The much-anticipated score for the latest iteration of Team Biden’s Build Back Better confirms what everyone expected from the Democrats: The bill President Joe Biden claims “costs zero dollars” is paid for only by using budget gimmicks.
According to the Congressional Budget Office cost estimate, the House version of the social-infrastructure bill will increase deficits by $160 billion over the next 10 years. Getting rid of the gimmicks, however, shows the bill would increase new spending by a third and lead to deficit increases of over $700 billion.
Democrats will claim the bill is paid for because CBO underestimates the amount of money that the IRS will be able to wring out of taxpayers by hiring more bureaucrats to audit tax returns.
CBO estimates that increased tax enforcement will raise only $207 billion; Biden’s Treasury estimates that having an IRS agent in every CPA’s office would raise more than twice as much, $480 billion. That difference of $273 billion is more than the CBO’s score of $160 billion, so Dems will claim the bill is more than paid for.
This simple statement ignores that many new programs in the legislation are expected to end after a couple of years — even though that’s not likely. Examples of this gimmick abound and run from the minor to the major.
A relatively small-dollar gimmick is the temporary expansion of financial aid for college students. The bill provides a four-year hike in Pell Grants and other programs that the CBO scores at $12 billion. In reality, the cost will exceed $30 billion when all is said and done because lawmakers will be unable to “cut” financial aid in four years.
Similarly, the bill provides more money to states through 2025 for the Medicaid program at a cost of $10.4 billion; extending it through the budget widow would add another $20 billion to the cost of the bill.
Much has already been written about the cleverness of the compromise to provide increased child-care subsidies and universal preschool for only six years. It’s long-term but not permanent. The CBO says these programs will cost $382 billion as written. Making them permanent, as many lawmakers, want will add at least another $300 billion to the cost.
The same cleverness is found in the green-energy subsidies. Many are provided in large payments for 2022 that will be ripe for continuation when the money runs out.
Perhaps the most outrageous, in-your-face example of playing the timing game comes from Chairwoman Maxine Waters’ Financial Services Committee. It provides all its $150 billion bogie in Year 1, with most of the money spent after seven years. Taxpayers can expect lawmakers won’t allow those subsidies for public and affordable housing to lapse, at a minimum cost of $50 billion.
Democrats will focus on the 10-year cost of the bill when congratulating themselves on fiscal restraint but focus on the political benefits of all the goodies they’re providing to voters before the next election. Based on the CBO estimate, deficit spending before the next election would exceed $175 billion. The full-year deficit will increase by 13 percent, to $1.3 trillion, but don’t expect Democrats to talk about that.
The bill provides huge amounts of added government spending at a time the economy doesn’t need more fiscal support. Too many dollars are already chasing after too few goods. Build Back Better will only exacerbate the current “transitory” spate of inflation.
We have become numb to the budget games both parties play. Federal deficits haven’t mattered because interest rates have been low. Deficits will matter when interest rates rise, fueled by the Biden inflation we are all beginning to feel, and debt service costs spike.
That’s when Democrats will look to middle-class tax hikes to pay for the continuation of spending programs they never really paid for today. It’s only a matter of time if this budget buster makes it to the president’s desk.
Dan Kowalski is a former counselor to the secretary of the Treasury and a former deputy staff director for the US Senate Budget Committee.