During his time in the Obama administration, then-Vice President Biden once infamously proclaimed that we had to “spend money to keep from going bankrupt.” When he became president, he kept his word — at least when it comes to spending.
In an appearance before lawmakers last week, Congressional Budget Office (CBO) Director Phillip Swagel testified that the cost of the green pork provisions included in Democrats’ 2022 Inflation (Reduction) Act is likely to total $1 trillion. Unsurprisingly, the Biden administration figured out even more ways to spend money beyond what Congress, and the CBO, originally projected 18 months ago.
Preview of Fiscal Outlook
Swagel’s testimony largely focused on the accuracy of CBO’s budget projections — i.e., did fiscal conditions in prior years turn out as the budget gnomes forecast? But at the end of his prepared remarks, he turned to the upcoming release of the budget and fiscal baseline. How does CBO project the nation’s fiscal status in the coming decade?
In previewing that document, Swagel included a big admission: “We are now projecting that several developments affecting energy-related tax provisions, many of which were part of the 2022 reconciliation act [i.e., the Inflation (Reduction) Act], will add about $400 billion to the deficit over the 2024-2033 period.”
CBO and the Joint Committee on Taxation (JCT) had previously estimated that those provisions would cost approximately $570 billion over a decade — approximately $17 billion in outlay effects, representing spending for people and entities who have no income tax liability, and $553 billion in reduced revenues. Including an additional $400 billion in deficit spending would bring the total of these “green pork” provisions to $970 billion, or just under the $1 trillion mark.
When it comes to this new estimate, three elements are worth emphasizing. First, to the extent that the original $570 billion in spending was paid for, it came from 1) raiding the Medicare program and 2) creating an army of new IRS employees to harass Americans into coughing up more tax dollars. Now CBO admits that even these onerous provisions will not be enough to pay for all the new green subsidies Democrats included in their law.
Second, note CBO’s explanation for the increase in its projections on these subsidies:
The largest part of the roughly $400 billion change results from a rule proposed by the Environmental Protection Agency after those baseline projections were finalized that would change standards for vehicle emissions. The rest of the change reflects market developments that increased our projections of the rate of adoption of technologies eligible for tax credits and implementation guidance from the Treasury Department that has been more generous to taxpayers than JCT anticipated in the original estimates for the legislation.
In other words, most of the higher costs of these subsidies come not from their increased popularity. Instead, the $400 billion cost derives largely from the EPA issuing new vehicle emissions standards — i.e., taking existing cars off the road and forcing people to buy new “green” automobiles — and the Treasury Department expanding the number of entities that qualify for the new subsidies. Of course, these changes came without explicit authorization from Congress and without any offset to their higher costs.
Finally, even the $1 trillion figure may end up being an underestimate of these subsidies’ full fiscal effect. According to The Wall Street Journal, a report from Goldman Sachs last March indicated that the green subsidies would cost at least $1.2 trillion — 20 percent higher than CBO’s newly raised estimates. That data point suggests that the budget office’s estimates of this green pork may rise even higher.
Stop the (Green) Giveaways
At a time when the federal government is $34 trillion in debt and running sizable deficits, CBO’s reestimate illustrates why Congress and the Biden administration have no business doling out more giveaways to people who spend their money on certain government-favored projects. It’s long past time for Washington to stop this crony capitalism and focus on cutting spending, instead of playing Santa Claus to lobbyists and their well-heeled friends.