Axios has a report out about how President Biden’s team is finally coming to the realization that with razor thin majorities in Congress, maybe it was a bit of overreach to try to shove a sweeping social agenda into one massive bill and then ram it through on a pure party-line vote. But in the meantime, they are settling on a new bogus spin to sell the $3.5 trillion bill: In reality, it costs nothing.
The report notes, “In branding some Democrats wish had started months ago, White House chief of staff Ron Klain said Sept. 15 at the SALT financial conference in New York: ‘The net cost of Build Back Better is zero.’” Now, White House spokesman Andrew Bates tells Axios: “The bill’s price tag is $0 because it will be paid for by ending failed, special tax giveaways for the richest taxpayers and big corporations, adding nothing to the debt.”
To start with, there is no evidence that Biden’s plan raises enough money to pay for the spending, because there is no final legislation. So far, Democrats have been talking about a $3.5 trillion spending bill, but the tax hike package approved by the House Ways and Means Committee raised about $2.1 trillion. Democrats are so far away from getting any sort of final bill that there isn’t even anything on the spending side for the CBO to evaluate. Biden’s proposals could cost much more than $3.5 trillion. Remember, for months supporters claimed the $550 billion infrastructure bill was going to be fully paid for, but then the CBO estimated that it actually would add $256 billion to deficits — in other words, about half paid for. It’s also worth remembering that Democrats have made no commitment to pass legislation that is fully offset. The reconciliation instructions they are operating under allow for any legislation to add $1.75 trillion to the debt.
Let’s for a moment put this aside and assume that Democrats will find enough taxes to raise to offset all of the new spending. It still does not mean legislation is cost free as it will certainly cost money to the individuals and businesses who would have to pay higher taxes. Also, as I wrote in more detail a few months ago, just because the government raises taxes enough to finance new spending, it doesn’t mean that the new spending has no fiscal impact. Any time the government raises taxes to pay for newly-passed spending it taps revenue sources that are no longer available to meet existing obligations. Increasing spending, in every circumstance, increases the burden on government finances.
Some liberals have been complaining for months that when the 2017 Republican tax bill was being described, it was always from the perspective of net cost. But when discussing significant changes to one side of the ledger (in that case, revenue) it makes perfect sense to discuss what the net effects would be. So if Democrats were planning to offset the new $3.5 trillion by cutting $3.5 trillion in spending from elsewhere in the budget, they would have a much better case. But they aren’t, they are talking about imposing higher costs on taxpayers, and saying something is cost free.
The White House formulation — that the tax hikes involve “tax giveaways” — is an effort to make tax cuts and spending into the same thing categorically. But unless we’re talking about actual “giveaways” (such as tax credits that can exceed a person’s actual tax obligations), tax cuts merely allow people to keep more of their earned income. To suggest reducing tax rates amounts to a “giveaway” is a fundamentally authoritarian perspective, that views all money as the property of the federal government by default, with every dollar untaxed dollar treated as a government transfer payment.
The Biden White House spin is a deeply dishonest way of presenting things. It would be like a business spending $1 million to expand, raising prices to pay for the expansion, and claiming that the expansion cost $0.
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