As Joe Biden gloats over the legislative victory that Nancy Pelosi and 13 House Republicans have finally handed him with his $1.2 trillion infrastructure bill, he and administration officials continue to blast out the false claim that the much larger “Build Back Better” budget reconciliation spending package will have a “zero dollar” cost.
The claim would be laughable if the damage it is sure to do to the American economy were not so dire. Michael J. Boskin of the Hoover Institution said that even though all politicians exaggerate, Biden’s claims about a zero cost “rises to a higher plane.”
Boskin points out three fundamental errors in the zero-cost talking point. First, it ignores the opportunity cost of lost private investment and production caused by shifting resources to the government away from the private sector. Second, all taxes are a direct cost to the economy. They also divert resources away from private production. Third, the claim focuses only on the dollars claimed to be involved by the bill’s drafters. The actual costs include huge administrative and compliance costs and the destructive impact of economic incentives involved.
The University of Pennsylvania’s Wharton School of Business will issue a new study this week that will show that the direct cost in actual dollars added to the federal debt will be at least $2.42 trillion.
The new package’s provisions would reportedly add new spending of $3.98 trillion and $1.56 in new federal taxes. The new estimates should attract the attention of some lawmakers, especially those who have been pressing for the Congressional Budget Office to “score” the legislation before it is voted on.
Meanwhile, Treasury Secretary Janet Yellen admitted last week at the U.N. climate conference in Scotland that governmental policies require the “wholesale transformation.” She said that the estimated cost over the next 30 years is “between $100 and $150 trillion.”
She went on to say that the “gap between what governments have and what the world needs is large.” Of course, since governments have no power to raise money other than extracting it from practical production, she added that “the private sector needs to play a bigger role.”