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Rep. Josh Gottheimer talks on the phone

Rep. Josh Gottheimer (D-N.J.) walks down the House steps of the Capitol after the final votes of the week on September 20, 2019. (Photo: Bill Clark/CQ-Roll Call, Inc. via Getty Images)

CBO's Exclusion of IRS Boost Could Help Right-Wing Dems Tank Biden Agenda

"The CBO score is not going to 'cost out' because CBO is not allowed by rule to say that giving the IRS a bunch of money will lead to better tax collection," said one critic. "If you think that's insane you're right!"

Kenny Stancil

The Build Back Better Act includes increased funding for Internal Revenue Service enforcement, which the Biden administration has taken into account when saying that the legislation will raise enough money to fully offset spending, but the Congressional Budget Office is expected to omit the projected boost in tax collection from its forthcoming estimate of the fiscal impact of the 10-year, $1.75 trillion social infrastructure and climate package.

The exclusion could be significant because the more transformative part of President Joe Biden's legislative agenda has been put in jeopardy by five right-wing House Democrats who last week made their support for the Build Back Better (BBB) Act contingent on receiving fiscal information from the CBO that matches existing estimates provided by the White House.

Bloomberg reported Tuesday night:

The Biden administration estimates a better-funded IRS could bring in $400 billion over a decade through more aggressive audits of corporations and the wealthy. But under budget rules set by Congress and the executive branch, the government's nonpartisan analysts can't officially count money that will be spent as also increasing revenue when estimating the cost of legislation.

Andrew Grossman, chief tax counsel for the Democratic majority on the House Ways and Means Committee, suggested Tuesday that the Congressional Budget Office will instead limit its analysis of the IRS plan to a footnote in its official report. That's because revenue expected from that increased funding would not be "scoreable" under rules guiding official government estimates, he said.

Even then, Grossman said, its estimate will likely be well below the White House's projection.

While analyses by the White House, the Treasury Department, and the Joint Committee on Taxation have all shown that BBB is fully "paid for" and may even reduce deficits, the CBO is likely to come to a different conclusion because it won't consider spending that raises revenue in its "score."

The only reason any of this matters is because last week, corporate Democratic Reps. Ed Case (Hawaii), Josh Gottheimer (N.J.), Stephanie Murphy (Fla.), Kathleen Rice (N.Y.), and Kurt Schrader (Ore.) betrayed a long-standing agreement to pass the bipartisan physical infrastructure bill (BIF) and the more ambitious social infrastructure and climate package simultaneously, insisting at the last minute that they would not vote for BBB until they received fiscal information from the CBO that is consistent with existing estimates.

Given the razor-thin margins in Congress, Democrats can afford only three defections in the House and none in the Senate to pass BBB through the filibuster-proof budget reconciliation process. 

Ironically, the CBO estimated earlier this year that the $550 billion BIF adds $256 billion to the deficit, a fact that Rep. Alexandria Ocasio-Cortez (D-N.Y.) drew attention to last Friday.

BIF supporters' lack of concern about such a finding, which was also not lost on Senate Budget Committee Chair Bernie Sanders (I-Vt.), prompted critics to suggest that the request for additional fiscal information from the CBO by several right-wing House Democrats was nothing more than a thinly veiled attempt to tank the more ambitious portion of Biden's agenda.

Rather than ignoring the demand for additional fiscal information or postponing the votes that had been scheduled for both BBB and BIF in order to keep the two pieces of legislation linked, as the Congressional Progressive Caucus (CPC) suggested on Friday afternoon, House Speaker Nancy Pelosi (D-Calif.) acquiesced to the conservative obstructionists—holding a floor vote on BIF and shelving the planned vote on BBB in favor of a procedural "rule for consideration" to set up a future vote on the reconciliation bill.

