The Bipartisan Safer Communities Act Reuses Egregious Budget Gimmick

The Senate has reached a compromise on gun legislation that would provide federal funding for mental health services, school safety, and to encourage states to include juvenile records in the national system used for background checks. Unfortunately, it “pays for” this legislation using a budget gimmick that Congress can’t seem to stop itself from taking advantage of.

The Congressional Budget Office (CBO) estimates that the Bipartisan Safer Communities Act (BSCA) would increase spending by nearly $21 billion over the decade, although three-quarters of the total ($15 billion) would be spent by 2027. But The Hill's report on the proposal and the cost estimate has a headline that reads, "CBO releases score of bipartisan gun safety bill showing legislation fully paid for." The text goes on to state, "The CBO score is likely a relief for lawmakers and another hurdle overcome." Other outlets reported similar findings. ABC News wrote that the bill would be “fully paid for.” The Associated Press said it would be “more than paid for by budget savings it also claims.”

The Hill’s article tells part of the story with a quotation from an unnamed congressional aide that "the legislation is paid for by delaying the implementation for one year of a Trump-era rule relating to eliminating the anti-kickback statute safe harbor protection for prescription drug rebates." But the newspaper fails to inform its readers about the nature of this budget gimmick that will only amount to phantom savings.

The Trump administration finalized this rule in 2019 to limit how pharmaceuticals can offer rebates. Major rules like this get included in CBO's baseline. Back in 2019 CBO had estimated the rule would end up increasing spending by $89 billion. It was supposed to go into effect at the beginning of this year, but soon after settling into the White House, the new Biden administration delayed it by a year pursuant to a court order.

Even though the rule has not yet gone into effect, it is still included in CBO's baseline. This means that legislation to repeal it would result in a huge budgetary savings on paper. But instead of ending the rule, lawmakers have been unable to resist the temptation to use this provision as a budgeting gimmick by delaying it for short periods of time. Thi way, the "offsets" can be spread across separate pieces of legislation. 

For example, the infrastructure law passed last year delayed the rule for three more years, netting savings on paper of $52 billion. Lawmakers also included delay of the rule in the now-stalled Build Back Better plan ($177 billion in offsets) and in the House’s Affordable Insulin Now Act ($20 billion in offsets). Delaying the rule in the BSCA scores savings of almost $16 billion in 2026 and another $5 billion in 2027.  If this bill is enacted as is, lawmakers will have to amend the delay dates of the “offset” in the insulin bill.

Given that the lawmakers have already delayed implementation of the rebate rule, it is uncertain that it would ever be permitted to take effect. This raises doubt about including its costs in the baseline. As NTUF noted last year, it is unclear that the rule would end up costing taxpayers as much as the official estimates figure. While CBO has not gone into detail on the other points of uncertainty in the estimate, it noted that an outside consulting firm estimated different scenarios on implementation of the rule and how stakeholders might respond to it and found a range of estimates from a savings of almost $100 billion to a cost of $139 billion.

In scoring this bill, CBO followed the rules as set up by Congress. However, this budget gimmick could be easily closed. The House and Senate budget committees could ask CBO to assume for now that the rule will not be permitted to go into effect. There is precedent for this. For one recent example, CBO deviated from its baseline construction rules by not including certain large and temporary discretionary coronavirus spending in its 2021 budget outlook.

Congressional leaders should put a stop to this gimmick. Meanwhile, media outlets reporting that the new gun safety legislation is “paid for” owe it to their readers to explain the chicanery involved in this budget math.