Insight

Executive Summary

As the debate around the Build Back Better Act (BBBA) continues, it is useful to determine whether the bill’s spending provisions would reasonably result in positive macroeconomic effects that offset the drawbacks of its tax increases. To get a better sense of the potential economic impacts of the legislation under three different scenarios, the American Action Forum (AAF) commissioned John Diamond of Rice University to assess the macroeconomic implications of the tax and social spending proposals in H.R. 5376, the BBBA, as passed by the U.S. House of Representatives on November 19, 2021.[1] Diamond also estimated the macroeconomic effects of an alternative proposal that assumes the BBBA would reduce the deficit by $500 billion and scale back the expected spending accordingly. The results inform the desirability of the BBBA as passed by the House, as well any potential alternatives that could secure passage in the Senate.

• For this study, Diamond used techniques similar to those employed by the Joint Committee on Taxation (JCT) and Congressional Budget Office (CBO) and had autonomy on the data and necessary assumptions in the analysis. The congressional budget agencies estimated that the House-passed BBBA would raise a net $946 billion in new taxes (over 10 years) and spend, on net, $1.3 trillion, for a net deficit effect of $365 billion.

• In Scenario 1 (see Summary Table 1), Diamond estimated the effects of the BBBA as passed by the House. He...

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