One Big Accounting 'Gimmick' in the Infrastructure Bill

One Big Accounting 'Gimmick' in the Infrastructure Bill

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Plus, the expanded Child Tax Credit's economic boost
Tuesday, August 3, 2021

Good evening, fiscal followers! President Biden said Tuesday afternoon that the Centers for Disease Control and prevention would soon issue a new eviction moratorium aimed at protecting renters after an earlier moratorium expired a few days ago — and after the administration said he lacked the authority to renew it. Biden warned that the new moratorium "is likely to face obstacles" given a recent Supreme Court decision that the previous one wasn’t legal. Here’s what else is going on:

Bipartisan Infrastructure Bill Still Relies on One Big Accounting ‘Gimmick’

The bipartisan infrastructure bill is slowly making its way through the Senate. While Senate Majority Leader Chuck Schumer (D-NY) and Minority Leader Mitch McConnell (R-KY) continue to squabble over the pace of progress and the consideration of amendments, the package still faces some serious questions over its proposed financing.

The Washington Post’s Jeff Stein reports that, even as Senate negotiators scrapped some criticized financing measures from the bill, budget watchers say they’re still relying on some fuzzy math and creative accounting as they look to pay for some $550 billion in new spending.

"Before, they were doing four or five gimmicks. Now they just picked one gimmick and just made it much bigger," Marc Goldwein, a budget expert at the nonpartisan Committee for a Responsible Federal Budget, tells the Post. "So, maybe less in style points."

CRFB estimates that the proposed offsets in the legislation — revenue and savings from repurposing unused COVID relief funds, lowering prescription drug costs, improving cryptocurrency information reporting and a host of other measures — will only raise about half as much as lawmakers claim they will.

"Lawmakers claim these policies will save at least $483 billion and that the legislation will boost economic growth enough to generate an additional $56 billion of savings," the committee said in a recent blog post. "This $539 billion of reported offsets would nearly cover the $550 billion of new spending. However, we believe actual savings would be closer to $200 billion before dynamic scoring, only covering about half of the new spending overall."

The more than $200 billion in savings from repurposing unused Covid relief money, for example, may largely come down to the difference between what the program was originally expected to cost and what was actually spent — savings that would exist regardless of the new infrastructure bill, and that are being counted selectively, Stein reports: "While some coronavirus relief provisions ended up costing less than projected, others — not mentioned by the bill's authors — ended up costing more."

Stein notes that some economists say it’s not necessary to offset the new spending given that interest rates are low and the nation’s infrastructure needs are increasingly urgent. He adds that the negotiators behind the bill have defended their numbers — and have agreed to not judge the package according to the Congressional Budget Office’s official score, which is likely to find that it will add to federal budget deficits.

"When I asked about the fuzzy math behind the pay-fors of the bipartisan infrastructure deal, one senior Democrat responded: "Let us have our bridges, Jeff," Stein tweeted Tuesday.

The bottom line: Questionable accounting may not prevent senators who want to vote for the bill from doing so, but it could at least add some political pressure. The conservative group Heritage Action for America on Tuesday called on senators to vote against the infrastructure bill, saying it "recklessly spends $1 trillion."

Expanded Child Tax Credit Provides Major Economic Benefits: Analysis

A new analysis from the conservative-leaning Niskanen Center finds that the expansion of the child tax credit pushed through by the Biden administration will provide significant benefits to the broader economy, especially in rural America.

According to the analysis, the temporary, one-year boost to the child tax credit — which is now delivering up to $300 per child to the majority of American households — will result in $27.6 billion in additional spending and provide support for more than 500,000 new jobs. It will also produce an estimated $1.9 billion in revenues for local governments from sales taxes.

"While only enacted for one year, the expanded CTC is expected to reduce child poverty by 40% and support investments in children that promote family stability," Niskanen said in a press release. "Less appreciated, however, is how child benefits like the CTC can serve as a powerful economic stimulus for local communities given the greater consumption needs of households with children."

Getting the most from federal spending: The analysis finds support for the idea that providing money to lower-income households provides more bang for the buck than giving money to higher-income families, since the former are far more likely to spend their benefits quickly, creating more economic activity. This "implies that the economic impact of the CTC will exceed its headline budgetary cost," the analysts say.

Big boost for red states: Given the way the tax credit is structured, more money will flow to states with lower household incomes and larger families. That includes red states such as Utah, Texas and Florida that have often elected Republican representatives who tend to oppose expansions of the social safety net.

"The child tax credit expansion is going to be huge for rural working-class communities," Samuel Hammond, the Niskanen economist who co-authored the report, told The Washington Post. "It’s strange to see Republicans oppose spending money even when it goes to their own constituents."

