It’s the Washington equivalent of a new Beyoncé album dropping: The Congressional Budget Office just released its “score” of the latest version of the Build Back Better bill. The House hopes to pass the bill Thursday night, and centrist Democrats may have been waiting to hear a bad deficit score to cut back or kill the bill.
But it turned out that the CBO score looks quite good for the BBB. It found that the bill will increase the deficit, but within a margin that should permit an important principle to kick in: While we should take the CBO’s analysis into account, we should also remember that there’s always a good bit of uncertainty in its projections.
Let’s first review what CBO found. Taking into account the various provisions, the CBO estimated that in total, the BBB would increase the deficit by $367 billion over 10 years.
On one key question — how much money will be raised by providing $80 billion to increase IRS enforcement on rich tax cheats — the CBO said it would raise $207 billion over 10 years, meaning the net savings would be $127 billion.
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But while the $207 billion in savings wasn’t included in CBO’s top-line numbers, the $80 billion in enforcement was. Subtract that $207 billion, and it means the CBO thinks this bill will raise the deficit by only $160 billion.
That’s $16 billion a year. In the scope of the federal budget, that’s a tiny amount.
On top of this, many people think CBO’s figure on the cost savings from tax enforcement is a drastic underestimate. The Treasury Department estimates that it would generate $400 billion in revenue, for a net savings of $320 billion, almost $200 billion more than CBO thinks. If Treasury is right, the bill’s effect on the deficit is almost nothing.
The core dispute is over whether, in the face of IRS enforcement, wealthy tax cheats would find new ways to avoid taxes (as the CBO believes), or whether more would actually pay up. Treasury believes the latter, projecting new revenue will come directly (from people forced to pay what they otherwise wouldn’t), and indirectly (as enforcement convinces rich scofflaws to stay on the straight and narrow).
Giving BBB a big boost, former treasury secretary Lawrence H. Summers, who has been critical of the Biden administration, argues that the more optimistic scenario is correct, noting that the way CBO calculates gains from enforcement “is conservative to the point of implausibility.”
Summers says that even Treasury’s $320 billion estimate is too small. He thinks the revenue gain could be twice as large, and others think it will be even higher.
Who’s right? We can’t know for sure, which points to the reason it’s foolish to act as though the CBO’s predictions are necessarily the correct ones. There’s a lot of guesswork involved. And like anyone else, CBO brings its own assumptions to its projections, assumptions which themselves may be right or wrong.
Which is a good reason to take its predictions as useful information but not gospel — and not let those predictions be the deciding factor in whether a bill should or shouldn’t become law.
Here’s the good news: All the Democrats in the House, even the moderates who have expressed deficit fears, seem to realize that. They’ve had a reasonable debate with the CBO over its assumptions, but after the score was released, House Speaker Nancy Pelosi (D-Calif.) announced a vote on the bill for Thursday night. Pelosi wouldn’t schedule that vote unless she felt sure the bill would pass.
So overall, while we can’t be certain what will happen, this seems like more good news. Democrats held a long argument over the revenue and deficit side, and that seems to have been resolved. They held a long argument over the bill’s provisions, and while a lot was left on the cutting room floor, the story now is what the bill contains.
The climate provisions, the effort to cut the price of prescription drugs, the expansion of access to health care on multiple fronts, the move toward universal pre-K, the child tax credit, which has already slashed child poverty — are they important? Will they make a difference in people’s lives and our future? If these things are worth doing — and they are — even if the revenue falls a bit short, it will still have been the right choice. That’s what matters in the end.
So this bill will likely pass the House. Once it does, the bill will go to the Senate. Where everything depends on a certain senator from West Virginia.