New Congressional Budget Office estimates show that the House-Senate payroll tax package will add $167.5 billion to the deficit over the next three years but as offsets fully kick in, that will be reduced to about half or $89.3 billion over the decade.
Coming just hours before a scheduled House vote Friday, the analysis is a mixed blessing for the leadership. CBO largely credits negotiators with hitting their marks in coming up with promised offsets. But the nature of the package is such that the payroll tax holiday portion is not paid for and in other cases the offsets take time to fully achieve the promised savings.
For example, CBO credits the bill with achieving $15.2 billion from spectrum sales—an important mark for the House-Senate conference in trying to pay for unemployment benefits. But less than $3 billion of these added receipts will be in the first two years when the cost of the jobless benefits is the greatest.
The same is the case with an adjustment in Medicare to prevent deep cuts in reimbursements to physicians treating the elderly. Over 10 years, CBO estimates that the bill more than offsets the cost with $18.17 billion in savings from health programs, but in 2012 and 2013, this still adds about $15.4 billion to the deficit.
The result is that the deficit for the last months of this fiscal year ending Sept. 30 would grow by $101 billion: $70.4 billion in lost revenues and $30.7 billion in added spending. In 2013 and 2014, deficits will be $40.2 billion and $26.2 billion larger, but in each of the years after, the offsets dominate until the net 10 year deficit impact is reduced to $89.3 billion.
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