Dems' $1.85 Trillion Spending Plan Faces New CBO Stumbling Block

Dems' $1.85 Trillion Spending Plan Faces New CBO Stumbling Block


House Democrats are racing toward a vote on their Build Back Better package of social spending, climate programs and tax changes this week — though their race has been less like a sprint and more like a marathon run through a maze. Now, as they near what they hope is the finish line, their path to the tape still depends on — and could be complicated by —an official cost estimate of the legislation from the Congressional Budget Office.

Lawmakers have another recess planned for Thanksgiving week, so Democrats hope to be able to vote on BBB before then. They’re still waiting on the full CBO analysis of the legislation, though. The nonpartisan scorekeeper said Monday that it anticipates publishing its complete estimate by the end of the day on Friday — a timeframe that could push any House vote into the weekend or next week.

A stumbling block from CBO: The nonpartisan scorekeeper, which has been releasing portions of its BBB analysis, may have already added another hurdle for Democrats, though. Their plan to fully pay for proposed new spending relies on spending $80 billion over a decade to beef up Internal Revenue Service enforcement and crack down on high-earning tax dodgers, an investment that the administration has projected could raise some $400 billion in revenue over a decade. The CBO analysis of that plan was always expected to come up well short of the administration’s revenue projection, and CBO Director Phillip Swagel reportedly said Monday that the IRS plan would generate far less — about $120 billion over 10 years.

That lower estimate could give fiscal conservatives in both the House and Senate pause about backing BBB, though the White House is reportedly already trying to make the case that its own projections are more accurate.

“The White House has begun bracing lawmakers for a disappointing estimate from the budget office, which is likely to find that the cost of the overall package will not be fully paid for with new tax revenue over the coming decade,” Alan Rappeport of The New York Times reports. “Senior administration officials are urging lawmakers to disregard the budget office assessment, saying it is being overly conservative in its calculations, failing to properly credit the return on investment of additional I.R.S. resources and overlooking the deterrent effects that a more aggressive tax collection agency would have on tax cheats.”

As Rappeport indicates, the markedly different projections result from different assumptions in modeling out how the stepped-up enforcement would play out over time: “On Monday, Mr. Swagel suggested that the Biden administration was betting too heavily on the idea that more aggressive auditing would deter rich people and corporations from finding ways to avoid paying taxes. He said such groups could take even more aggressive measures to keep their tax bills low, making it harder for the federal government to collect as much tax revenue as anticipates through better enforcement of the tax code.”

Ben Harris, Treasury’s assistant secretary for economic policy, told the Times that it was “patently absurd” that strengthening IRS enforcement wouldn’t result in greater compliance. The Treasury also expects that greater compliance to be sustained at higher levels over time than CBO does.

The bottom line: House moderates who insisted on seeing a CBO score before voting on the Build Back Better bill have pledged to work toward passage even if the official cost estimate diverges from the White House’s numbers, but the budget office’s analysis of the IRS plan could send at least some Democrats searching for other revenue — and CBO’s timeframe for completing its full estimate likely means lawmakers are in for a long week ahead. If or when the House does pass the bill, it will almost certainly have to take up the package again within weeks after the Senate sends back its own version.