Does anyone else wonder what Joe Manchin thinks of the implications of this new CBO report? Or do we already know what he thinks? Manchin issued new and dire warnings this week about budget gimmicks in the Build Back Better reconciliation proposal, and the CBO has vindicated him today:
The House version of the Democratic climate and social spending bill would increase federal deficits by $3 trillion over the next decade if temporary provisions are made permanent, the Congressional Budget Office estimated Friday.
The numbers were requested by Republicans, who have criticized the Democratic plan as being riddled with budgetary gimmicks to make it appear to cost less. The legislation has several spending items that sunset early that, if made permanent as Democrats intend them to be, would balloon the cost of the bill.
The report from the budget office released Friday is a blow to President Joe Biden’s efforts to push the bill through Congress, as it will add to fears that the spending measure would push the government further into debt and stoke inflation hotter. Democratic Sen. Joe Manchin of West Virginia, in particular, whose vote Biden is counting on, has expressed such worries.
The initial scoring from the CBO only accounted for the legislation as written, sunsets included. The CBO first said that the legislation would increase federal deficits by $367 billion over the next 10 years.
The largest difference, the CBO notes in its summary, comes from the uber-gimmick of having the child tax credit expire next year — a program that Democrats clearly want to make permanent:
This letter responds to a request from Senator Graham and Congressman Jason Smith for a projection of the budgetary effects, including the effects on interest costs, of a modified version of H.R. 5376, the Build Back Better Act. They specified modifications that would make various policies permanent rather than temporary.
The Congressional Budget Office and the staff of the Joint Committee on Taxation project that a version of the bill modified as they have specified would increase the deficit by $3.0 trillion over the 2022–2031 period. That amount includes three components: effects usually counted in CBO’s cost estimates, the effects of increased resources for tax enforcement, and effects on interest on the public debt. Under long-standing guidelines agreed to by the legislative and executive branches, estimates to be used for budget enforcement purposes include the first component but not the second and third.
In comparison, including the same three components, the version of H.R. 5376 that was passed by the House of Representatives would increase the deficit by $0.2 trillion over the 2022–2031 period, CBO projects. The largest difference between the two estimates stems from an increase in the child tax credit that ends after 2022 in the House-passed version of the bill.
Republicans such as Graham and Smith may have requested the report, but Manu Raju knows who the real customer for this is. That’s why Democratic leadership is attempting to get out in front of the report by claiming that Republicans put their thumb on the CBO scale:
Schumer and Pelosi out with statements, saying this is a “fake” CBO report because, they argue, any extensions of the programs would be “fully offset.” “Republicans did not include this important fact in their request,” Schumer says
— Manu Raju (@mkraju) December 10, 2021
This is a nonsense argument on its face. If these programs were truly “fully offset” in their full extended form, there would have been no need for Democrats to created the complicated gimmickry they erected to hide their full cost. They still claim that this version of BBB is also “fully offset,” but the CBO shows it adding at least $231 billion to the deficit. And that’s only after the very sunny predictions of increased revenue from greater income-tax enforcement.
Even before the CBO issued this report, Manchin had repeatedly attacked the bill over the gimmickry in it, with the latest salvo this week:
Manchin noted that the Democrats’ social spending bill would amount to “major changes” in policy on taxes, climate and social services. While Democrats have brought down the price tag of the social spending bill to $1.7 trillion from $3.5 trillion, the West Virginia Democrat said Democratic leadership only changed the amount of time the policies would last.
“One goes for three years, one goes for one year … one might go for the full 10 years, do they not intend for those programs to last the full 10 years?” Manchin asked. “Well if you don’t intend for that to happen, what’s the real cost? Because we’re either going to debt-finance it if we’re not going to pay for it or come back and change the tax code again.”
At the same time, Manchin also insisted that the current wave of inflation argued against any new and massive spending initiatives:
During a Wall Street Journal CEO Council Summit, Manchin indicated that he is still waiting on final text before making a decision on whether to support the Democrats’ $1.7 trillion proposal. But he reiterated his unease about the state of the economy.
“The unknown we’re facing today is much greater than the need that people believe in this aspirational bill that we’re looking at and we’ve got to make sure we get this right,” Manchin said.
Today gives Manchin a two-fer in continuing to oppose the BBB. Inflation hasn’t just continued to rise, it’s now at levels not seen in almost 40 years. The CBO has also made clear that the BBB will make that exponentially worse as Democrats ensure that the sunset provisions on programs like the child tax credit never come into effect. Adding $3 trillion in debt from off-budget spending over the next decade will enshrine inflation as the central feature of the American economy for the next several years. Today’s reports make all of this clear and undeniable.
Senate Democrats had better prepare themselves for disappointment. The Hill reported this morning before both reports, though, that they’re not quite at that point — yet:
They say that if Senate Majority Leader Charles Schumer (D-N.Y.) schedules a vote on a motion to proceed to the Build Back Better Act before Christmas that it will get the support of 49 members of the Democratic caucus and that Manchin’s vote is the only question mark.
While Democratic negotiators acknowledge there are still intraparty disagreements to iron out, such as the details of a proposal to raise the cap on state and local tax (SALT) deductions, and that there’s a big backlog of work at the parliamentarian’s office, they insist everything could get done by Christmas if they had Manchin on board.
The problem, Democratic senators say, is that Manchin is showing no sign of getting behind the $2 trillion bill anytime this month.
One senior Democratic senator said there’s “no question” the bill could pass the Senate by Christmas — Schumer’s goal — if Manchin cooperated.
“We know we have 49 votes,” the senator said, referring to near unanimous support in the Democratic caucus for acting in the next two weeks. “We have 49 people, all we need is Manchin.”
A second Democratic senator said “there are a couple more things to negotiate, which we could complete I think relatively quickly just to get it done, and then the question is whether Manchin is willing to go forward.”
Do they have 49 votes? Has Sinema acquiesced on BBB and brought along Mark Kelly and Catherine Cortez Masto along with her? Or are they just talking about taking a vote as a way to end the politically draining episode once and for all? Given the likely impact of the inflation index and this CBO report, bet on the latter.