November 2, 2021 – PPE Research Director Josh Bivens took to Twitter to refute critics’ latest claim that the Build Back Better Act (BBBA) is only “fully paid” due accounting gadgets. The claim, Bivens points out, is “bad economics,” adding that BBBA is indeed fully paid. Read it full twitter thread here.
The final ill-founded objection to BBBA rests on claims that he is only fully “paid” due to accounting gimmicks or “shell games”. The root of this complaint is a bad economy, and the factual basis for it is overstated.
The essence of the new complaint is that revenue increases in the BBBA are permanent, but a number of spending provisions and tax credits expire before the end of the 10-year budget window. The bill is therefore not really “paid” and will increase the budget deficits.
The fundamental assumption here is that the debt financing of this bill will be economically damaging. There is no evidence that this is true. Interest rates remain at historic lows and have been low and falling for decades. In such environments, debt financing makes a lot of economic sense.
The BBBA negotiations have gotten to a point where they are funded by revenue rather than debt – and that’s great! Tax provisions are truly valuable in themselves and will not offset any of the macroeconomic benefits of spending.
So the underlying economic assumption that the BBBA must be fully funded to avoid harming the economy is totally wrong. But, assumptions aside, the simple fact is that BBBA pays off.
The inevitable comparisons that gullible commentators will make are with the tax cuts enacted under George W Bush and Donald Trump. All of these tax cuts contained at least some provisions that ended in the 10-year budget window, aimed at reducing their impact on the deficit.
These are terrible comparisons. For one thing, even with the sunset, the literal text of Bush’s tax cuts and Trump’s tax cut have unambiguously increased the nation’s debt significantly. It is not disputed. The BBBA would not. Period.
— Josh Bivens (@joshbivens_DC) November 2, 2021
The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank established in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI believes that every working person deserves a good job with fair pay, affordable health care and retirement security.www.epi.org