Hi – If you were following along while the Senate was debating the Build Back Better bill, you may recall that Sen. Joe Manchin put the final nail in the bill’s coffin when he used the bill’s Congressional Budget Office (CBO) numbers as an excuse to vote against it.

The CBO produces cost-benefits analyses of proposed policies. In the case of Build Back Better, the CBO predicted the BBB, "would increase the budget deficit by $367 billion over the years 2022 to 2031." The problem is, this CBO prediction isn’t necessarily accurate.

As our own Paul Constant wrote in Business Insider, the CBO’s models are regarded by lawmakers and media alike as the gold standard of economic objectivity, and their reports make or break legislation like the BBB. But the truth is, the CBO’s models are actually built on flawed assumptions. 

Economist Mark Paul points out a huge issue with CBO assessments: CBO estimates assume that public spending is only ever half as productive as private industry. 

That means nearly any public investment – including the Build Back Better bill – is always going to be deemed wasteful by the CBO. This theory is the product of a toxic trickle-down mindset that has held politicians in sway since the 1980s – the Reagan-popularized concept that government is always inept, inefficient, and unproductive. And it's important to note that this assumption actually bears no relationship to public spending in the real world.

In fact, there’s a well-known report that shows that public investment is 50% more productive on average than private investment. For example, the Build Back Better legislation that Manchin killed, using the CBO's projection as an excuse, would in practice likely have had a huge return on investment for ordinary Americans through programs like affordable child care, the child tax credit, and green infrastructure.

But because the supposedly objective CBO's estimates don't allow for any of that economic activity in their models, politicians refuse to pass ambitious legislation like the BBB. That’s why economists like Paul are calling for CBO reform that would strip the office of its air of infallibility and allow more transparency in its process.

Thank you for reading, 

Jack Sorensen

P.S. If you liked reading this educational email, will you share Paul Constant’s Business Insider article with a friend? We've already gotten it all written out for you, and it's as easy as one click!