The Covid-19 rescue package enacted in March will cost $2.1 trillion over the next decade, or some $200 billion more than initially estimated, according to new projections from the Congressional Budget Office.
In response to a request from Sen. Lindsey Graham (R-SC), the top Republican on the Senate Budget Committee, CBO Director Phillip Swagel said that the American Rescue Plan Act will add $1.8 trillion to deficits and debt held by the public from 2021 to 2031. That’s in line with the cost estimate CBO issued in March. But interest payments on the additional debt will add another $208 billion in costs over that time, so that deficits and debt by 2031 will be nearly $2.1 trillion higher than CBO had projected in February, before the law was passed. Debt held by the public would grow to 113% of gross domestic product by 2031, compared with 107% as of the February projections.
The revised estimates, Swagel noted, do not factor in any economic benefits from the new law — and, as The Hill’s Niv Elis notes, a larger economy boosted by the rescue plan “would likely lead to higher tax revenues, as well as lower spending on safety net programs and lower borrowing costs.”
CBO also looked at a couple of other scenarios as requested by Graham. It said that raising non-defense discretionary spending in 2022 by about 16% as President Joe Biden has requested (and having that spending increase at the rate of inflation thereafter) would add another $665 billion to deficits by 2031, including $618 billion in new spending and $47 billion more in interest costs. The debt held by the public would reach 115% of GDP in 2031 under this scenario.
CBO also estimated that, without new revenue to pay for them, Biden’s infrastructure and social welfare plans would add $.4 trillion to the deficit over the next 10 years. Combined, the Covid rescue law, Biden’s proposed non-defense spending increases and his infrastructure and families plans would add $7.6 trillion to deficits by 2031 and lift debt to 130% of GDP if none of the costs were offset, CBO estimated.
Biden has proposed raising taxes on corporations and the wealthy to cover the costs of his new spending plans and has said that he’s “not willing to deficit spend.” Republicans have rejected the idea of tax increases.