BBB Expirations Could Hide $1 to $2 Trillion of True Costs
As negotiations over President Biden’s Build Back Better reconciliation package continue, lawmakers are reportedly considering an extension of the current expanded Child Tax Credit (CTC) for only a single year and a three-year expansion of health coverage policies that build on the Affordable Care Act (ACA). These temporary measures would be blatant budget gimmicks that could set the stage for additional costs and borrowing once they expire.
Extending the current expanded CTC for one year1 and adopting the House of Representatives's ACA proposal for three years2 would likely cost nearly $300 billion on paper. As Committee president Maya MacGuineas recently explained, however, “these proposals don’t actually shrink the package; they just shorten it.”
In this piece, we show that:
- If the CTC and ACA expansions are made permanent, it could add $1.2 trillion ($1.0 to $2.2 trillion) to the cost over a decade.
- This could bring the total gross cost of the reconciliation bill with extensions to $3.1 trillion ($2.9 to $4.1 trillion).
- Lawmakers should reject extension gimmicks as a way to make the costs appear smaller and instead offset the full costs of the bill.
Assuming lawmakers adopt the President’s CTC proposal, as well as separately extend and pay for the CTC expansion included in the 2017 Tax Cuts and Jobs Act (TCJA), we estimate the ultimate gross cost of these proposals would rise to $1.5 trillion. That could mean more than $1.2 trillion of additional borrowing – $370 billion from the ACA provisions and $870 billion from extending the CTC – if lawmakers choose not to offset the extension.
Cost of President's CTC Policy and House ACA Policy, Assuming TCJA is Extended Separately
| Policy | Temporary | Permanent | Additional Cost if Permanent |
|---|---|---|---|
| CTC Expansion | $110 billion | $980 billion | $870 billion |
| ACA Enhancements | $180 billion | $550 billion | $370 billion |
| Total Cost | $290 billion | $1,530 billion | $1,240 billion |
| Memo: Cost Range | $270-$300 billion | $1,310-$2,460 billion | $1,040-$2,160 billion |
The ultimate cost could be higher or lower and would depend on the details of the policies themselves as well as what happens to the underlying programs they are modifying. For example, if lawmakers adopt the more-generous House version of the CTC expansion and make expansions included in both the American Rescue Plan and TCJA permanent, the cost of extension would rise to $2.5 trillion. On the other hand, if they adopt a more modest version of the CTC with stronger means-testing and don’t extend the underlying TCJA changes (or assume they are extended seperately), extensions would only cost $1.3 trillion in total.4
If the package is $1.9 trillion and fully paid for on paper, these extensions would boost the ultimate cost to between $2.9 trillion and $4.1 trillion, with as much as $1.0 trillion to $2.2 trillion of new borrowing, absent future pay-fors. If additional policies are made temporary, those costs would rise further. Arbitrary expirations also put the policies themselves at risk, as future Congresses may allow them to expire.
As lawmakers work to trim their Build Back Better agenda to fit within a smaller budget, they should avoid relying on these kinds of arbitrary sunsets that only mask the true costs of policies and create excessive uncertainty about their futures.
In our Build Back Better for Less plan, we show how lawmakers can prioritize, target, and economize to fit their agenda into a $1.5 trillion to $2.3 trillion package. The plan both strengthens the ACA and extends the expanded CTC while relying on a combination of means testing, consolidations, and reforms to reduce costs.
Rather than relying on gimmicks and games, policymakers should consider these types of approaches. It’s far better to do a few things well than to enact a laundry list of policies for only a few years.
Read more options and analyses on our Reconciliation Resources page.
1 For 2021, the American Rescue Plan increased the CTC from $2,000 to $3,000 ($3,600 for children under age six) while making it fully refundable with no phase in and issuing a portion of benefits monthly.
2 The House bill would extend expansions of the ACA subsidies across the income spectrum from the American Rescue Plan, provide coverage to those below the poverty line in states that didn’t expand Medicaid, and make other changes.
3 We assume this would reduce the cost of the expanded CTC by about a quarter. Actual costs may differ. An earlier version of this blog siad the reduction would be 7 percent, which was a typographical error.
4 In all cases, we assume the ACA enhancements match the House proposal, based on the Congressional Budget Office’s score, with the three-year estimate equaling the reported $180 billion.
