WASHINGTON – The price of President Joe Biden’s plan for a massive expansion of the country’s social programs remains a subject of negotiation in Congress.
But regardless of the final number, Biden insists the true cost will be zero.
“The point is, my Build Back Better program costs $ 0 – and it won’t raise taxes for anyone who earns less than $ 400,000 a year,” Biden tweeted Monday. “We’re going to pay for it by making sure those at the top and big business pay their fair share.”
Republicans accuse Biden of lying.
“He’s very confused,” Sen. Tom Cotton, R-Ark., Wrote on Twitter.
Who is right?
Budget analysts say it would be possible for Congressional Democrats to craft a bill that would have a net cost of zero. Tax increases on corporations and wealthy Americans could theoretically generate enough income to offset the cost of expanding social programs and tackling climate change, they said.
But the current bill that serves as the basis for negotiations between House Democrats does not achieve this goal. This proposal would enact $ 3.5 trillion in spending increases and tax breaks and about $ 2.9 trillion in tax increases and health care savings to offset the cost, leaving a hole in the wall. about $ 600 billion, according to the Non-partisan Committee for a Responsible Budget.
In addition, the spending and tax breaks could cost as much as $ 5,000 billion or $ 5.5 trillion, well below the $ 2.9 trillion in offsets, the organization said.
Final net cost of invoice remains unknown
Biden and Democrats are negotiating to lower the price of the package to between $ 1.5 trillion and about $ 2.2 trillion to appease moderates concerned about the overall cost. Whether the net cost is zero or higher depends on the final price and the compensations that remain in the package.
If negotiators reduce the cost to around $ 2 trillion and keep the compensation offered to the House, “then the net cost could be zero,” said Marc Goldwein, senior vice president and senior policy director of the Committee for a responsible federal budget.
But, “we won’t know the final net cost until we see the invoice,” Goldwein said.
Tax businesses and the rich
The set of social programs and climate change initiatives are at the heart of Biden’s Build Back Better agenda and one of Democrats’ top legislative priorities. The far-reaching package includes proposals for a free community college, universal preschool, subsidized child care, and national paid time off.
Biden has offered to spend $ 3.5 trillion on the 10-year package, although that number is at the center of ongoing negotiations between Democrats in Congress.
Biden and the Democrats intend to pay for the program’s extensions through a series of tax increases on corporations and wealthy Americans.
Under the current proposal, the maximum corporate tax rate would drop from 21% to 26.5% on income over $ 5 million. Biden initially suggested raising the corporate tax rate to 28%, but Democrats and some businesses opposed it.
The top tax rate for people earning over $ 400,000, or $ 450,000 for couples, would be 39.6% from 37% currently. People who earn more than $ 5 million a year would also be subject to a 3% surtax.
The top tax rate for capital gains – money earned on the sale of stocks or property – would rise to 25% from the current 20%.
Raising taxes on corporations and Americans earning more than $ 400,000 a year, negotiating the price of prescription drugs, and tapping into other sources of federal revenue would allow the administration to offset the cost of the massive expansion of programs. social and Biden’s proposals on climate change, the White House and the Democrats are arguing.
Republicans, however, insist that the $ 3.5 trillion in spending the Democrats set is fiscal recklessness and the big government is at its worst.
“The radical left is pushing all its strengths – it wants to use this terrible but temporary pandemic as a Trojan horse for permanent socialism,” said Republican Senate Leader Mitch McConnell of Kentucky. “Billions and billions more in government spending as families already face inflation.”
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“Lots of hypotheses”
It is not entirely clear whether Biden’s claim of a “zero” cost is feasible under the 10-year outlook used by the Congressional Budget Office to assess the economic impacts of the legislation.
Biden’s own budget officials earlier this year estimated his program would increase the national debt by nearly $ 1.4 trillion over the decade. The real impact will only be known when the bill is finalized and the measures are evaluated by the Congressional Budget Office, the final arbiter of how the legislation will affect the federal balance sheet.
Even so, “there are just a lot of assumptions,” said Joshua Sewell, senior policy analyst at Taxpayers for Common Sense, a non-partisan budget watchdog group.
The impact of spending proposals is generally assessed or noted over 10 years. But the health of the economy over a decade can be affected by unforeseen events.
No one could have predicted last year’s recession caused by the coronavirus pandemic. Likewise, forecasters were predicting a budget surplus when Republicans passed a tax cut law in 2001. Then 9/11 happened, “and that clearly wiped out any surplus that was going to happen,” Sewell said. .
Budget projections “are subject to reality” and may prove to be inaccurate, Sewell said.
In some ways, the claim that the Build Back Better program won’t cost anything is a semantic argument, Sewell said.
“The federal budget is not like a family’s budget, but it is still subject to the laws of accounting and basic math,” he said. “So if you’re saying the Build Back Better program or this specific bill doesn’t cost anything, that’s not true. “
Even if there is enough revenue in the bill to pay for the programs, there is still a cost, Sewell said.
“If you have an income that allows you to buy a lunch and you pay for it with your income, your lunch still costs you $ 10 to buy a cheeseburger,” he said. “You just didn’t have to borrow from your uncle to pay it off. “
On the other hand, if one claims that the bill would add no cost to the federal deficit, that is a different argument, he said.
“If these projected expenses or these projected expenses occur and the projected revenues occur, the net cost of financing the deficit could be zero,” Sewell said. “It is certainly plausible.”
Michael Collins covers the White House. Follow him on Twitter @mcollinsNEWS.
Contribution: The Associated Press
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This article originally appeared on USA TODAY: Biden Build Back Better Budget Proposal Could Cost Zero, With Changes