The Tortured Logic that Lets Joe Biden, Nancy Pelosi Say a $3.5 Trillion Bill Will 'Cost Zero Dollars'

To understand how the government works, look no further than the assertion by both President Joe Biden and House Speaker Nancy Pelosi that the Democrats' plan to spend $3.5 trillion over the next ten years will "cost zero dollars."

The claim lit up social media with the predictable jokes—and widespread puzzlement. How could $3.5 trillion in new spending actually not cost anything?

The answer is simple. Biden and Pelosi together have spent over 80 years in Washington D.C. And in Washington, concepts like how much something costs have a very specific, if very peculiar, definition. To Washington lawmakers, adjustments to the federal budget—whether a tax cut (the amount of tax revenue the government takes in) or a spending increase (the amount it sends out in various government programs) only "cost" something if it isn't "paid for."

Consider the tax cuts passed during the Trump administration. To Democrats and other critics, the corporate and individual tax cuts Trump signed into law in 2017 weren't paid for, in the sense that spending wasn't cut by an amount commensurate to the loss in revenue the government incurred—$275 billion in just the first year after the cuts were enacted, according to a Brookings Institution analysis. That companies and individuals actually got to keep more money because of the tax cuts is irrelevant to the ledger-watchers. The Trump tax cuts "cost" the government money.

Biden and Pelosi can argue that the $3.5 trillion budget reconciliation bill they want to pass won't cost anything because in D.C.-speak, it's "paid for." That is to say, yes, the government will be spending a whole lot more, but it's okay because we're going to increase taxes in sufficient amounts to cover the cost of all that new spending.

Set aside for the moment whether that's actually true (spoiler alert: it isn't), and consider the mindset: as long as government revenue increases by as much as government spending, the effect on the federal budget will be nil, and thus the legislation doesn't "cost" anything.

In the real world, of course, no one believes this kind of thinking or acts on it. Not the executives or employees who work for companies that will be paying significantly higher corporate taxes (and then passing those costs along to consumers), nor the individuals—those making more than $400,000 per year, in Biden's telling—whose personal tax rates will go up. There will be real, actual costs to them. But, in theory, none to the federal government. So Biden and Pelosi can freely assert that the largest federal spending bill in history, which now hangs in the balance, will cost zero dollars.