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A @POTUS Twitter post over the weekend made some fiscal representations I'd like to understand.

President Biden
@POTUS

United States government official

My Build Back Better Agenda costs zero dollars.

Instead of wasting money on tax breaks, loopholes, and tax evasion for big corporations and the wealthy, we can make a once-in-a-generation investment in working America.

And it adds zero dollars to the national debt.

5:34 PM · Sep 25, 2021·The White House

I'm specifically asking about the cost and debt impact claims.

What is the basis for claiming the plan "costs zero dollars"?

Even if the plan eventually becomes revenue-neutral in 15 years, does that justify a claim of no impact on the debt? Is that the distinction between federal deficit and federal debt?

Alignment w/ CBO projection

Does the white house have charts showing the impact of the agenda to compare to the current CBO projections:

enter image description here

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  • Given all the reporting in the past 24 hours on this, I think they would have deleted it if they really didn't mean it. Might be interesting if this gets brought up at some press conference.
    – Fizz
    Sep 28 at 22:19
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    "Is that the distinction between federal deficit and federal debt?" The debt is total oustanding amount currently owed by the US Govt, for all time. The deficit is how much more money the US Govt spends each year vs how much it takes in. That difference is added to the debt each year (and almost every year there is a deficit, rather than a surplus). (Adding this as a comment since it's ancillary to the question rather than a direct answer)
    – TylerH
    Sep 29 at 14:02
  • You're it doesn't make sense.... and this is exactly why I propose a ban on Presidents making huge announcements via twitter Sep 30 at 15:25
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IT DEPENDS ON WHAT YOU MEAN BY 'COST.'

In politics, the words are often moulded to have meanings beyond what they would mean in common, conversational contexts. Here, the word 'cost,' is being applied in a very specific way.

The Biden Administration is claiming that the program will not require any increase in the national debt. That's why the tweet you cite ends on that point, to clarify what is meant by 'cost' in that statement. It's repeated in the first quote cited by the Post

This isn't necessarily disingenuous, insofar as 'cost' can be taken to mean "a burden borne as a result of a choice."

Obviously the program's various aspects will "cost" a fair bit (hundreds of billions per year over ten years) in terms of dollars being spent to make them manifest - but in economics you can find the concept of relative costs.

Suppose you were forced to choose between A: losing $500 and B: losing $700. You can describe this by saying Option A costs $500 and Option B costs $700. That's how most people would, conversationally, understand the word 'cost.'

But to an economist or accountant, the fact of the matter is that you're out at least $500 no matter what. So really the choice is between losing another $200, or not. (This is known as throwing good money after the bad.) In that context, you can say "making the 'wrong' choice will cost you $200." This is not an incorrect way of describing it, and is similar to the way in which the Biden administration is claiming their plan will cost $0. They're basically saying the money that they're going to use to fund this is already committed, or would have been spent for other things.

The term "budget neutral" is used to mean something similar here, but they're probably avoiding that term either because they don't think it polls well or because there's some other slightly more creative accounting they're claiming (such as raising taxes on rich folks).

It's certainly not as honest as speaking in plain language, but it's not all smoke and mirrors, either.

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    It's also similar to the language "buy one, get one free". The second one isn't really free, because you have to spend money on the first one (it's essentially the same as discounting the price by 50%). But if you would have bought the first one anyway, the second is essentially free.
    – Barmar
    Sep 28 at 20:07
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    @Burt_Harris "an amount that has to be paid or spent" can be expressed in relative/differential terms. I can buy a pair of headphones without a mic for $15. I can buy a headset with a mic for $20. The cost of the mic, to me is $5. But at no point do I spend $5 on the mic. Sep 28 at 20:17
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    @Barmar IMHO a better comparison is a coffee-maker which "will pay for itself". Regular people understand this well: why it's sometimes true, and how it's sometimes half a lie. Sep 29 at 3:39
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    @Burt_Harris As much as it would be nice if political speech was bound by strict, proscriptive definitions (as a political scholar, it would certainly make MY job easier...), that's just simply not the case. English words' definitions are fluid and context-driven. So what the CBO uses, what the Oxford Dictionary uses, are not the final say as to what the word means. Economists use relative costs all the time. And as others have pointed out, outlays can mean 'net outlays' and now we need ask 'net over what time period' As I said in the answer: it's not the most honest framing but also not a lie Sep 29 at 11:38
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    @WilliamWalkerIII I submit it actually is the most understandable and honest framing. Joe blue-collar easily understands how Ads saying "XYZ insurance saves you $200 a year" means "compared to what you would have paid otherwise". They may not believe the claim, but anyone saying it's arcane and confusing is engaged in sophistry. Sep 29 at 13:49
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Apparently, the basis of the zero cost claim is that it will "reuse" unspent funds from a Covid bill. This has been judged a pretty misleading though, e.g. by WaPo, which gave it "2+" Pinocchios since the final cost isn't even known. There's also the issue that goes under "the plan" has been changing:

Originally [...] two bills were supposed to work in tandem, but now the White House claims only the reconciliation bill represents the president’s ‘Build Back Better’ plan. That wasn’t the story in the spring.

