Both Democratic and Republican senators who negotiated a bipartisan infrastructure bill have claimed the legislation is “paid for.” But a budget watchdog group says the bill only pays for about half of the $548 billion in new spending.
The crux of the disagreement is that the senators count savings from COVID-19 relief programs that didn’t end up costing as much as expected.
“The framework claims $491 billion of offsets, and an additional $56 billion of savings from dynamic scoring, to pay for the bill,” the Committee for a Responsible Federal Budget writes in a post on its website. “However, many of these pay-fors count savings that have already occurred. We estimate actual offsets will total roughly $200 billion before dynamic scoring.”
Dynamic scoring factors in the impact of economic effects.
Penn Wharton Budget Model Senior Economist Jon Huntley told us whether or not the legislation covers the cost of the new spending “depends on how you define ‘paid for.'”
“Some of the funds that they’re using would be going back to the U.S. Treasury,” meaning the savings from other legislation would return to the federal government. Since the money would normally go back to the Treasury, it would end up reducing the debt. But if those dollars are applied to the infrastructure bill instead, the spending will increase the debt.
The Penn Wharton Budget Model calls that “deficit-financed spending,” Huntley said. “It is something that increases the debt relative to the baseline.”
Senators from both parties who helped craft the bill are on the same page, however, in stating the legislation’s costs are covered.
In a July 28 press conference, after a Senate procedural vote moved the bill forward, Sens. Rob Portman and Kyrsten Sinema, the lead negotiators, both said the legislation was paid for.
“It’s paid for. We do it without raising taxes,” Portman, a Republican, said.
“So, we’ve taken a lot of time to ensure that we were paying for this package, and doing so in a way that was responsible and that was defensible,” Sinema, a Democrat, said.
Other senators who were involved in negotiating the package have reiterated that.
“This is paid for. Our infrastructure bill is all paid for,” Democratic Sen. Joe Manchin said on CNN’s “State of the Union” on Aug. 1.
The same day on the Senate floor, Republican Sen. Mitt Romney said the bill wouldn’t raise taxes and instead would take some money that had been appropriated but not used for COVID-19 relief. “This is a bill which is paid for.”
Marc Goldwein, senior vice president and senior policy director at the Committee for a Responsible Federal Budget, calls the claim a “half truth,” because the bill is “half paid for.”
Spending and Offsets in the Bill
CRFB breaks down the spending and offsets for the nearly $550 billion in new infrastructure expenditures. (The bill totals $1 trillion, but nearly half of that is previously approved funding.) The new spending includes: $110 billion on roads, bridges and major projects; $66 billion on passenger and freight rail; $39 billion on public transportation; $25 billion on airports; and the rest on ports, waterways, electric vehicles, road safety and broadband.
But while the senators say the offsets total $491 billion, and another $56 billion would come from dynamic scoring, CRFB tallies only $200 billion and says dynamic scoring could add another $50 billion.
The biggest sticking point is the $210 billion in repurposed COVID-19 relief funds, which CRFB says amount to just $40 billion to $50 billion in actual offsets. The bill claims another $53 billion in unused unemployment insurance funds; CRFB says that amounts to zero savings. And the $87 billion in the sale of wireless spectrum frequencies is really $20 billion in offsets for the bill, because the senators’ figure includes money from sales that already happened.
Goldwein told us there were two problems with counting savings from policies that ended up costing less than originally anticipated.
One, it’s not a valid way of budgeting. Determining how much a bill costs involves looking at how much the legislation will change the federal budget compared with not having the legislation. For the COVID-19 relief, unemployment insurance and spectrum sales, “for the most part, the answer is the legislation will do nothing.”
The bill doesn’t generate the money claimed by the senators. “None of these is actual savings,” Goldwein said.
Two, the method used by the senators amounts to cherry-picking, Goldwein said. Some parts of the COVID-19 relief bills cost less than anticipated, but others cost more. Overall, the relief acts will “end up costing more than the initial scores, not less.”
