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CBO Says Financial Reform Bill Would Reduce the Deficit

April 22, 2010 - by Donny Shaw

The Congressional Budget Office has released their “score” for the financial reform bill (a.k.a. the Restoring American Financial Stability Act of 2010), and it looks like more good news for the Dems. Reuters reports:

The Democratic Senate financial reform bill would reduce the U.S. budget deficit by $21 billion over the next 10 years, according to a cost estimate by the Congressional Budget Office obtained by Reuters on Wednesday.

The estimated reduction in the budget deficit over the 2011-2020 period stems largely from charging the financial industry assessments for a fund to liquidate large, troubled financial firms, the office said.

The CBO doesn’t generally analyze the effects of bills beyond a 10-year budget window because of the uncertainty that would be involved such long-term estimates, but in 2009 the Democrats added a provision to their budget resolution requiring the CBO to estimate whether bills would cause an increase in deficits of more than $5 billion in any of the 4 consecutive 10-year periods. If the CBO determines that a bill would in fact increase the deficit by more than $5 billion in any of the next 4 10-year periods, the 2009 budget resolution states that “it shall not be in order” for it to be considered by the Senate. In order to bring such a bill to the floor, the point of order must be waived by an affirmative vote of 3/5th of the Senate, or 60 votes.

In their budget score, the CBO estimated (.pdf) that the bill would likely cause an increase in the deficit of more than $5 billion in one of the next 4 10-year periods:

Under S. 3217, the estimated reduction in budget deficits over the 2011-2020 period stems largely from industry assessments required to capitalize the OLF established by the bill to resolve systemically important firms. Those collections exceed the expected cost of liquidations during the capitalization period. After that time, a growing share of the budgetary resources for future liquidation activities would be derived from interest credited on balances in the OLF (with additional assessments collected only as needed to cover losses). Such intragovernmental interest payments are not budgetary receipts and do not affect the federal deficit. Thus, CBO estimates that the expenses of the OLF would ultimately exceed income from new assessments paid by financial firms, resulting in an increase in the deficit in those later years. Pursuant to section 311 of the Concurrent Resolution on the Budget for Fiscal Year 2009 (S. Con Res. 70), CBO estimates that the bill would increase projected deficits by more than $5 billion in at least one of the four consecutive 10-year periods starting in 2021.

This won’t be too hard for the Democrats to waive. Sixty is the number of votes that are needed for any motion to proceed with the bill, like breaking inevitable Republican filibusters at each stage of the process. If they can get 60 votes for any motion, they can get 60 to waive the point of order resulting from the 2009 budget resolution. It’s just interesting to note that the Democrats have set up this hurdle and forced themselves to have to vote against their own deficit control mechanism.

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