As for the debt:

Moody’s Analytics, in a July report, said the reconciliation bill would add about $600 billion to the deficits over 10 years but would be “more-or-less paid for” when the positive economic effects are calculated.

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  • My understanding is that it gets money back in taxes from larger corporations by removing tax brackets and not letting them shift money around to pay lower taxes.
    – Joe W
    Sep 28 at 18:26
  • Note that a budget deficit is not the same thing as the national debt. It might be if we required a balanced budget and had to borrow to make up for the deficit, but we don't.
    – Barmar
    Sep 28 at 20:11
  • I meant that we don't have a national balanced budget requirement. We borrow all the time, but not specifically to make up for the deficit. @Burt_Harris
    – Barmar
    Sep 28 at 20:35
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    @Burt_Harris There's always a debt limit. But if we reach it without passing a bill to increase it, we default, we don't borrow more. This is separate from the budget deficit.
    – Barmar
    Sep 28 at 21:02
  • @Barmark In 2019, the government temporarily suspended the debt limit and put into place a sequestration system. That expired in July 2021, but spending during those two years didn't count (against the limit.) Deficits count against the limit again now. Sep 28 at 21:30
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Something that hasn't been mentioned is that, assuming a government has a functioning corporate tax regime in place (a big "if"), spending it does on things like infrastructure, education, and other things that make people and businesses more productive does pay for itself, in whole or in part. If the government builds a bridge between a buyer of widgets and a supplier of widgets, the sale of widgets goes up, the profits of the supplier go up, and so does tax revenue.

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    Wise spending might pay for itself, but the federal government's spending hasn't (as illustrated in the CBO chart above.) See for example the new deal spending starting in 1933. Sep 28 at 21:02
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    @Burt_Harris For sure the half of all discretionary spending that goes to the military makes no one more productive. But i don't see that the chart makes an argument for government waste. There are other explanations: a broken tax code, a broken and corrupt central banking system, or the simple fact that entitlement programs that pay for the care of the disabled and elderly don't get an ROI because why should they? But if you do think debt implies inefficiency, you should see the ballooning private sector debt in this country. And they're not caring for anyone but themselves. Sep 28 at 21:29
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    @nick012000 Caring for the elderly is an unsustainable Ponzi scheme? Little hard to believe given that it’s been happening since the advent of humans. Sep 29 at 14:29
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    @nick012000 a Ponzi scheme is fraudulent because it purports to be an investment scheme in real assets generating a real return when it isn't. Social security is not an investment scheme, it was never held out as an investment scheme. Young people pay for the benefits of old people. It's just a transfer. You might as well call any completely transparent wealth transfer a Ponzi scheme. Sep 29 at 15:23
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    @Ryan_L Yes, if workers are aging out of the workforce at a rate lower than replacement, then the near-universal human custom of caring for the elderly may, all things being equal, come under strain. If you want to call any society with an aging population and a distaste for euthanizing old people a Ponzi scheme, that's fine, but you're gonna have a hard time convincing anyone that it's some kind of scandal. This is completely setting aside the fact that it's literally impossible for SS to go bankrupt since it's funded by an institution with the power to issue currency. Sep 30 at 6:48
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You seem to be asking more about the rhetoric than the actual accounting, so is the nature of the claim not addressed by the language on The Build Back Better Agenda website?

The Build Back Better Agenda is an ambitious plan to create jobs, cut taxes, and lower costs for working families – all paid for by making the tax code fairer and making the wealthiest and large corporations pay their fair share.

I'm not saying it's correct, but certainly you can argue that a package deal of additional spending and additional revenue balances out to no additional debt. Budget deals come like this all the time. Whether this package actually zeroes out is a separate question.

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  • I'm asking about a social media post in an account controlled by the office of the president. Sad as that is, social media is now demonstrably a major influencer today. The matter being discussed is budgeting, not accounting. Sep 29 at 18:43
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    So, "This bill, plus the taxes used to pay for it, adds up to no net cost"? That's such a vacuous statement that it has to be considered dishonest. Sep 30 at 19:14
  • @Acccumulation assuming the tax policy to pay for the bill is clearly stated I'd say that was the opposite of vacuous. It's clearly stating where the money to pay for the policy comes from rather than adding it to the deficit or paying for it with the really dishonest "efficiency savings" approach.
    – Jontia
    Oct 1 at 14:25
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The source of the @POTUS "zero dollars" claim seems to be Rep. Pramila Jayapal (D-WA), who spoke on CNN's State of the Union this weekend, saying:

I think we should look, first of all, as I said to the President, and I heard him say, this is a zero dollar bill because it's all going to be paid for by taxes...

