Here’s an example (this one is from Catherine Rampell of The Washington Post, with my comments in italics):
How much does President Biden’s proposed agenda cost?
This seems like a straightforward question, but the answer varies wildly depending on your accounting method. And this has caused headaches as Democrats try to lock in crucial . . . votes within their own party.
In recent years, there has been something of a budgeting double standard in the framing of Republican and Democratic economic proposals. Consider Republicans’ signature achievement during the T____ era, their 2017 tax cut. This bill was usually referred to as a “$1.5 trillion” tax cut because that was the initial estimate for its net cost over a decade.
A bill’s net cost refers to the price if you add up all the provisions that raise money, subtract all the provisions that lose money and then see how it all washes out. For the 2017 tax bill, the net result was forecast as a $1.5 trillion increase in deficits over a decade. (This was later revised upward, to nearly $2 trillion.)
If, however, we had counted only the law’s gross costs (i.e., without offsetting revenue-raisers, such as the cap on state and local tax deductions), its price tag would have looked multiple times more expensive.
But that’s exactly how most politicians and journalists are tallying the “cost” of Democrats’ safety-net-and-climate legislation.
As Republicans did in 2017, Democrats are trying to pass their legislation through “reconciliation,” a process that requires only a party-line vote. Most references to the Democrats’ package describe it as costing $3.5 trillion.
That number reflects the gross costs of Democrats’ agenda items, such as paid leave, health-care expansions, universal pre-K and child tax credits.
In other words, the $3.5 trillion headline refers to only one side of the ledger. However, Democrats plan to pay for at least some of these priorities with various offsets, such as higher taxes on corporations and the wealthy. Once you include the offsets, the net cost will be lower.
How much lower? That’s TBD. Democrats are still fighting over what will make it into the bill, including various tax hikes.
We know the maximum possible net cost, though. When a bill goes through reconciliation, lawmakers must commit in advance to a ceiling on how much the bill can raise deficits.
Last month, lawmakers agreed to a maximum deficit increase of about $1.75 trillion over a decade. They could ultimately choose a smaller number. The White House says it’s aiming for a fully paid-for bill — i.e., with a net cost of zero — though that outcome seems unlikely.
The $1.75 trillion maximum net cost has gotten almost no attention, while the $3.5 trillion gross figure dominates news coverage. This has irked White House officials, one of whom complained to me that “ ‘$3.5 trillion’ is disconnected from any kind of meaningful measure of what this developing legislation is,” since it doesn’t reflect the bill’s deficit impact or even the total size of its spending items. (The proposal cuts some taxes, too.)
And the framing matters because it has been distorting congressional negotiations.
Sen. Joe Manchin III (D-W.Va.) reportedly has drawn a red line for the bill’s “size” at no more than $1.5 trillion. If he were focusing on a net cost of up to $1.5 trillion, Democrats could cram a lot of priorities in the bill, so long as they also include substantial pay-fors. But Manchin has apparently anchored his demands around the bill’s gross costs [ignoring how the bill would be paid for!].
That severely constrains what programs Democrats can create or expand, no matter how enormous the offsets are.
How come Republicans got to use bookkeeping that made their legislation seem less costly, while Democrats are saddled with metrics that overstate their fiscal profligacy?
. . . [One explanation is that] some Democrats emphasize their agenda’s gross costs because they want to play up the scale of progressive ambitions. When comparing an agenda to the New Deal, it helps to make it sound larger. And recent polls suggest Democratic voters increasingly like the sound of Bigger Government.
So progressive leaders don’t guide the debate away from that $3.5 trillion gross figure, and reorient discussions toward (smaller) net costs, as White House officials might prefer; after Manchin’s downsizing demands, Sen. Bernie Sanders (I-Vt.) declared that $3.5 trillion is “the very least” the plan should cost [even though it wouldn’t cost that much!]. . . .
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