True Cost of Budget Plan Could Exceed $5 Trillion
The Senate may soon move forward on reconciliation instructions to allow for the enactment of $3.5 trillion in new spending and tax breaks (on top of the proposed $579 billion bipartisan infrastructure package). However, the proposals outlined in a fact sheet released to the press appear to cost far more than the $3.5 trillion advertised.
While the actual cost of this new legislation will ultimately depend heavily on details that have yet to be revealed, we estimate the policies under consideration could cost between $5 trillion and $5.5 trillion over a decade, assuming they are made permanent. In order to fit these proposals within a $3.5 trillion budget target, lawmakers apparently intend to have some policies expire before the end of the ten-year budget window, using this oft-criticized budget gimmick to hide their true cost.
Since the released fact sheet does not provide enough detail to conclusively estimate the cost of new policies, our initial estimates involve a degree of uncertainty. We arrived at the figures below primarily by matching brief, bullet point descriptions of proposals in the fact sheet to specific policies in the President's budget or other proposed legislation – actual policies could differ. Based on these sources, we estimate policies in the fact sheet would cost about $5 trillion over a ten-year period. Including additional policies not explicitly mentioned but rumored to be part of the package, and incorporating possible estimating differences between the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO), the cost could rise to $5.5 trillion.
Potential Cost of Reconciliation Policies, if Made Permanent
|Tax Credit Extensions|
|Extension of expanded Child Tax Credit (CTC)||$1,100 billion#|
|Extension of expanded Earned Income Tax Credit (EITC)||$105 billion|
|Extension of expanded Child and Dependent Care Tax Credit (CDCTC)||$105 billion|
|Clean Energy Investments|
|Clean energy and vehicle tax incentives||$330 billion|
|Climate-smart agriculture, wildfire prevention, and forestry||$100 billion*|
|Federal procurement of clean technologies||$50 billion|
|Weatherization and electrification of buildings||$40 billion|
|Clean energy accelerator||$30 billion|
|Civilian Climate Corps||$10 billion|
|Clean energy standard||N/A'|
|Education and Families|
|Funding for community colleges, HBCUs, and Pell Grants||$285 billion|
|High-quality and affordable child care||$250 billion|
|Paid family and medical leave||$225 billion|
|Universal pre-kindergarten for all 3- and 4-year-olds||$165 billion|
|Nutrition assistance||$45 billion|
|Manufacturing, Jobs, and Housing|
|Housing investments (including funding for affordable housing programs)||$190 billion|
|Upgrades to Innovation and Research & Development||$185 billion|
|American manufacturing and supply chains funding||$180 billion|
|Investment in workers and communities||$120 billion|
|Immigration and border management||$100 billion*|
|Small business support||$30 billion|
|Pro-worker incentives and penalties||N/A'|
|Expansions of home and community-based health care services||$400 billion|
|New dental, vision, and hearing benefit in Medicare||$370 billion^|
|Closing the Medicaid "coverage gap" in non-expansion states||$300 billion*|
|Extension of expanded Affordable Care Act benefits from the American Rescue Plan||$165 billion|
|Lower patient spending on prescription drugs||$120 billion^|
|Total Cost of Permanent Policies||$5,000 billion|
|Potential Additional Policies and Costs|
|Changes to State and Local Tax (SALT) deduction cap||$120 billion*|
|Investment in K-12 school infrastructure and upgrades federal hospitals and buildings||$90 billion|
|Expansion of Graduate Medical Education||$20 billion*|
|Costs from potential estimating differences||$250 billion†|
|Potential Total Cost with Additional Policies and Costs||$5,480 billion|
Source: Estimates are from the President's FY 2022 Budget, unless otherwise noted. Figures may not add due to rounding.
#Reflects the cost of making the CTC expansion permanent, assuming the TCJA expansion is extended in the baseline, using OMB and CRFB estimates. The actual cost of making this provision permanent, without offsets, would be closer to $1.5 trillion.
*CRFB rough assumption based on proposals not included in the President's budget.
^Based on proposals in the H.R. 3, The Elijah E. Cummings Lower Drug Costs Now Act, Titles III, IV, and V.
'These provisions would ordinarily have little budget impact, but could be designed to have a more substantial impact in order to comply with the Byrd rule. We have no basis for estimating the magnitude or even direction of the cost/savings without more information.
†Accounts for possible differences between CBO and OMB scores of universal paid family and medical leave, ACA premium subsidies, and tax credit extensions.
The actual costs of permanently enacting these policies could be higher or lower than our estimates, depending on policy details. However, it is clear that policymakers cannot fully and permanently fund "every major program that President Biden has asked us for," along with proposed health care expansions and other measures, for $3.5 trillion.
To fit $5 trillion to $5.5 trillion worth of spending and tax breaks into a $3.5 trillion budget, background documents to reporters explain that "the duration of each program's enactment will be determined based on scoring and Committee input." In other words, tax credits and spending programs will be set to expire at some point before the end of the decade, in the hope that future lawmakers will extend these programs. While some provisions could also be scaled down or otherwise adjusted, these premature expirations appear to be a key source of cost reduction.
This budget gimmick, which would obscure the true cost of the legislation and put program beneficiaries at risk, was rightly criticized in 2017 when used for some of the 2017 tax cuts. It would be unwise and irresponsible to use arbitrary expirations and sunsets to obscure the true cost of this legislation.
Read more options and analyses on our Reconciliation Resources page.