At the behest of Biden, CPC Chair Rep. Pramila Jayapal (D-Wash.) and Gottheimer worked out an agreement in which Jayapal would wrangle enough support from CPC members to pass BIF on Friday night and the five right-wing holdouts would vote for BBB "as expeditiously as we receive fiscal information from the Congressional Budget Office—but in no event later than the week of November 15—consistent with the toplines for revenues and investments" projected by the White House.

The fossil fuel-friendly BIF is awaiting Biden's signature after having been passed by the Senate in August and by the House on Friday night, when 13 Republicans joined most Democrats in supporting the measure.

Just six progressives—Ocasio-Cortez plus Reps. Jamaal Bowman (D-N.Y.), Cori Bush (D-Mo.), Ilhan Omar (D-Minn.), Ayanna Pressley (D-Mass.), and Rashida Tlaib (D-Mich.)—voted against BIF in an attempt to prevent the two parts of Biden's economic agenda from being decoupled, which they warned would take away the leverage necessary to advance social welfare and clean energy investments through the House as well as the evenly split Senate.

Now it remains to be seen whether the green public spending contained in BBB will see the light of day.

In response to Tuesday night reporting from CNN warning that a full CBO analysis is unlikely to be ready by November 15, Jayapal issued a reminder that Gottheimer et al.'s demand was for additional fiscal information—not a full score—from the CBO.

However, with the CBO's cost estimate expected to deviate considerably from the Biden administration's previous figures due to the CBO's exclusion of key information, the fate of BBB—already hanging by a thread—is still uncertain.

Last week, Adam Jentleson, a former congressional staffer and current executive director of the Battle Born Collective, a progressive communications firm, warned that "a statement of support for BBB that is contingent on the CBO score could be more of an escape hatch... than a commitment to vote for BBB," comparing it to a "heads, I win, tails, you lose" scenario.

If the conservative Democrats "are really committed, why build in a CBO contingency?" he asked, adding that those lawmakers raised no concerns when the CBO said BIF would add more than $250 billion to the deficit.

Others, including Warren Gunnels, majority staff director for Sanders, pointed out that the CBO's results are notoriously arbitrary and unreliable.

In a recent Groundwork Collaborative report, political economists Mark Paul of the New College of Florida and Adam Hersh of the Economic Policy Institute argued:

Past policy choices have been guided by the Congressional Budget Office's (CBO) mistaken projections that consistently underestimated "potential output" and overestimated future interest rates. These mistaken projections exaggerated budgetary costs and led policymakers to hit the brakes on spending far too early in past recoveries, entrenching long-standing racial and gender inequities and deterring investments that would raise efficiency and living standards over the long term.

Built into the CBO model are deeply problematic and racialized assumptions about how low the unemployment rate can go without sparking inflation, known as the "natural rate." CBO defines a "natural rate" for Black workers that is more than double the rate of white workers, and a "natural rate" for Latinos more than one-third higher.

Going too small on spending in past recoveries did more than make the economy more unequal—it created a self-reinforcing cycle of economic underperformance that permanently reduced America's potential for growth and prosperity.

The statement from Gottheimer et al. says that "in the event the fiscal information received from the Congressional Budget Office is inconsistent with the 'White House Preliminary Budgetary Estimate of the Build Back Better Act' document, we remain committed to working to resolve any discrepancies in order to pass the Build Back Better legislation."

Right-wing Democrats have already successfully gutted the reconciliation package, slashing the topline spending level from $3.5 trillion to $1.75 trillion over a decade.

"Further attempts to reduce the size of the bill could lead to more pieces dropping out, fueling further wrangling between Democrats over what should stay in," Bloomberg noted.

"A provision to allow Medicare to cap the way it pays for prescription drugs could bring hundreds of billions in additional offsets to help bridge the gap between the White House's revenue estimate and that of the CBO," Bloomberg added, "but Democrats have yet to finalize the policy amid disagreements between influential members of the House and Senate," including Rice and Schrader, who are among the party's lawmakers bankrolled by Big Pharma.

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