$3.5 Trillion Is a Phony Number Budget tricks disguise the true cost of Biden’s vast entitlement plans.
Democrats are grasping for ways to finance their cradle-to-grave welfare state, with the left demanding what they claim is $3.5 trillion over 10 years. The truth is that even that gargantuan number hides the real cost of their plans.
The bills moving through committees are full of delayed starts, phony phase-outs, and cost shifting to states designed to fit $3.5 trillion into a 10-year budget window that can pass with a mere 51 Senate votes. Even if the bill shrinks to $2 trillion or less, the real costs will be far greater. Behold one of the greatest fiscal cons in history.
• Start with the child allowance, which is among the bill’s most expensive provisions. Extending the $3,000 to $3,600 per-child payments for a decade would cost roughly $1.1 trillion. That’s as much as all of the income tax increases on individuals passed by the House Ways and Means Committee.
Democrats have hidden the real cost by extending the allowance only through 2025. Even if Republicans gain control of Congress and the White House in 2024, Democrats and their media allies will bludgeon them to extend the payments, which will cost another $110 billion each year. The GOP will be accused of raising taxes on middle-class families.
• Democrats are using a different time shift to disguise the cost of their Medicare expansion. New vision and hearing benefits would kick in over the next two years and cost about $20 billion a year. But Democrats are delaying the phase-in of the much more expensive dental benefit to 2028. This “saves” $420 billion over 10 years, but the costs explode after that.
• Then there’s the new universal child-care entitlement, which gives $90 billion to the states—but only from 2022 to 2027. The bill limits household costs to a share of income on a sliding scale. None would pay more than 7% of income no matter how much they earn or how many children they have.
Child-care providers will raise prices to capture more government subsidies, as colleges and health insurers do now. This is a rare entitlement in the bill that has a dedicated appropriation. But what happens when the $90 billion runs out, which may occur before the 2027 expiration? The bill automatically appropriates “such sums as may be necessary for each of fiscal years 2025 through 2027.”
• Democrats also charge states with standing up a universal pre-K entitlement, which would start next year and run through 2028. The House Education and Labor Committee bill doesn’t specify an appropriation, but President Biden’s budget projects this new entitlement would cost $33 billion a year when fully phased in.
Initially the feds would pick up 100% of the cost, but Washington’s share would decline to 60% by 2028. Shifting spending to the states reduces the 10-year cost, but the states will get stuck with huge bills as the federal cost-share declines.
• Democrats are also shifting some costs of free community college to the states. The entitlement passed by the House Education and Labor Committee would run only from the 2023-24 school year through 2027-28. The feds would pay 100% of average state tuition and fees for students at community colleges in 2023, but only 80% by 2027.
This phase-out and cost-shift shaves at least $50 billion off the 10-year federal tab. But states will have an enormous incentive to expand community college enrollment to reel in more federal dollars, so the budget costs could explode anyway.
The precedent is ObamaCare’s Medicaid expansion. Initially the feds induced states to expand eligibility up to 138% of the poverty line by picking up 100% of the cost. Federal spending ballooned as the Medicaid rolls swelled. But as the federal cost-share declined to 90% in 2020, states were stuck with a surprise bill.
A dozen states have declined to expand Medicaid. So now Democrats are creating a new federal program that expands Medicaid in these states, starting in 2025. This will soon become a national quasi-public option. Cost estimates are fuzzy. But as with other entitlements, the spending would be on autopilot and removed from Congress’s annual appropriations.
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The press has reported almost none of this, which is how Democrats like it. The Committee for a Responsible Federal Budget, which is far from a conservative outfit, pegs the real cost over a decade at $5 trillion to $5.5 trillion. Total U.S. annual GDP is about $23 trillion.
But don’t expect an honest accounting from the Congressional Budget Office, which will score the bill based on the directions Democrats give. Recall how CBO scored the federal takeover of student loans as a money raiser in 2010. The bottom line: $3.5 trillion is merely the first installment of a bill that would put government at the commanding heights of family life and the economy for decades to come. Tax increases will follow as far as the eye can see.
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