Before legislation passes either the House or the Senate, lawmakers should know how much it costs. That would seem to go without saying.
But lawmakers consistently overlook one key cost: the new interest payments their spending will create.
Say you’re wanting to buy a $20,000 car but don’t have $20,000 in cash to pay for it. If you borrowed the $20,000 from the dealer for a standard loan of five years at 4 percent interest, the true cost of the car after your last loan payment would be $22,100.
Borrowing the money you didn’t have added $2,100 to the purchase price of the car.
If you were budgeting for monthly car payments and only considered the list price of the car itself—and didn’t factor in the extra cost of interest payments—you might discover later that the actual total cost was more than you could afford.
Unfortunately, this is exactly what Congress does when considering new spending.
Congress relies on the nonpartisan Congressional Budget Office and Joint Committee on Taxation to estimate the cost of legislation. But Congress does not require either of them to include the cost of servicing the additional debt created by authorizing or reauthorizing spending. This results in an incomplete picture of the total actual cost.
Servicing the national debt is becoming a substantial part of federal spending. Within a few years, our nation will be spending more on interest payments than on the entire Department of Defense. By 2029, the Congressional Budget Office estimates that net interest payments will have climbed to $928 billion. This will increasingly crowd out other spending priorities.
I recently introduced H.R. 638, the Cost Estimates Improvement Act, to address these problems by requiring the Congressional Budget Office and Joint Committee on Taxation to add the cost of servicing the debt to the cost estimate of any future legislation.
As Romina Boccia of The Heritage Foundation explains:
Current scoring conventions fail to account for changes to interest spending when considering legislative changes to outlays and revenues. This introduces a discrepancy between the true cost of a bill and the cost reflected within the estimate prepared by the [Congressional Budget Office] and [Joint Committee on Taxation] as it is being considered by Congress.
In essence, Congress is not considering the comprehensive budgetary impact of spending and taxing proposals. This distorts congressional decision-making in favor of more spending and debt accumulation than might otherwise be the case.
The Cost Estimates Improvement Act would also require the Congressional Budget Office and Joint Committee on Taxation to produce a duplication report documenting how services provided by the proposed legislation might be repeating work already being done by other government agencies.
This report would provide members of Congress, their staff, and taxpayers with a snapshot of other programs the government is running that are similar to the one under consideration. It would also supplement the Government Accountability Office’s important annual report.
To use the car analogy, it would guard against buying several cars when you only need one—especially when you can’t afford the first.
For example, the president recently announced a plan to merge some of the 40 workforce development programs being run by 15 separate federal agencies. The Government Accountability Office reports our nation is set to waste tens of billions of dollars due to duplicative or overlapping government programs.
It would be smart to consolidate these programs. It would be smarter not to create redundant programs in the first place.
Congress routinely ignores the true costs and overstates the benefits of new spending. The American people have to account for the cost of debt in their family budgets, and the Cost Estimates Improvement Act is a commonsense reform that would hold Congress to the same standard, forcing lawmakers to reckon with the actual cost of raising our national debt.