The highlighted portion of the above quote is direct from the linked video, but "transcripts" of the show generally omit Jayapal her taking credit for telling Biden this was true. Jayapal then goes on to say:

We put our proposal out there. It costs 3.5 trillion when you add everything up.

Rep. Praypal is the Chair of the Congressional Progressive Caucus and serves on the house Budget Committee. She at least understands the difference between cost and deficit, so her statement could be correct because she didn't claim it cost zero dollars. Instead, she argued that the cost was offset by taxes (over an unspecified period.)

But Prapal's wording wasn't reflected or fact-checked in the @POTUS post, which altered the wording. The left-leaning Washington Post fact-checked the @POTUS claims and ranked them "2 Pinichos", while the Washington Times has rated it "pants on fire, totally false, four Pinocchios".

As background, under Rep Praypal, the progressive caucus has threatened to hold up the bipartisan infrastructure bill if the Senate doesn't pass the $3.5 trillion package. This faction has caused substantial conflict inside the Democratic party and a standoff that could lead to a government shutdown and potentially fiscal default on the federal debt. ​

As of this date, the Congressional Budget Office has not scored the $3.5T bill as to revenue impact.

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  • Comments are not for extended discussion; this conversation has been moved to chat.
    – JJJ
    Sep 29 at 21:18
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Without getting into the politics of the situation, the simplest answer that can be given is that the money is converted into another form which will itself add value to the country\economy as a whole.

You still have the money, but in the form of a bridge or a highway, or another amenity, and these items will enhance the economic activity of an area.

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  • But neither projected economic benefits nor offsetting taxation really impacts the "cost" of a program. One might reasonably claim it is deficit-neutral, but not zero cost. Oct 2 at 12:17
  • The crux of this argument is on how you define the word "cost". For example, are we talking in fiscal terms, or are we talking Opportunity Cost, or is "cost" being defined in some other way. In this context, Biden is exchanging capital for infrastructure. It's a one-to-one lossless conversion (At least in principle, real life not withstanding), so the cost is net Zero. You exchange X worth of dollars for Y of Bridges and roads. The amount of assets that America has changes its form, not its value. Oct 2 at 12:35
  • "Cost" is unqualified in the @POTUS tweet, thus a simple dictionary definition should apply. With a tweet, the audience is unlimited, so only the least-common-denominator meaning of the subject word seems fair. He's not talking to people who understand opportunity cost, and even if someone does, it's not implied by other content of the tweet. Oct 2 at 14:13
  • In communicating with a broad audience, assuming no more than a 6th-grade education was good back when journalism was practiced and respected. Oct 2 at 14:18
  • If you take the message as a whole the context is actually pretty clear. He states that he is making " a once-in-a-generation investment". Previous stimulus packages have traditionally involved tax break or rebates. Which is money that either leaves federal control or which is lost to federal control by virtue of not being collected through taxation. Biden is talking about converting existing capital into new infrastructure. Thus it's a conversion of fiscal capital into physical capital that is still owned by the state. Oct 2 at 14:46
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He is not legally forbidden from lying, exaggerating or otherwise misrepresenting facts, and as this is about the future, it’s pure speculation and not hard facts anyway. He is not doing anything that requires an explanation.

It’s a political, not financial, statement, the pro’s and con’s are political, the consequences (for him) are all political. It’s no different from Obama’s “if you like your health plan, you can keep it” or Bush’s “Read my lips: no new taxes”. Ultimately he’s not writing the bill, other people are, and all he is doing is repeating a sound bite that shows support for it.

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  • While that's true, it's not rational for him to do this just because it is not forbidden. Oct 1 at 21:26
  • From my POV, this issue isn't about the law that applies to everyone, it's about the oath of office. Drawing a parallel with equity, fiduciaries (e.g. bank presidents and trustees) are held to the 'highest legal standards. This kind of creative accounting wouldn't be permitted of a bank president, why shouldn't fiduciary standards apply to POTUS? Oct 1 at 21:29
  • @Burt_Harris: because in this case he is really no different from the CNN reporters, just repeating what someone else said.
    – jmoreno
    Oct 1 at 23:40
  • No, there is a key difference: POTUS is paid with tax dollars and swore a solemn oath. Freedom of the press doesn't apply to acts in official office. Oct 2 at 3:02
  • If, as you say, it's an issue of political speech and posted by one of his staff on the "official" twitter feed, the Hatch Act may apply. There is supposed to be a boundary between official conduct and politics. Oct 2 at 3:11

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