A new analysis predicts that the national debt will increase by 24% if the provisions of the Democrats’ social spending bill are made permanent.
The $1.75 trillion Build Back Better Act — which contains many portions of President Biden’s economic agenda — would introduce or expand various federal programs, including universal preschool, childcare subsidies, and climate change initiatives.
The Penn Wharton Budget Model — a nonpartisan public policy research initiative at the University of Pennsylvania’s Wharton School — evaluated the legislation under two sets of assumptions. If the Build Back Better Act’s programs expire without renewal from Congress, the analysts foresee a modest impact upon debt:
In the first scenario, PWBM presents the spending and revenue provisions ‘as written’ in the legislative text where certain provisions sunset within the 10-year budget window. Under this scenario, we project that the long-run trajectory of public debt would be 1.5 percent larger and that GDP would be 0.2 percent lower in 2050 relative to baseline projections.
If the Build Back Better Act’s provisions are extended, the national debt would balloon as economic output declines:
Under the second scenario, we assume that temporary provisions of the proposal are extended permanently. We find that, against baseline projections, government debt would be more than 24 percent larger in 2050 and GDP would be about 3 percent lower in the same year.
Another report from the Committee for a Responsible Federal Budget said that the true cost of the bill may be $4.9 trillion due to a number of “arbitrary sunsets and expirations.” The group argued that in its present state, the Build Back Better Act will increase federal deficits by $800 billion over the next five years and $200 billion through 2031. If provisions of the legislation are made permanent, deficits could rise by $3 trillion over the next decade.
In an interview with Jimmy Fallon, President Joe Biden claimed that “every single bit of that bill is paid for” and will “not increase the deficit one penny.” Though he also argued that the Build Back Better Act would not raise taxes on anyone making under $400,000 per year, a report from the Tax Policy Center found that many of middle-income households would pay more in taxes as time passes:
Taking into account all major tax provisions, roughly 20 percent to 30 percent of middle-income households would pay more in taxes in 2022. However, their tax increases would be very small. Among those with a tax increase, low- and middle-income households would pay an additional $100 or less on average. Those making $200,000-$500,000 would pay an average of about $230 more…
In general, the combined effects of these changes would result in many households paying higher taxes in 2023 than in 2022. They would shrink the average 2023 tax cuts for low-income households, raise taxes slightly for moderate-income households, and increase taxes significantly for the highest-income households.
On social media, Tesla and SpaceX CEO Elon Musk likewise shared concern over the Build Back Better Act’s implications.
“There is a lot of accounting trickery in this bill that isn’t being disclosed to the public,” said Musk, concluding with a famous quote from economist Milton Friedman, which President Ronald Reagan often borrowed: “Nothing is more permanent than a ‘temporary’ government program.”