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Lies, Damn Lies, and CBO Statistics

The Republican-led Congressional Budget Office is using gimmicks and fuzzy math to “prove” that the richest country on Earth can’t afford a decent welfare state.

Democratic House representative Josh Gottheimer of New Jersey. Gottheimer has said he will not vote for the Build Back Better bill unless it is scored by the Congressional Budget Office. (Mark C. Olsen / New Jersey National Guard via Flickr)

When Democratic leaders conditioned the passage of their Build Back Better (BBB) social spending bill on numbers from the Congressional Budget Office (CBO), they put their party’s entire agenda in the hands of economists who had already infamously denied the financial impact of climate change.

Now, the same Republican-led office is effectively denying the existence of its own previous estimates of savings from an enforcement initiative that would compel rich people to fork over their unpaid taxes. The CBO’s decision to pretend its own analyses don’t exist could be used by corporate Democrats as a rationale for dooming their party’s already pared-back health care, climate, and anti-poverty legislation.

At the same time, corporate Democrats are deploying a budgetary trick that will allow the CBO to decide that a massive tax cut for the wealthy will not cost anything at all.

Taken together, the machinations illustrate how Republicans and corporate Democrats have figured out how to game the CBO’s analyses and use them as a weapon to shred the progressive agenda and enrich their wealthy donors.

Suddenly Denying the Existence of Its Own Projections

Last week, progressive lawmakers agreed to move ahead on passing the Senate’s bipartisan infrastructure legislation before voting on the party’s Build Back Better bill, in exchange for a promise that corporate Democratic holdouts would support the latter if the CBO say the bill is fully funded and won’t raise the deficit. The controversial bargain came despite warnings that CBO analyses are rigged against progressive priorities.

Those warnings appear to have come true: The CBO just said that when calculating the net cost of the BBB, it will not include its own projections of massive savings that would be generated by strengthening tax enforcement to collect hundreds of billions of dollars of levies that go unpaid by the wealthiest sliver of the population.

Less than two months ago, the CBO estimated that a BBB provision to increase funding for the Internal Revenue Service (IRS) by $80 billion over the next decade would raise about $200 billion in revenue over that time period. That followed an earlier CBO report that found that increasing the IRS budget by just $20 billion over the next decade would increase revenue by about $61 billion.

Yet the same CBO now says it will not include these estimates when calculating the budgetary impacts of BBB except in a footnote, according to Bloomberg News. The office is basing that decision on its budgetary scorekeeping guidelines, which include an obscure provision stipulating that “estimates for appropriation bills include only the budgetary effects of the amounts that would specifically be provided. Indirect effects that could result when an agency spends the discretionary funds are excluded.”

Increasing funding for IRS enforcement is the largest source of revenue for BBB. Excluding that revenue from the CBO score makes it far more likely that the office will conclude that the reconciliation bill will add to the budget deficit, giving corporate Democrats the ammunition they need to justify voting down president Joe Biden’s promised agenda.

The CBO’s move comes less than three years after the office issued a report insisting that the budget effects of climate change “will probably be small over the next 30 years and larger, but still modest, in the following few decades.”

That declaration, combined with the CBO guideline against considering “indirect” budgetary impacts, suggests that separate cost savings from BBB programs to combat climate change will also go uncounted by the CBO.

Accounting Gimmicks for Me, Not for Thee

Meanwhile, Democrats are using an accounting gimmick to pretend that a massive tax cut for the wealthy — a temporary repeal of the $10,000 cap on state and local tax (SALT) deductions — will not cost anything.

Corporate Democrats have long pretended that eliminating the so-called SALT cap would help middle-class families. However, more than 56 percent of the benefits of repealing the SALT cap would flow to the top 1 percent of earners, while only 4 percent of the benefits would flow to the bottom 80 percent.

A full repeal of the SALT cap would cost $475 billion over those first five years, while limiting SALT deductions to $72,500, as House Democrats have proposed, would cost $222 billion over five years. But that’s not how the CBO’s budget wonks will score it.

This is where the budget gimmick comes into play: By raising the SALT cap for five years and reinstating the $10,000 cap for the following five years, Democrats are expecting the CBO to say that over the decade, the SALT policy won’t actually cost anything — which is total nonsense.

Representative Josh Gottheimer (Democrat from New Jersey), who has led efforts to include a repeal of the SALT cap in BBB, is also one of five corporate Democrats who have said they will not vote for the legislation until the CBO conducts an analysis of whether the bill will increase the federal deficit.

Earlier this year, Gottheimer proposed using the revenue from increasing the IRS budget to fund his SALT cap repeal. “There is a cost for infrastructure investments and in eliminating the SALT cap, but there is a solution readily available,” he wrote in a letter to Treasury secretary Janet Yellen.

But now, Gottheimer is demanding to see the CBO score of BBB before he votes for it, despite the fact that the score will omit a revenue measure that he endorsed in the past.

While the CBO is technically a nonpartisan office, it is directed by Republican Phillip Swagel, who has held affiliations with the right-wing American Enterprise Institute and Milken Institute. The House speaker and Senate president pro tempore appoint the director, and either branch of Congress can pass a resolution to remove the director at any time.