In recent days, Tesla and SpaceX CEO Elon Musk has sharply criticized the Biden administration’s social welfare agenda.
Earlier this week, Musk argued that the Senate should not pass the Build Back Better Act. The $1.75 trillion legislation — which the House of Representatives has already approved — would expand various social programs, including universal preschool, childcare subsidies, and climate change initiatives.
“I would say can this bill, don’t pass it. That’s my recommendation,” argued Musk during The Wall Street Journal’s CEO Council Summit. “If this bill happens or doesn’t happen, we don’t think about it at all really. Honestly it might be better if the bill doesn’t pass.”
On Wednesday, the entrepreneur added to his remarks by sharing an analysis from the University of Pennsylvania’s Wharton School — Musk’s alma mater — explaining that the national debt would increase by over 24% if the bill’s provisions are made permanent.
We evaluate the Act under two scenarios. 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.
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.
“There is a lot of accounting trickery in this bill that isn’t being disclosed to the public,” said Musk, noting that the $1.75 trillion price tag is deceptively low due to the early expiration of several programs.
Musk concluded with a famous quote from economist Milton Friedman, which President Ronald Reagan often borrowed: “Nothing is more permanent than a ‘temporary’ government program.”
Nothing is more permanent than a “temporary” government program
— Elon Musk (@elonmusk) December 8, 2021
A similar report from the Committee for a Responsible Federal Budget noted that the true cost of the bill may be $4.9 trillion due to a number of “arbitrary sunsets and expirations.”
The Build Back Better Act relies on a number of arbitrary sunsets and expirations to lower the official cost of the bill. These include extending the American Rescue Plan’s Child Tax Credit (CTC) increase and Earned Income Tax Credit (EITC) expansion for a year, setting universal pre-K and child care subsidies to expire after six years, making the Affordable Care Act (ACA) expansions available through 2025, delaying the requirement that businesses amortize research and experimentation (R&E) costs until 2026, and setting several other provisions – from targeted tax credits to school lunch programs – to expire prematurely.
In its current state, the group says that the legislation 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, however, deficits would rise by $3 trillion over the next decade, they claim.