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Editorial: Go slow on adding to the federal deficit

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Economists are debating the impact of President Joe Biden's Build Back Better plan. Some fear it will spark more inflation.

The U.S. House on Friday passed a huge, $1.75 trillion spending bill. The Senate needs to take a hard look at its effects on the deficit and inflation.

This legislation comes on top of a $1.9 trillion pandemic recovery bill in March and a $1.2 trillion infrastructure bill earlier this month. Together, the three bills would add about $2.8 trillion to the deficit over the next five years. That would put upward pressure on prices at a time when inflation is already a concern.

Figures produced by the Congressional Budget Office suggest that the three pieces of legislation would cause the economy to run hot — above its productive potential — until 2026. When that happens, inflation is unavoidable. That projection underscores the need to further refine the proposal, which thankfully was scaled back from a $3.5 trillion wish list.

The March pandemic recovery bill is partially to blame for inflation already running over 5%. Supply chain bottlenecks and labor shortages also are causing prices to rise. As President Joe Biden recently said: “People have more money now because of the first major piece of legislation I passed. … But what happens if there’s nothing to buy and you got more money? … It creates a real problem.”

Now the House wants to add to that bounty in a bill that over the next five years would require the government to borrow $800 billion, on top of the roughly $2 billion in borrowing for the March stimulus bill and the relatively more modest infrastructure act.

The CBO says the net deficit from the Build Back Better bill is “only” $367 billion, but that is because the office looks ahead 10 years while the bill front-loads spending and backloads revenues. Most of the borrowing for the bill occurs between now and 2026 while most of the revenue it raises comes in after 2026.

It’s that early spending surge that should concern the Senate. The bill pulls together regular authority to spend and new programs into one piece of legislation that can pass the Senate by a simple majority under a special rule for reconciliation of spending bills and the annual congressional budget resolution.

That makes the legislation so vast that it is hard to identify and evaluate all of its strengths and weaknesses. There undoubtedly are some good, bipartisan initiatives in the legislation, because tacking them on is the only way, under House Speaker Nancy Pelosi’s system, to enact them this year. And, of course, what Democrats consider a strength Republicans are likely to consider a weakness. And vice versa.

For example, one of the largest initiatives in the bill provides universal preschool ($109 billion) and “birth through five childcare and learning entitlements” ($273.5 billion). These new expenditures have some merit, but they are not covered by the revenues in the bill. Opinion on them is predictably divided, with some contending they would free more women to participate in the workforce, adding to economic growth, and others concerned that they would have an opposite effect by relieving families of the need for a second income. If the bill is enacted, only time will tell who was correct. A pilot program to test the effects makes more sense.

If the Senate fails to agree to the omnibus spending bill, Congress can go back to the drawing board and try to make better sense of the challenges it faces while avoiding dangerous overspending. Some measures also may be worthy of passage as standalone bills.

Members have another year before they face reelection. We urge them to use it wisely.

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