So, only counting the parts with savings is cherry-picking.
The nonpartisan Congressional Budget Office hasn’t released an analysis of the bill yet, but Goldwein says the CBO won’t find that the bill is paid for.
Sinema’s and Portman’s offices acknowledged the CBO wouldn’t count savings from other legislation as offsets for the infrastructure bill, chalking it up to “limitations” of CBO scoring.
Mollie Timmons, a spokesperson for Portman, told us: “From the beginning of the bipartisan infrastructure negotiations, Senator Portman has emphasized the importance of passing an infrastructure bill that is financed without raising taxes or adding to inflation on an already overheated economy. This group of bipartisan members have worked hard to come up with a product that meets those goals. It includes responsible pay-fors that generate new revenue and savings, some of which won’t be fully reflected in the final score because of limitations on the way CBO scores legislation.”
Similarly, John LaBombard, a spokesperson for Sinema, told us: “Our bipartisan group, along with the White House, engaged with economic policy experts on a daily basis throughout this process—including experts at the Congressional Budget Office, the Joint Committee on Taxation, the Office of Management and Budget, and more. While some organizations are quite limited in what is factored into their formal ‘scores’—for instance, cost-savings from under-used federal programs and long-term economic growth are not scored by the CBO—Senator Sinema and our bipartisan group are confident that this historic legislation’s new spending is responsibly offset and will result in stronger economic activity for years to come.”
The Penn Wharton Budget Model is in the process of analyzing the bill. When it ran the numbers on a previous version of the legislation, which carried a $579 billion price tag for new spending, it said it was “funded by a mix of deficits, user fees, and other tax provisions.” That version also included unused COVID-19 relief funds and unemployment insurance, as well as money from wireless spectrum sales.
Under that bill, government debt would increase by 0.4% in the first decade, PWBM said. But by 2050, as spending dropped and revenue increased due to “higher output,” the government debt would decrease by 0.9%.
PWBM estimated that the infrastructure spending (again, from that previous version of the bill) would lead to additional private investment, which in turn would make workers more productive and increase their wages slightly, by 0.1% in 2040 and 2050. That boost to wages would lead to more revenue to the federal government in terms of taxes. That’s part of the dynamic scoring.
CRFB calls one small piece of funding for the bill a “gimmick”: $3 billion the senators expect from what’s called “pension smoothing.” Other organizations, including the Tax Policy Center, Heritage Foundation and the Center on Budget and Policy Priorities have condemned this tactic before, saying it doesn’t actually raise revenue in the long term. Pension smoothing lowers the amount businesses have to contribute to pension plans, so they will then end up paying more in income tax, in the short-term. But some day in the future, they’ll have to make up the difference, which leads to a drop in that tax revenue.
Other pay-fors in the Senate infrastructure bill would raise money. For instance, a delay in a rebate for Medicare prescription drug plans would garner $51 billion, CRFB agrees, and a new tax reporting requirement for cryptocurrency brokers, which the industry isn’t happy about, would rack up $28 billion.
But, again, about half of the supposed revenue for the bill comes from past savings, which in federal budgeting amounts to deficit spending.
Senate Majority Leader Chuck Schumer has said he expects the infrastructure bill to pass the Senate as soon as this week, or before the Senate takes an August recess. After that, the Democratic leader will push forward a $3.5 trillion budget resolution bill with reconciliation, which would require a simple majority vote in the Senate.
Update, Aug. 5: The CBO published its analysis of the infrastructure bill, finding that “the legislation would add $256 billion to projected deficits” over the 2021-2031 time period.
PWBM also released its updated analysis of the bill. It found that the $548 billion in new spending “is funded by $132 billion in new tax provisions and $351 billion in new deficits.” Unlike the analysis of the June bill, this PWBM analysis says government debt would increase both in the first decade (by 1.3%) and by 2050 (by 0.6%). Workers’ wages and gross domestic product wouldn’t change.
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