A few weeks ago, I shared with you that the Congressional Budget Office had estimated that the Democrats’ Build Back Better (BBB) bill would only increase the deficit over the next ten years by about $200 million. However, as I pointed out, that estimate was based on the highly unlikely assumption that Congress would end the spending programs in the bill after five years but continue the new revenue streams for the entire ten-year projection period.
Shortly after the CBO released its estimate, Senator Lindsay Graham and Representative Jason Smith asked the CBO to estimate the increase in the deficit over the next ten years if the new spending programs were not ended after five years. Last week, the CBO responded to their request estimating that if the spending programs were not ended after five year the deficit would balloon to an additional $3 trillion.1
There are two things that bother me about this new projection. First, it makes it clear that Biden’s incessant talking point that BBB is “paid for” is, at best, grossly misleading. Biden campaigned as someone who would tell the truth as opposed to Trump’s ubiquitous prevarications. His willingness to misrepresent the true cost of this bill once again shows that both parties are willing to play fast and loose with the facts.
Second, it must be kept in mind that this $3 trillion is on top of the $15 trillion increase in the national debt that CBO was projecting before BBB. The CBO is already expecting that our national debt will be 106% of the GDP by the end of the decade. This additional $3 trillion would take it to about 116%.
It is difficult to compare the national debt between countries because of differences in the way they account for the debt of local governments and pensions. But the International Monetary Fund publishes comparative data. Its most recent report shows that the U.S now ranks 14th in the highest national debt to GDP ratio and that by 2026 it will move into third place behind only Japan and Italy. And keep in mind that is before the effect of BBB is taken into account.
I am not a debtphobe, but there is a correlation between countries’ ratio of national debt to GPD and their overall economic growth. That seems logical. If future generations must pay more of our bills, they will have less to invest in their own growth.
Thomas Jefferson famously opined that “it is incumbent on every generation to pay its own debts as it goes.” I would modify his admonishment to say that every generation should pay its own debts unless it relates to infrastructure improvements that will benefit future generations. By calling the BBB spending “human infrastructure,” the Democrats are making the case that those programs are an investment that will benefit future generations. But since this bill was cobbled together in backroom deals instead of in public hearings, we have little information to make a judgment whether that is true. But I think it would be fair to say that the long-term benefits of the federal government’s spending on these kinds of social programs in the past as been mixed at best.
Note 1 – In my previous report to you, I had estimated the result of not ending the spending programs after five years would add at least $1.5 trillion but the Committee for a Responsible Federal Budget nailed it with their $3 trillion estimate.