Read the full analysis from the Niskanen Center here.

Is Congress Shortchanging Pandemic Preparedness Funding?

Washington Post Columnist Catherine Rampell reports that the bipartisan infrastructure package being considered in the Senate doesn’t include any of the $30 billion in "biopreparedness and biosecurity" funding that President Joe Biden proposed in his own infrastructure plan.

"Public health experts," she writes, "hoped it would be shifted into the reconciliation bill that Democrats plan to pass with a party-line vote. Senate aides have told me, however, that while there is a line item in the reconciliation package for pandemic preparedness funding, it has been shaved down — from Biden’s original $30 billion to about $5 billion."

Rampell says that, while Congress has provided $10 billion for similar purposes in a previous Covid relief bill, public health experts are concerned that we’re not taking the necessary long-term view when it comes to pandemic preparedness. "A year and a half into covid-19, with more than 613,000 Americans dead and cases rising again, lawmakers still aren’t ready to commit the funds necessary to prevent another tragedy of this scale," Rampell writes. "If these conditions aren’t sufficiently motivating, what would be?"

Read the full piece at The Washington Post.

Wealthy Account for Most ‘Excess Savings’ During Pandemic: Study

Denied the opportunity to spend on travel, dining and entertainment, and boosted by a surging stock market and an unprecedented gusher of federal spending, Americans saved about $3.7 trillion during the Covid-19 pandemic, according to a new study by Oxford Economics. Most of that money, however, has ended up in the pockets of those who were already well off.

Oxford found that 70% of the savings during the pandemic went to the top 20% of households in terms of wealth. And when looking at "excess savings" — the money saved at a rate higher than the pre-pandemic trend would suggest — the numbers are even starker: The top 20% claimed 80% of excess savings, with the top 1% claiming nearly half, or 47%.

The study also found that households in the bottom 20% saved less than expected during the crisis, relative to their pre-pandemic pattern.

"This latest data suggests that savings are even more skewed to the top than we previously thought," Oxford’s Nancy Vanden Houten told CNBC.

How much will they spend? The findings could have implications for the ongoing and so far uneven economic recovery. Oxford economists expect Americans to spend about $360 billion of their excess savings over the next 18 months, with the top 20% spending about $250 billion. That means the recovery could depend in large part on the willingness to spend by the wealthy.

"This is unprecedented," Vanden Houten said. "There are some limits in spending. Will wealthy people go on two vacations instead of one because they missed one in 2020? Or will they just take one more elaborate vacation? We don’t know."

Trump’s Health Secretary Calls on Republicans to Encourage Vaccinations

Alex Azar, the former secretary of Health and Human Services under President Trump, is calling for Republicans to embrace and encourage Covid-19 vaccinations. In a piece for The New York Times Tuesday, Azar touts his role, and the Trump administration’s, in developing the vaccines and emphasizes that the shots are safe and effective.

Azar also details some areas where he says officials could have done better, suggesting that they could have done more to address vaccine hesitancy and to explain that the Food and Drug Administration’s emergency use authorization means that the vaccines were held "to such high standards that the only real difference is that full approval requires steps like analyzing longer-term safety and efficacy data, and inspecting manufacturing facilities."

Azar also laments that they "did not predict the politicization of vaccines that has led so many Republicans to hold back" — politicization that, critics would surely note, was simply an extension of Trump’s approach to the pandemic. Azar doesn’t admit that, but he hints at it: "I’m glad former President Trump got vaccinated, but it would have been even better for him to have done so on national television so that his supporters could see how much trust and confidence he has in what is arguably one of his greatest accomplishments."

Azar writes that it’s time for conservatives to step up — and claim the vaccines as part of Trump’s legacy while they’re at it.

"The vaccines could be a victory lap for the Republican Party, and I call upon all party leaders and conservatives to double down on encouraging vaccination," he writes. "Conservatives need to do our part, and the Biden administration must find voices that will be trusted in conservative communities to explain the data and integrity of the vaccine programs. They would also do well to continue to acknowledge the historic achievement of the Trump administration in expediting these vaccines. I’m not naïve about the partisan issues and the mistrust between parties at play — but a measure of political graciousness could go a long way to depoliticize the issue."

Read the full piece at The New York Times.

Quote of the Day

"Some governors aren’t willing to do the right things to make this happen. I say to these governors, please, if you aren’t going to help, at least get out of the way for people who are doing the right thing."

President Joe Biden, criticizing governors who have blocked mask mandates or other measures to prevent the spread of Covid-19. Speaking from the White House, Biden on Tuesday did not name any specific governors but singled out Florida and Texas, Republican-led states where cases have surged.

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