Government budgeting, both at the state and federal level, has always been partly about smoke and mirrors. For example, lawmakers on both sides of the aisle have long reduced the apparent cost of new spending or tax relief by making it “temporary” — and daring future lawmakers to stop the largesse. But Democrats striving to pare back their massive $3.5 trillion spending plan — the largest spending bill in history — appear poised to take such budget gimmicks to absurd new heights in the weeks ahead. As Politico reported Wednesday,
“The White House is seriously entertaining the idea of across-the-board haircuts to most items in President Joe Biden’s $3.5 trillion social spending package.”
Congressional leaders have not publicly weighed in on this strategy, although Speaker Nancy Pelosi privately said this week her members prefer a less-is-more approach — funding fewer programs but for a longer amount of time.
As the above suggests, Democrats are considering two options to reduce the apparent cost of their massive legislation: (1) “Trim everything” — meaning reduce spending across the board on new benefits included in the current $3.5 trillion spending plan; and (2) fund “fewer programs but for a longer amount of time” — meaning jettison some parts of the current legislation altogether.
Four key facts provide needed context.
First, “trim everything” is far less than meets the eye. No current spending would be trimmed to make way for proposed new spending. The only thing being trimmed is the increased spending Democrats are proposing on top of the rest of what government now does. Those proposed increases started out at $10 trillion, then $6 trillion, then $3.5 trillion, and now apparently are somewhere around $2 trillion over the next 10 years. Again, that’s the proposed new spending by the federal government already projected to operate $12 trillion deficits in the next decade.
Second, in many cases, “trimming” means providing the same new benefits in the $3.5 trillion bill — just payable for fewer years than previously proposed. Liberal Rep. Alexandria Ocasio-Cortez (D-NY) has spoken approvingly of this approach, saying “I think that one of the ideas that’s out there is fully fund what we can fully fund, but maybe instead of doing it for 10 years, you fully fund it for five years.”
Third, Democrats have already used this “fewer years” approach to reduce the apparent cost of some of the biggest ticket items in their $3.5 trillion bill. The current expanded child tax credit is a case in point. That policy replaces mostly annual tax relief for working parents with de facto monthly welfare checks that provide larger payments even to non-working parents. But it is currently in place only for 2021.
The $3.5 trillion spending plan proposes extending those changes for an additional four years, as a down payment on Democrats’ stated intention of making the larger benefits permanent. The massive $500-plus billion cost of that four-year extension suggests Democrats might “save” well over $200 billion by extending the policy for two years instead. But if you take the President and others at their word in wanting to extend those benefits forever, the proposed four-year extension was already hiding over $1 trillion in costs over just the second half of this decade. Cutting the extension to two years would simply raise those hidden costs by another $200 billion.
Fourth, even if Democrats adopt option two and include all four years of the expanded child tax credit in their new bill, that legislation would still cost $1 trillion more than its $2 trillion sticker price. That’s without even considering whether other policies they include have similarly massive out-year costs.
Republicans are not immune to such gimmickry on tax policy, which former Ways and Means Committee Chairman Bill Thomas (R-CA) once likened to “putting a pound and a half of sugar into a one-pound bag.” But Democrats seem poised to take these gimmicks to a new level as they adjust their massive $3.5 trillion bill to make it appear less costly. And as the details of that legislation suggest, tax relief is far easier to roll back than spending increases — including those conceived through trillion-dollar gimmicks whose true cost will only become apparent in the future.
