Build Back Better Bankruptcy
Unlike President Biden’s perfidious claims that Build Back Better will cost “zero;” the WSJ, in a service to its readers, outlines the ways in which Democrats are disguising (lying about) their entitlement blowout.
Add Another $1.5 Trillion to the Deficit
The Journal begins with the report from the Committee for a Responsible Federal Budget (CRFB), which pegs the cost at $4.9 trillion if temporary tax credits and programs are made permanent through 2031.
This would add $1.5 trillion to deficits over the next five years without additional tax offsets.
Touring the Budget Sham:
- Enhanced Child Allowances ($3,600 for children under age 6 and $3,000 up to age 17)This is the bill’s most expensive provision at about $130 billion a year, which is why Democrats limit it to one year. Does anyone doubt they’ll extend it in the future?
- Earned income tax credit expansion
The bill nearly triples the maximum EITC value for childless adults—but only for one year. Its $15 billion annual cost would be $135 billion if extended over the decade. The kicker: Individuals can qualify based on their previous year’s earnings, so they technically don’t have to work to get it.
- ObamaCare Premium Subsidies
Democrats in March extended eligibility to Americans making more than 400% of the poverty line and capped their premium payments for benchmark plans at 8.5% of income. Subsidies for lower earners were also increased so people making 150% of the poverty line don’t have to pay a penny toward their premiums, compared to 4.1% before the change.These sweetened subsidies are set to expire after next year, but the bill extends them through 2025 while also allowing lower-income adults in states that opted out of the ObamaCare Medicaid expansion to qualify. CRFB says these subsidies will cost $530 billion if they are made permanent.
- A New Child-Care Entitlement
Households making up to 250% of their state’s median income would qualify for child-care vouchers, and their payments would be capped at 7% of income—less for lower earners. The bill appropriates about $100 billion through 2024 to states and “such sums as may be necessary” from 2025 to 2027.Spending on this entitlement like all others can be expected to increase on autopilot, especially as providers raise prices to capture more subsidies. States will have to pick up 5% of the cost from 2025 to 2027, which somewhat reduces federal spending but could lead to state tax hikes down the road.
- Universal Pre-K
The bill appropriates about $18 billion to states for universal pre-K through 2024 and then “such sums as may be necessary” through 2027. States would be on the hook for about 5% of the cost starting in 2025 and 37% in 2027.The pre-K and childcare entitlements are estimated to cost only $380 billion because they phase in gradually and expire after six years. But there’s zero chance they will expire in 2027.
Once the middle-class gets hooked, the entitlements will be impossible to repeal. CRFB estimates the two programs would cost $800 billion if made permanent.
The current $10,000 limit on the state-and-local tax (SALT) deduction increases to $80,000 through 2030. In 2031 it would return to $10,000.Penn Wharton says this gimmick would lead to $65 billion in additional tax revenue through 2031 though it would cost about $300 billion through 2025. Confused?
In sum, the House bill will cost $2 trillion to $3 trillion more than CBO is estimating because Democrats have camouflaged the costs.
Penn Wharton estimates the bill’s tax increases and other revenue will yield about $1.8 trillion, but this doesn’t account for how the tax hikes will change the incentives to work and invest.
The WSJ explains why this is the most dishonest spending bill in American history:
When the spending all kicks in, and the rich are all taxed out, the middle class will be hit with a huge tax increase.
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