CBO Estimates a Permanent Build Back Better
The Congressional Budget Office (CBO) today released an estimate of how much it would cost to make most temporary provisions in the House-passed Build Back Better Act permanent. Under assumptions requested by Ranking Members of the Budget Committees, CBO finds a permanent version of the Build Back Better Act with no further offsets would increase budget deficits by $2.75 trillion before interest, as opposed to by $158 billion as the bill is written. Though CBO does not score gross costs, we find the gross cost of the bill would rise from $2.40 trillion to $4.73 trillion using CBO's numbers.
As we have noted before, the Build Back Better Act relies on a number of arbitrary sunsets and expirations to lower the official cost of the bill. These include extending the American Rescue Plan's Child Tax Credit (CTC) increase and Earned Income Tax Credit (EITC) expansion for a year, setting universal pre-K and child care subsidies to expire after six years, and making the Affordable Care Act (ACA) expansions available through 2025, among other provisions. CBO estimates that making most of these provisions permanent would add about $2.3 trillion to the cost of the bill (and lose roughly $260 billion of revenue from imposing the state and local tax (SALT) deduction cap beyond 2025). Most of this increase is due to the cost of extending temporary provisions, though a small amount is likely because some the proposals will cost more in the early years if states and other entities expect them to be permanent.
Cost of Permanent Build Back Better Act, Based on CBO Analysis
| Policy | Official Cost | Permanent Cost |
|---|---|---|
| Expand the CTC, mostly for one year | $185 billion | $1.60 trillion* |
| Expand the EITC for one year | $13 billion | $135 billion |
| Provide Universal Pre-K and Child Care for six years | $381 billion | $752 billion |
| Expand the Affordable Care Act through 2025 | $135 billion | $428 billion |
| Strengthen Medicaid Home and Community-Based Care | $146 billion | $209 billion |
| Other expiring spending and tax breaks | $44 billion | $110 billion |
| Other intentionally expiring or non-expiring spending and tax breaks | $1.50 trillion | $1.50 trillion |
| Gross Cost of Build Back Better from CBO Analysis | $2.40 trillion | $4.73 trillion |
| Deficit Impact Assuming No Further Offsets | $158 billion | $2.75 trillion |
| Deficit Impact Assuming No Further Offsets, with interest | $231 billion | $3.01 trillion |
| Deficit Impact Assuming No Further Offsets, with interest & cancellation of R&E amortization | $231 billion | $3.17 trillion |
Sources: Congressional Budget Office and Committee for a Responsible Federal Budget.
Assuming these provisions are made permanent without any offsets (note that President Biden has committed to offset extensions), the bill would add $2.75 trillion to the deficit before interest and $3.0 trillion including interest. That debt increase would grow to $3.2 trillion if lawmakers also make permanent a temporary delay of amortization of research and experimentation expenses.
CBO's estimates are very similar to our recent estimates, but they differ in some respects. CBO estimates a permanent Build Back Better Act with no further offsets would add $2.75 trillion budget deficits, while we estimated $2.81 trillion. Moreover, CBO's estimates suggest the gross cost of a permanent bill would total $4.73 trillion, compared to our estimate of $4.78 trillion.
Small differences in the total obscure somewhat larger but offsetting differences for specific policies. For example, we assume the Build Back Better Act would be made permanent in the context of an extended or partially extended Tax Cuts and Jobs Act – which results in our permanent Child Tax Credit estimate being roughly $400 billion lower but our permanent SALT cap estimate being about $350 billion higher. We also incorporate a permanent extension of the bill's delay in the requirement for businesses to amortize research and experimentation expenses, which CBO does not. Other differences are mainly due to estimating assumptions.
Comparison of Estimated Cost of Permanent Build Back Better Act
| Policy | CBO Estimate | CRFB Estimate |
|---|---|---|
| Expand the CTC | $1.60 trillion* | $1.19 trillion* |
| Expand the EITC | $135 billion | $135 billion |
| Provide Universal Pre-K and Support Affordable Child Care | $752 billion | $665 billion |
| Expand the Affordable Care Act | $428 billion | $495 billion |
| Prevent R&E Amortization | n/a^ | $150 billion^ |
| Raise SALT Deduction Cap to $80,000 | $245 billion* | $600 billon* |
| Other extended policies | $320 billion | $330 billion |
| Other spending and tax breaks | $1.25 trillion | $1.21 trillion |
| Gross Cost of Build Back Better with Extensions | $4.73 trillion | $4.78 trillion |
| Memo: Deficit Impact Assuming No Further Offsets | $2.75 trillion# | $2.81 trillion# |
Sources: Congressional Budget Office and Committee for a Responsible Federal Budget.
*Differences on Child Tax Credit and SALT are largely due to methodological differences. CRFB’s estimates are based on the assumption that the TCJA is extended or partially extended in separate legislation, which reduces the cost of extending the Child Tax Credit relative to CBO but increases the cost of extending the SALT cap increase. ^The Build Back Better act delays but does not repeal scheduled amortization of research & experimentation expenses. CRFB assumes a permanent Build Back Better would fully repeal R&E amortization, whereas CBO was not instructed to make this assumption. #Both the CRFB and CBO estimates assume no revenue from imposing the SALT cap, separate from other TCJA changes, after its scheduled expiration in 2025.
Importantly, these estimates do not reflect what is actually written in the Build Back Better Act nor its official cost for scorekeeping purposes. Lawmakers may choose to allow some provisions to expire, to extend some as written, and to modify some. To offset the cost of extending these provisions as President Biden has committed, they would need to more than double current offsets in the bill. Extending programs without these offsets would substantially increase in the debt. $3 trillion of new debt would increase debt to over 116 percent of Gross Domestic Product in 2031, up from 107.5 percent under current law.
The Build Back Better Act relies on a substantial amount of short-term policies and arbitrary sunsets to reduce its cost, raising the possibility of deficit-financed extensions in future years. A more robust and fiscally responsible package would not rely on these gimmicks to achieve deficit neutrality.
Read more options and analyses on our Reconciliation Resources page.
