sums of money—extracted via taxes from productive parts of the economy—to service the debt.
In short, by hiding the true cost of the Build Back Better plan’s provisions over the long term, Congress is also able to hide the long-term economic impact of hiking government spending by trillions of dollars.
The Biden administration’s pitch to Americans—and to key holdouts in Congress like Sen. Joe Manchin (D–W.Va.)—has been that the BBB plan won’t add to the deficit and that it will boost the economy. It’s becoming clear that neither is true, no matter how hard Congress tries to hide the true cost of the legislation.
The post Biden’s Build Back Better Act Will Likely Cost Twice as Much as the CBO Projects. Here’s Why. appeared first on Reason.com.
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