Much like a red wheelbarrow, so much depends on a little-known government agency responsible for determining the costs of legislation. The Congressional Budget Office, or CBO, a nonpartisan agency under congressional control, is set to reveal its full cost estimate for Democrats’ massive social spending bill by Friday. Lawmakers are bracing for a set of numbers that may differ from the figures the White House had previously touted, giving rise to concerns that the bill may not be fully paid for, as some Democrats have stipulated it must.
House Democrats reached an agreement earlier this month to vote on the Build Back Better Act this week, pending a CBO score for the legislation. Five moderate Democrats who had been reluctant to support the bill without a final cost estimate agreed to a vote once the CBO releases “fiscal information” about the Build Back Better Act. The agency said in a statement on Monday that the final score would be ready by Friday; the office has already published cost estimates for several of the bill’s provisions and is continuing to do so in piecemeal fashion. The White House and the Joint Committee on Taxation have also released estimates, which conclude that there is sufficient revenue to pay for the bill.
The House may vote on the Build Back Better Act as early as Thursday, Majority Leader Steny Hoyer told reporters on Tuesday, with debate on the bill beginning on Wednesday. “We will get it done this week,” Hoyer said, although he acknowledged that votes could slip to Saturday. It is unlikely that a vote could be pushed back later than that: Congress is off next week for Thanksgiving recess. Whether the bill will garner sufficient support from moderates once the score is released has been an open question from the moment the bill landed on the CBO’s desk. For the moment, though, the answer seems to be a tentative “yes.”
The White House and lawmakers are anticipating that the final CBO score could find that the bill may not be fully paid for through tax revenue. Attention has been primarily focused on a provision in the bill that would provide the IRS with an injection of funds that would enable the agency to crack down on tax evaders, which the White House says will raise hundreds of billions of dollars. But the CBO seems likely to conclude that this plan may yield less revenue than Biden officials have suggested is possible. The director of the CBO, Phillip Swagel, estimated on Monday that the proposal to boost IRS funding to go after tax cheats would raise only $120 billion over a 10-year period, instead of the $400 billion estimated by the White House.
But this figure from the CBO is unlikely to be a deal-breaker, at least not in the House. Under budget scorekeeping guidelines established by Congress, the CBO is not permitted to say that investing money in the IRS will create the “secondary effect” of increasing revenue, so its estimate may not be fully accurate. Moreover, the five moderate holdouts enthusiastically supported the bipartisan infrastructure bill signed by President Joe Biden on Monday, even though the CBO found that it would increase the deficit.
“We anticipated that,” said Representative Kurt Schrader, one of the five moderates who signed the statement in early November, about the expectation that the CBO would have a lower estimate for the revenue raised by IRS enforcement. He added that he believed the Build Back Better Act would be paid for, and said that he had spoken to Swagel.
“Even he admitted there’s just a different interpretation [of] how the consumer is going to react,” Schrader said. “I think it’s OK. That would not dissuade me at this point.” He also noted that “CBO doesn’t agree to all the pay-fors” for the bipartisan infrastructure bill, but he still believes that measure is fully funded.
The CBO released a preliminary estimate, in September, finding that boosting IRS funding would generate less revenue than the White House believes, priming members of Congress for a lower estimate in the case of the Build Back Better Act. The White House is betting that taxpayers will become more compliant with the IRS once they see it cracking down on tax cheats, while the CBO tends to think that evaders will adapt their behavior to continue to dodge taxes.
The White House is also already beginning to manage expectations of the score. “There has been wide agreement on the part of everyone involved, moderates, liberals, etc., that CBO does not have experience analyzing revenue amounts gained from cracking down on wealthy tax cheats who are taking advantage of every honest taxpayer,” deputy press secretary Andrew Bates told reporters on Tuesday. Bates added that “there’s a huge body of work from economic experts … affirming that, if anything, our estimates lowball how much revenue can be brought in by cracking down on rich tax cheats.”
Representative Josh Gottheimer, another one of the five key moderates, on Tuesday tweeted a June op-ed by a bipartisan crew of former treasury secretaries that argued that investing in the IRS would raise even more revenue than the administration estimates. (Charles Rettig, the IRS commissioner, who was nominated by President Donald Trump, also advocated for Congress to approve the $80 billion investment, in an op-ed last week.)
“The current Treasury estimate of savings from IRS enforcement in Build Back Better—$400b/10 years—is, if anything, too conservative,” Gottheimer said, indicating that he would trust Treasury estimates over the CBO score. “We have consistently used U.S. Treasury estimates for the savings from IRS enforcement, because Treasury and IRS have the experience to estimate the direct and indirect effects of compliance activities.”
Representative Stephanie Murphy told reporters on Tuesday that the CBO’s likely estimate on IRS enforcement “doesn’t come as a surprise to anyone.”
“I think we, for a long time, have understood that there is a discrepancy between Treasury’s analysis of revenues that come from tax enforcement and what CBO’s number is. We knew that, based off of our negotiations during the infrastructure bill,” Murphy said. The scores the CBO has released for other provisions in the bill have also been in line with what the White House has estimated.
Some Democrats have raised concerns about the CBO in the past. Although the agency is nonpartisan and has committed itself to objectivity, critics have noted that Swagel worked in the Treasury Department during the Bush administration and held roles in conservative think tanks. The CBO drew the ire of some Democrats in February when it determined that raising the federal minimum wage to $15 per hour would raise the deficit, contradicting other analyses. But the CBO is often the target of partisan frustration. Republicans lambasted the agency in 2017, when it projected that repealing the Affordable Care Act would leave millions uninsured.
Progressives had been concerned that once the House voted on a bipartisan infrastructure bill, moderates would have little incentive to support the larger social spending package. The House has now voted for that bill, and it was signed by Biden in a triumphant ceremony at the White House on Monday. And with a vote on the Build Back Better Act expected later this week, it seems that any issues will not necessarily stem from a disappointing CBO score on IRS enforcement.
But even if moderates in the House seem to be on board, at least one key Democrat—Senator Joe Manchin—remains skeptical. He has previously raised concerns about how further government spending could affect inflation, and he reiterated those worries on Tuesday. When asked by CNN how voters in West Virginia were approaching him about the bill, Manchin said that they were “very much concerned.”
“Inflation has hit them extremely hard,” Manchin said. “They say, ‘Are you as mad as I am?’ And I say, ‘Absolutely.’” (The White House and most congressional Democrats have argued that passing the Build Back Better Act would ease inflation. My colleague Tim Noah has argued that the pandemic is principally to blame for the inflation spike.)
Manchin also poured cold water on Senate Majority Leader Chuck Schumer suggesting that the Senate could complete the Build Back Better Act before Christmas, saying he has “a lot of concerns” about that timeline. But that’s a problem for the Senate—along with figuring out how to ensure the bill fits the strict rules for the reconciliation process—and this week, the focus is on the House.
“If the speaker gets a CBO score, I think she does a quick head count of the caucus and brings it to the floor,” said Representative Richard Neal. He also noted that Gottheimer would appear at a press conference with Speaker Nancy Pelosi on Wednesday. “I talked to him today. And I can tell you that’s a good sign.”