Bipartisan, Bicameral Group Requests CBO to Include Debt Servicing Impact in Legislative Cost Estimates
Senator Mike Lee (R-UT) and Representatives Ed Case (D-HI) and Michael Cloud (R-TX), in a bipartisan and bicameral group of 68 lawmakers, this week signed a letter to leaders of the House and Senate budget committees requesting that debt service costs be included in all Congressional Budget Office (CBO) scores. This request is a commonsense reform and is one of several reforms the Committee for a Responsible Federal Budget has previously recommended as part of our Better Budget Process Initiative.
In the letter, lawmakers pointed out that the total amount of gross federal debt outstanding recently surpassed $23 trillion, and that January CBO projections estimate that interest payments will reach $928 billion by 2029 – nearly 3 percent of GDP. Even in the most recent projections that grow slightly slower, interest is the fastest growing part of the budget, more than doubling over the next decade.
Currently, CBO does not include interest cost estimates when it scores legislation. A change in the law would fix this issue, but the Congressional Budget Act of 1974 also grants the House and Senate Budget Committees authority to direct the CBO to change their cost estimate methodology. For bills that increase the debt, the additional cost in the form of the interest payments to service that debt is not counted; for bills that reduce the debt, additional savings go unrecognized. Omitting debt service costs therefore obscures the impact of bills that affect the debt in either direction. Not including interest costs in CBO scores is yet another that lawmakers use to hide the real cost of legislation.
As the letter explains:
When Congress does not understand the true cost of a proposal, it is more likely to make decisions that endanger our ability to address future needs. Including debt servicing costs in legislative cost estimates will better equip lawmakers to make informed spending decisions. Members of Congress and congressional staff would benefit with this information, which can help better inform the development of legislation and voting decisions.
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
Our nation’s long-term fiscal situation is increasingly dire. Debt is rising faster than economic growth, and interest payments are the fastest-growing part of the budget. Our latest projections show that interest payments will reach over $800 billion within ten years. The federal government will spend more on interest than on children by 2021 and more on interest than on Medicaid by 2023. Given the ever-growing impact of interest costs, it is critical that they be included in budgetary estimates for legislation — and there is no reason anyone should oppose this increased level of transparency. Thank you to Senator Lee and Representatives Cloud and Case for leading an effort, along with a bipartisan and bicameral group of lawmakers, to ask for a common sense and overdue fix to this problem.
The letter builds upon recent momentum in Congress to fix our broken budget process. Two bills, the Cost Estimates Improvement Act (HR638) introduced by Cloud, and the Budgetary Accuracy in Scoring Interest Costs (BASIC) Act of 2019 (S2435/HR3979), would require cost estimates from both the CBO and the Joint Committee on Taxation (JCT) to include interest effects. Former Senate Budget Committee Chairman and current Committee for a Responsible Federal Budget board member Kent Conrad testified in support of the BASIC Act before the Senate Budget Committee in May last year:
For all estimates of legislation by CBO, require interest to be included in the cost. Unless it’s offset, every piece of legislation has an interest component to its cost. Choosing not to include that component in a cost estimate means choosing not to understand its full cost. This shift will guarantee the full fiscal impact of legislation is quantified for lawmakers and will better emphasize the benefit of paying for new legislation.
Requiring CBO to include estimates of the interest effects of legislation is also among the reforms contained in the Bipartisan Congressional Budget Reform Act (S2765), a bill that was approved by the Senate Budget Committee by a bipartisan vote of 15 to 6 in November last year.
We commend the 68 lawmakers willing to push for commonsense measures to help tackle our burgeoning debt. Although this proposal is just one of many reforms needed to fix our broken budget process, it is an important first step worthy of consideration.