House Jobs Plan Doesn't Work for the Deficit
House Republicans plan to vote this week on a jobs package combining bills that would "build a robust economy and foster job creation." While promoting economic growth should be a top priority after a lackluster jobs report and a slow recovery, policymakers should also be fiscally responsible. Unfortunately, the House Republican approach would make the debt much worse. We've compiled the cost estimates for the various bills, and the package would cost more than $570 billion over ten years, before interest.
The package includes a combination of tax, spending, and regulatory changes, many of which could help to spur short or long-term economic growth. The majority of the costs in the legislation come from permanently extending and expanding a few expired tax provisions which focus on promoting research and investment. Unfortunately, the legislation would include over $570 billion of costs, but only $400 million worth of savings. Without offsets, the package will add substantially to the debt.
This increase in debt isn’t only bad for the fiscal situation; it also works against the exact purpose of the bill. As CBO has noted, a high national debt creates drag on economic growth by crowding out private investment, reducing output, and increasing interest rates. The package's care-free attitude towards increasing the debt will dampen any economic growth that would occur from the legislation.
As we've argued many times, if something is worth having, it is worth paying for. The fact that a package has the potential to promote growth does not mean we should allow it to add to the debt over the long run. In the past, we’ve suggested numerous offsets to pay for unemployment insurance, highway spending, extending tax provisions, veterans health care, or the Medicare "doc fix." Any of those, or any number of others, could be attached to this package to make it more fiscally responsible.
|Provisions in the September 2014 House Jobs Package
|Ten-Year Costs, 2015-2024
|Expand and make permanent bonus depreciation
|Expand and make permanent the research & experimentation tax credit
|Expand and make permanent 2013 levels of small business expensing (Section 179)
|Change the definition of full-time employment from 30 to 40 hours/week
|Repeal medical device tax
|Make permanent two expired tax breaks relating to S Corporations
|Exempt from the employer mandate servicemembers and veterans who already have health insurance
|Codify standards for regulations that create private mandates
|< $0.1 billion
|Require agencies to submit a monthly report of proposed and final regulations
|< $0.1 billion
|Require major regulations to get Congressional approval
|Exempt most private equity financial advisors from SEC registration
|Exempt certain merger & acquisition brokers from SEC registration
|Streamline the process to obtain permits to extract critical and strategic minerals from public land
|Permanently ban states and localities from imposing taxes on internet access
|Increase timber production on federal lands
|- $0.4 billion [savings]
|Total, House Republicans Jobs Package
Sources: CBO, JCT estimates.
*This total does not include the costs of one bill, requiring Congressional approval for major rule changes. CBO estimates that the effects on both spending and revenues would be "significant" but impossible to determine. Fourteen of these bills have previously been approved by the House in this Congress, while repealing the medical device tax was approved by the House in 2012.
The House is also planning to pass an energy package made up 13 bills that would collectively save about $2 billion over 10 years, not nearly enough to offset the costs of the jobs package.
Given the slow economic recovery, it is understandable that policymakers may want to enact additional spending measures or tax cuts to boost economic growth. However, these additional measures should be fully paid for over the ten-year window. Otherwise, they make our substantial debt problems worse and undermine the very growth they are trying to create.
Update 9/15/14: This blog was originally published on September 5, but updated to reflect one provision being added to the legislative package, permanent repeal of the medical device tax, which has not been passed as a standalone bill.
Update 9/18/14: The post has been updated with an official estimate from JCT, at a total of $572 billion. Our original post added cost estimates from past versions of the bills to come up with $590 billion.