CBO comes clean on the price tag if the programs are made permanent.
Editorial Board, The Wall Street Journal, December 12, 2021
President Biden’s tax and entitlement plan received what should be a pair of knockout punches late last week. The report of surging inflation has been well covered. But the media have largely ignored the second blow—the real cost of the plan if honestly scored. Allow us to complete the record.
We’ve been telling you for months that the plan’s advertised cost of $1.75 trillion over 10 years includes multiple budget gimmicks that disguise the real cost. The Penn Wharton Budget Model has scored the 10-year cost at about $4.6 trillion, but the White House keeps claiming against all evidence that the cost is “zero.”
Now comes the Congressional Budget Office to report that the claim of zero cost is a Big Con. CBO, a political outfit beholden to Congress, can’t be so blunt. It is constrained by budget conventions imposed by Congress. But even under those conventions, CBO has said the bill would add $200 billion to the deficit over 10 years.
Enter Sens. Lindsey Graham and John Cornyn, who asked CBO director Phillip Swagel to add up the cost of the bill that recently passed the House if all of its programs were made permanent. This is a more honest accounting because Democrats admit both that they want to make the spending permanent and that they’ve adjusted programs to make them fit under the Senate budget rules so they can pass with a mere 51 votes (including Vice President Kamala Harris ).
Mr. Swagel’s response, sent on Friday, is a torpedo speeding toward the hull of Build Back Better. The dishonesty in the $1.75 trillion spending total is astonishing even by Congressional standards.
Take the child allowance, which Democrats say will cost only $185 billion because it ends after one year. No one believes they won’t extend it next year, and the year after that, ad infinitum. CBO says the real cost over 10 years is $1.597 trillion. Democrats also peg their earned-income tax credit expansion at a cost of $13 billion because it too ends after one year. CBO says the real cost is $135 billion over 10 years.
An honest accounting of those two programs alone consumes $1.732 trillion, or nearly all of the $1.75 trillion that Sen. Joe Manchin has said is the most total new spending he’ll support over 10 years.
But there’s so much more. Democrats phase out the child-care and pre-K entitlements after 2027 with a total cost of $381 billion. CBO says the real cost over 10 years is $752 billion if made permanent. They also underestimate the cost of expanded healthcare subsidies at $74 billion by phasing them out in 2025 or 2026. CBO says the real cost is $220 billion.
And don’t forget the spending after 10 years once the subsidies for all of these new programs become embedded in American behavior. This is the main purpose of making these programs into entitlements—to make people more dependent on government from cradle to grave.
One of the bill’s biggest tricks is its restoration of the state and local tax deduction to $80,000 up from $10,000. Democrats pretend that this will raise $15 billion over 10 years because the current $10,000 limit is set to expire after 2025. CBO says the real cost of this Democratic tax deduction for the rich without that gimmick would be $245 billion.
We could go on, and we recommend people look at Mr. Swagel’s letter on the CBO’s website. The 18 programs that Mr. Swagel itemizes in a table with his letter contribute $3.477 trillion over 10 years to the total cost of the House bill—compared with the $889 billion that Democrats claim those same programs cost under their gimmicky rules.
Overall, Mr. Swagel says in his letter, CBO and the Joint Committee on Taxation project that the House bill would increase the deficit by $3 trillion over 10 years without the budget gimmicks and phony phase-outs.
Democratic leaders Nancy Pelosi and Chuck Schumer reacted furiously to this news, falling back on their claims that the Build Back Better Act is “fully paid for.” Mrs. Pelosi says CBO has scored Mr. Graham’s “imaginary bill.” But her bill is the real fiscal fantasy and “fully paid for” is the lie of the year.
All of this gives Mr. Manchin, and other Democrats hiding behind his skepticism, ample ammunition to call the whole thing off. If this bill passes, they’ll own all of the deficits, debt and inflation that result.