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What Does Biden's Spending Bill Really Cost?



House Democrats passed a large bill on Friday that aims to curb climate change, fight poverty and invest in children, workers and families. How large? Probably about $2.2 trillion. But there’s a wide range of other estimates for the price tag, reflecting the difficulties in pinning a true “score” to a plan that has changed a lot over the past weeks and months.

Lawmakers, along with budget experts, haven’t settled on a headline number for the bill, which is now headed to the Senate after a Friday morning vote. That’s because they don’t agree on how to count up all the various programs that President Biden and his party have stuffed into it.

Some are using $1.7 trillion, which is the Congressional Budget Office’s estimate for the bill’s total “direct spending.” The estimate is a useful measure, but not a complete one, because it leaves out some tax benefits that cost the government money, including ones meant to fight climate change.

Some are putting the price tag at as much as $2.5 trillion, a calculation that includes changes to the state and local tax deduction, and which is, for accounting reasons, a bit misleading.

Mr. Biden and his aides have said the bill costs nothing, because, by White House math, it would not add to the deficit over the course of a decade. But $0 is neither an accurate nor a useful way to convey the size of a sweeping piece of legislation that would build affordable housing, provide paid leave to workers, reduce child care costs, establish universal prekindergarten, cut taxes for parents, seek to cut greenhouse gas emissions through a variety of measures and much more.

The simplest and best number to use when discussing the bill — and the one that is most consistent with the price tags that have been attached to earlier versions of it — is $2.2 trillion. That’s the total value of the new government spending programs in the legislation, plus the value of the new tax cuts it includes.

The New York Times had initially called the bill a $1.85 trillion package. That was a number Democrats attached to the “framework” for the legislation known as the Build Back Better Act that Mr. Biden announced late last month. But two things changed in recent days, causing us to recalculate.

First, House Democrats added several items to Mr. Biden’s framework, including a provision that would fund paid leave for workers. That made the package’s price tag bigger.

Then on Thursday, the nonpartisan C.B.O. released its official score of the bill. It’s an estimate of how much the spending programs and the tax cuts would cost the federal government, and how much money would be raised by the tax increases and spending cuts that Democrats are using as “pay-fors.” The C.B.O.’s estimates differed from the administration’s in some important ways.

When you add up the C.B.O. scores for all the spending and tax cuts in the bill — which is to say, all of the things Democrats say will benefit Americans — you get about $2.2 trillion.

The short answer is: paid leave. That measure alone added more than $200 billion to the cost of the bill. A variety of other cost adjustments, like for the housing and immigration provisions in the plan as well as other spending additions, did the rest.

This is a tricky one. The other big change from Mr. Biden’s framework in the House bill is a rejiggering of a limit on the deductions individuals can take on federal income tax forms for the state and local taxes they pay. It’s a measure that would largely help high earners in high-tax states like New Jersey and New York. But oddly enough, it doesn’t add to the bill’s official cost — mostly because the measure is an accounting move, meant to deliver more goodies to certain taxpayers in the short term while taking some benefits away later.

Republicans capped the state and local tax deduction, known as SALT, at $10,000 per household in 2017. Under that bill, the cap would go away in 2026, meaning an unlimited deduction would return. The Democrats’ plan would increase the cap to $80,000 per household for most of the decade before dropping it to $10,000 again in 2031. That means households taking advantage of the deduction would get a significant tax break for the next several years, but a smaller one for the back half of the decade.

Biden’s ​​Social Policy Bill at a Glance


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A narrow vote. The House passed President Biden’s social safety net and climate bill on Nov. 19. Democratic leaders must now coax the $2 trillion spending plan through the 50-50 Senate and navigate a tortuous budget process. Here’s a look at some key provisions:

The budget office found that the change would essentially be a financial wash for the government, raising a bit more over the decade than the current system, since SALT currently maintains a higher cap all decade instead of allowing the cap to disappear in 2025.

Some groups, like the Committee for a Responsible Federal Budget in Washington, have chosen to break off just the early-year benefits of the SALT change and add them to the total cost. The Times isn’t doing that, in order to stay consistent with how we add up the costs and benefits of the rest of the bill, which are measured across the full decade.

Mechanically, yes. Practically, no.

With both the 2017 law and this bill, we’re trying to add up the cost of the parts of the legislation meant to benefit people and companies. That’s the “price tag.”

For former President Donald J. Trump’s cuts, most estimates initially used $1.5 trillion as the cost. This number reflected the amount of money Republicans added to the federal deficit as part of the budget process that allowed them to bypass a Democratic filibuster. It was a net calculation: The law actually had trillions of dollars in tax cuts, partially offset by trillions more in tax increases, but in many cases, they were meant to cancel each other out. For example, businesses got a lower corporate tax rate but had to pay a one-time tax on profits they were holding overseas and shielding from U.S. taxes. Individuals lost their personal exemptions but gained higher standard deductions.

Mr. Trump often bragged about the larger figure — the total amount of tax cuts, without factoring in the offsetting tax increases — but most analysts agreed that the effect on the economy was best measured by the gap between the total cuts and the total offsets. The C.B.O. initially pegged that at $1.5 trillion, then increased the estimate to $1.9 trillion after accounting for interest payments on the borrowing needed to finance those cuts.

The Democratic bill is different. Its benefits are a mix of tax cuts and spending programs, which we are adding together. Those benefits are offset by what’s known as pay-fors — changes that add revenue. But even after taking those pay-fors into consideration, there are reasonable quibbles you could make over what should go in what category.

For example: We count an effort to reduce prescription drug costs as a pay-for, as do many Democrats, because it saves the government money. It also saves money for consumers, so you could argue it should go on the “benefits” side, but as a negative number, which would reduce the price tag to less than $2 trillion.

Yes. Senators are almost certain to amend the House bill, most likely to reduce its cost and bring it more in line with Mr. Biden’s framework. At least one centrist Democrat, Joe Manchin III of West Virginia, has said he does not want the bill to cost more than $1.9 trillion. He also opposes the paid leave program. Other spending and tax cuts could also be curbed. If that happens, the cost of the bill will change again.

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By: Jim Tankersley
Title: How Much Does Biden’s Spending Bill Actually Cost?
Sourced From: www.nytimes.com/2021/11/20/us/politics/biden-spending-bill-cost.html
Published Date: Sat, 20 Nov 2021 08:00:06 +0000

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