The $1.9 Trillion Relief Package Could Add Trillions More to the Debt
The $1.9 trillion relief package Democrats are sending to the president’s desk for approval isn’t just a potential inflation catalyst. It could also add upward of $4 trillion to the nation’s already groaning pile of debt.
The culprits: temporary tax relief and social welfare measures that supporters want to make permanent:
…the American Rescue Plan Act includes one- or two-year versions of several longstanding policy priorities of President Biden’s or Congressional Democrats’. It includes over $100 billion for a one-year expansion of the Child Tax Credit (CTC), which increases the credit from $2,000 to $3,000 (or $3,600 for children under age 6) and makes it fully refundable. The bill also includes a $15 billion, one-year expansion of the Earned Income Tax Credit (EITC) for childless workers that many have been seeking for years, and an $8 billion expansion of the Child and Dependent Care Tax Credit (CDCTC), which closely matches President Biden’s campaign proposal to increase the maximum credit from $2,100 to $8,000 and from covering 35 percent of expenses to 50 percent of expenses. Finally, the legislation includes a $35 billion, 2-year increase in Affordable Care Act premium subsidies that closely matches a similar proposal in President Biden’s campaign plan and $10 billion in small Medicaid expansions that last five years.
According to the Center for a Responsible Federal Budget, the “extensions would cost $1.9 trillion before interest, boosting the overall cost of the bill to $4.1 trillion when interest is included.”
Of course, the political class could reduce the debt and deficit effects through tax changes, or spending reductions. But that would require a bipartisan change in behavior that’s not been witnessed on Capitol Hill in more than a generation.
Image Credit: By Jericho [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons