Analysts: Democrats’ $3.5 Trillion Spend May Cost $5.5 Trillion

A group of analysts predicts that Congressional Democrats’ $3.5 trillion budget reconciliation plan could actually cost up to $5.5 trillion.

As The Daily Wire recently reported, lawmakers are attempting to ram spending proposals through Congress without Republican approval. Their budget incorporates portions of President Biden’s American Families Plan and American Jobs Plan.

Analysts at the Committee for a Responsible Budget cast doubt on whether the Democrats’ costs projections are accurate:

While the actual cost of this new legislation will ultimately depend heavily on details that have yet to be revealed, we estimate the policies under consideration could cost between $5 trillion and $5.5 trillion over a decade, assuming they are made permanent. In order to fit these proposals within a $3.5 trillion budget target, lawmakers apparently intend to have some policies expire before the end of the ten-year budget window, using this oft-criticized budget gimmick to hide their true cost.

The analysts matched the brief proposal descriptions in the fact sheet to specific policies in the President’s budget or other proposed legislation:

Based on these sources, we estimate policies in the fact sheet would cost about $5 trillion over a ten-year period. Including additional policies not explicitly mentioned but rumored to be part of the package, and incorporating possible estimating differences between the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO), the cost could rise to $5.5 trillion.

Some of the largest expenses in the budget are the extended child tax credit, community-based health services, clean energy and vehicle tax incentives, funding for higher education, and affordable housing investments — which amount to $1.1 trillion, $400 billion, $330 billion, $285 billion, and $190 billion respectively.

With the potential addition of amended State and Local Tax (SALT) deductions, investment in K-12 school infrastructure, expanded graduate medical education, and costs from potential estimating differences, the federal government could spend another $480 billion.

Federal deficit spending — upon which the Democrats’ budget reconciliation plan would heavily rely — is deeply harmful to long-term economic development.

Economists from the University of Pennsylvania’s Wharton School explain that deficit spending discourages investment in private ventures, thereby cutting innovation and business growth:

The government collects real resources via voluntary transactions with economic agents who are willing to trade real resources today for the promise of real resources in the future. Debt buyers, including U.S. households saving for retirement, view this debt as savings, which reduces their savings in private investment. This substitution is called the ‘capital crowding-out effect’ from government debt issuance.

With $1 trillion in deficit spending, capital stock would fall 0.78% by 2050; with $10 trillion in spending, capital stock would fall by 8.59%.

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