November 2, 2021 – EPI director of research Josh Bivens took to Twitter to refute critics’ most recent claim that the Build Back Better Act (BBBA) is only “fully paid for” due to accounting gimmicks. The claim, Bivens stresses, is “bad economics,” adding that BBBA is indeed fully paid for. Read the full Twitter thread here.
The newest unsound objection to BBBA rests on claims that it is only fully “paid for” due to accounting gimmicks or “shell games”. The root of this complaint is bad economics, and the factual basis of it is oversold.
The essence of the new complaint is that the revenue increases in the BBBA are permanent, but a number of the spending provisions and tax credits sunset before the end of the 10-year budget window. Hence, the bill is not really “paid-for” and will increase budget deficits.
The root assumption here is that debt-financing any of this bill will be economically damaging. There is no evidence this is true. Interest rates remain at historic lows and have been low and falling for decades. In such environments debt-finance makes a lot of economic sense.
The BBBA negotiations landed in a spot where it is funded with revenue instead of debt – and that’s great! The tax provisions are genuinely valuable in and of themselves, and, they will not neutralize any of the macroeconomic benefits of the spending.
So, the underlying economic assumption that the BBBA must be fully paid-for to avoid harming the economy is entirely wrong. But, assumptions aside, the simple fact is that the BBBA is paid-for.
The inevitable comparisons credulous commenters will make are to the tax cuts passed under George W Bush and Donald Trump. All of these tax cuts contained at least some provisions which sunsetted over the 10-year budget window, aiming to make their deficit impact look smaller.
These are terrible comparisons. For one, even with the sunsetting, the by-the-letter text of the Bush tax cuts and the Trump tax cut unambiguously added significantly to the nation’s debt. This is not in dispute. The BBBA would not. Period.
— Josh Bivens (@joshbivens_DC) November 2, 2021
The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI believes every working person deserves a good job with fair pay, affordable health care, and retirement security.www.epi.org