WASHINGTON — The nonpartisan Joint Committee on Taxation released its initial analysis of Democrats’ major social spending and climate bill Thursday, judging that the “Build Back Better Act” would raise $1.48 trillion in revenue over a decade and be unlikely to add to the deficit long term.
The results are a boon for Democrats, and the report itself clears one of the last remaining hurdles keeping the House from holding a vote on the bill — a demand by moderates to see at least one major nonpartisan analysis of the bill’s effects.
The JCT and the Congressional Budget Office both traditionally evaluate the impacts of major legislation on the federal budget, and their assessments carry weight with lawmakers on both sides of the aisle. It was not clear Thursday when the CBO would release its report.
But with the JCT report in hand, House Speaker Nancy Pelosi and her lieutenants were busy Thursday negotiating with the last few remaining holdouts in the Democratic caucus. With just a three-vote majority, Pelosi cannot afford any last-minute defections.
Speaking to reporters Thursday in the Capitol, Pelosi would not offer any estimates of when a vote might take place.
But she insisted that the House would vote on Build Back Better bill and the companion bipartisan infrastructure legislation together, fulfilling a key demand by progressives that the infrastructure bill not proceed ahead of the social spending plan.
The JCT results
The 10-page report did not include an assessment of the cost of extending pandemic-era Obamacare subsidies or expanding Medicare to cover hearing aids. Democrats have estimated those provisions will cost $165 billion altogether.
Nor did the report factor in the revenue potential of expanded IRS enforcement, something Democrats believe will bring in around $400 billion over a decade. Another revenue stream the report did not include is the projected income from allowing Medicare to directly negotiate prices for certain drugs, starting with up to 10 products in 2023.
But even absent these major provisions, the JCT assessed that the bill will not add to the budget deficit in either the medium-term or the long-term.
While the first two years of the bill’s enactment will be costly, largely due to a one-year extension of the expanded Child Tax Credit, starting in its third year the Build Back Better Act’s revenue will outpace the costs. Over a decade, the JCT estimates the net total revenue from the legislation will be $944 billion.
While major pieces of the bill are currently left out, the JCT report as it is offers Democrats a reason for optimism. The long-term net revenue estimate was higher than many observers had anticipated.
President Joe Biden has long insisted that the bill will not add to the long-term budget deficit. But some of the the early assessments of the bill’s revenue sources looked a little too rosy, leading moderate Democrats and some economists to question whether the bill’s authors were being too generous in their estimates.
Some outside observers accused Democrats of deploying the same fuzzy math that Republicans used in 2017 to argue that their massive tax cut for the wealthy, the Tax Cuts and Jobs Act, would ultimately be a net revenue gain for the federal budget because it would stimulate economic growth and in turn lead to higher tax bases and more revenue.
Thursday’s JCT report should put many of those fears to bed, at least temporarily.
By comparison, the JCT estimated in 2017 that the Republican tax cuts would cost the federal government $1.46 trillion more over a decade than they would bring in.
Other analyses
Following Thursday’s JCT release, the Treasury Department issued a statement saying the Build Back Better bill will generate $2 trillion in savings, not the $1.48 trillion the JCT estimated.
Treasury arrived at the figure by adding the additional elements that were left out of the JCT analysis.
Specifically, Treasury estimated that the Medicare negotiation and rebate rules will generate an additional $250 billion over a decade, and enhanced IRS enforcement measures will add another $400 billion to government coffers.
“The bottom line is that the Build Back Better Act under consideration in the House of Representatives will be fully paid for and reduce the deficit,” said Assistant Secretary for Tax Policy Lily Batchelder in a statement.
A separate Moody’s Analytics analysis released Thursday also gave fodder to Democrats.
The report said the Democratic social spending and bipartisan infrastructure bills combined would be “more-or-less paid for” by static scoring – which does not include economic effects – and “more than paid for” once growth is taken into account.
Real GDP growth would average 2.2% over the next decade if both bills become law, versus 2.1% if they do not, Moody’s estimated. The report noted that “concerns that the plan will ignite undesirably high inflation and an overheating economy are overdone” – a welcome projection for the White House as inflation lingers around the country.
The chief economist of Moody’s is Mark Zandi, whose past analyses have been used by Democratic administrations to help make the case for their economic policy proposals.
But a third analysis of Democrats’ social spending bill was not as optimistic about the bill’s long-term effects.
A Penn Wharton Budget Model report Thursday estimated the plan would cost $1.87 trillion over a decade and raise $1.56 trillion – leaving a shortfall of more than $300 billion.
Like the JCT estimate, it did not appear to include the effects of the Medicare negotiation changes.
The legislation would increase federal debt by 2 percentage points and decrease GDP by 0.1 percentage points in 2050 relative to current law, the Penn model estimated.
Christina Wilkie reported from Washington and Jacob Pramuk reported from New York.