CBO says bipartisan infrastructure bill would add $256B to deficit over 10 years
The Congressional Budget Office (CBO) on Thursday released an analysis saying the $1 trillion bipartisan infrastructure package would add $256 billion to the federal deficit over the next decade, a difficult pill to swallow for GOP senators who have insisted on paying for the entire cost of the legislation.
The budget office estimates the bill would increase discretionary spending by $415 billion over 10 years while increasing revenues by $50 billion and decreasing direct spending by $110 billion.
“On net, the legislation would add $256 billion to projected deficits over that period,” CBO reported in its summary.
The bipartisan group of senators who negotiated the bill with the White House says it would spend $550 billion in new money over the current budget baseline. That means just more than half of the new spending — $294 billion — would be offset by pay-fors, according to CBO's stringent standards for scoring legislation.
Many Republicans have said for weeks that they wanted to see an official analysis showing the $1 trillion infrastructure bill is being “credibly” paid for.
“We need to get a score, so we need to see whether the proposal is credibly paid for,” Senate Minority Leader Mitch McConnell (R-Ky.) said in late June, when he said he was undecided over whether to support the legislation.
McConnell was one of 17 Republicans who voted last week to proceed to the bill, though that doesn’t necessarily mean he’ll support final passage.
The CBO score backs up conservative Republicans who criticized some of the bill’s methods to fund programs as budget gimmicks.
“It’s easy to get so wrapped up in it and so wrapped up with the things that you see in the bill that are good … sometimes when you get so wrapped up in that, it’s easy to lose sight of the fact that the pay-fors are fake,” said Sen. Mike Lee (R-Utah).
“As much as half of the pay-fors are just fake,” he added.
CBO’s projection comes as a disappointment to fiscal hawks in Congress but not as a total surprise.
The lead authors of the legislation, including Sen. Rob Portman (R-Ohio), had already acknowledged to colleagues that the budget office had signaled it would assess the various sources of revenue in the legislation as covering only part of the bill’s overall cost.
Portman’s staff has worked for weeks to give other Senate Republican offices advanced notice that the CBO would rate the revenue sources as only partially covering the cost of the bill.
The Ohio Republican and his staff have also pointed to additional materials, such as CBO estimates that aren’t included in the official score, that indicate the real-world budgetary effect of the infrastructure bill won’t add as much to the deficit as Thursday's estimate suggests.
Portman and Sen. Kyrsten Sinema (D-Ariz.), the lead negotiators of the bipartisan bill, argued Thursday that their pay-fors would cover more than $500 billion in new spending, even if they’re not recognized by CBO.
“The CBO score says that the cost of the bill is $228 billion over five years and $415 billion over 10 years, and the offsets we have identified total $519 billion,” they said in a joint statement.
They explained the “CBO is limited in what it can include in its formal score.”
Those arguments appear to be persuasive, as senators said they don’t expect a significant drop-off in support now that the CBO score has been released.
Several Republican swing votes had already said they wouldn't have a problem with a cost analysis showing that $550 billion in new spending was not fully paid for.
“The Congressional Budget Office has long been hamstrung by rules that make them always wrong. They’ve never been exactly right,” said Sen. Todd Young (R-Ind.) on Monday. “There’s real-world score-keeping, as my constituents understand, like when you claw back unused COVID money or use other unspent government monies."
“The Congressional Budget Office doesn’t give credit for that and instead counts that as a whole in the spending,” he added. “My constituents are smart enough to understand that that’s an artificial score. So I’m not troubled by it. I dive into the particulars and look at the real-world accounting, as opposed to Washington, D.C., CBO accounting.”
CBO acknowledged in the report that its cost estimate did not include the possibility that increased infrastructure investment would rev up the economy and in turn boost federal tax revenues.
“Enacting this legislation would create macroeconomic effects that in turn would cause budgetary feedback. CBO has not estimated those effects or their budgetary consequences for this legislation,” the agency wrote.
In a draft proposal circulated to senators at the end of June, the bipartisan group of negotiators estimated that increased economic activity would boost government revenues by $58 billion under a dynamic scoring model, one that differs from the CBO's approach.
The CBO estimated the bipartisan legislation would raise $6.18 billion through higher custom user fees, $3.16 billion from manufacturer rebates for unused drugs paid for by Medicare, $50.8 billion from delaying a Trump-era rule on providing rebates for prescription drugs under Medicare and $10.18 billion from spectrum auctions.
The budget score on Thursday was released shortly after the CBO said it expects the federal deficit to hit $3 trillion this year. It also projected an average annual deficit of $1.2 trillion for 2022 to 2031.
The Committee for a Responsible Federal Budget, a group that advocates for fiscal responsibility and smaller deficits, issued a statement Thursday afternoon arguing the bipartisan bill will add closer to $340 billion to the deficit when all the spending is totaled.
“As CBO explains, the direct spending, appropriations, and revenue provisions in the legislation would have a net cost of $256 billion. One top of this, the legislation would increase highway and transit ‘contract authority’ by roughly $9- billion over five years and set the stage for a $196 billion increase over a decade,” the group wrote in an analysis.
Updated at 8:14 p.m.