PWBM estimates that President Biden’s FY2022 budget proposal would increase spending by $5.9 trillion and increase revenue by $3.9 trillion over the 2022-2031 budget window. By 2050, we project that the President’s budget proposals would decrease public debt by 7.3 percent and decrease GDP by 1.1 percent relative to current law.
PWBM projects that the American Jobs Plan proposed by President Biden would spend $2.7 trillion and raise $2.1 trillion dollars over the 10-year budget window 2022-2031. The proposal’s business tax provisions continue past the budget window, decreasing government debt by 6.4 percent and decreasing GDP by 0.8 percent in 2050, relative to current law.
PWBM projects that the broad distribution of relief payments in the Biden administration’s proposed plan will flow largely into household savings and will produce only small stimulative effects, with 73 percent of the stimulus going directly into household savings. Sectors affected by the pandemic still face restrictions and are unlikely to grow from stimulus payments, while much of the rest of the economy is operating close to productive capacity.
PWBM estimates that three provisions in the Biden COVID relief plan—direct payments, expanding the Child Tax Credit, and expanding the Earned Income Tax Credit—together would cost $595 billion in calendar year 2021, with 99 percent of households in the bottom 80 percent of incomes receiving a benefit.
PWBM estimates that the $1.9 trillion in spending in the full Biden relief plan would increase GDP in 2021 by 0.6 percent. Over time, the additional public debt resulting from the Biden plan would decrease GDP by 0.2 percent in 2022 and 0.3 percent in 2040.
PWBM uses dynamic distributional analysis to evaluate the effects of the Biden platform on different age and income groups. We find that working-age individuals in the bottom 40 percent of taxable income benefit the most due to expanded health insurance, increases in housing subsidies, and lower cost of prescriptions in the Biden platform, while young, high-income individuals and wealthy retirees see net losses due to tax increases and lower returns on their savings.
PWBM estimates that the CARES Act increases GDP by about 5 percent in 2020 while lowering GDP by 0.2 percent in 2030.
We estimate the lasting macroeconomic effects of the anticipated recession due to coronavirus, as the initial shock leads to lower federal revenue and higher debt. If the economy recovers the year after a deep recession ("V shape"), we project that federal debt will be 3.2 percent higher and GDP will be 0.3 percent lower by 2030. If the recovery occurs over two additional years (“U shape”), federal debt rises by 5.9 percent and GDP falls by 0.6 percent lower by 2030. Barring future fiscal policy to reduce debt, so-called “potential GDP” will, therefore, be permanently lower due to the coronavirus.
