In a July 2023 brief, we estimated that President Biden’s SAVE plan would incur a budgetary cost ranging from $391 to $559 billion over the next ten-year budget window, with a medium estimate of $475 billion. Tables 1a and 1b below present updates of our cost estimate, which includes a shift in the 10-year window by one year along with other changes in the economy over the past 13 months.
Update: Budgetary Cost of Climate and energy provisions in the Inflation Reduction Act
The 2022 Inflation Reduction Act (IRA) contained a range of climate and energy provisions that PWBM previously estimated to cost $384.9 billion over 10 years (FY2022 – 2031). Since that estimate, newer implementation details have emerged, and the fiscal year calendar has moved to start at FY2023. Our updated estimate for over 10 years (FY2023 – 2032) for just the climate and energy provisions is now $1,045 billion. Table 1 decomposes these costs by specific area of climate and energy provisions.
H.R. 5376, Build Back Better Act: Budgetary Effects
Last week, the House Committee on Rules issued updated reconciliation legislation as H.R. 5376, Build Back Better Act (available here). PWBM estimates that the proposal would cost $2.1 trillion, offset by $1.8 trillion in new revenues and other savings.
In order to provide additional context as part of the current reconciliation debate, PWBM has also estimated an illustrative scenario where all spending and revenue provisions in the Build Back Better Framework are permanent. These estimates are neither PWBM’s estimate of any current legislation nor PWBM’s estimates of the Build Back Better Framework released by the House of Representatives. PWBM estimates that making all provisions of the proposal permanent would cost an additional $2.5 trillion.
White House Build Back Better Framework, Illustrative Permanent Scenario
In order to provide additional context as part of the current reconciliation debate, PWBM has estimated a scenario where all spending and revenue provisions in the Build Back Better Framework are permanent. The table below reflects this alternative. These estimates are neither PWBM’s estimate of any current legislation nor PWBM’s estimates of the Build Back Better Framework released by the White House.
The Macroeconomic Effects of the August 2021 Senate Budget Reconciliation Package
Drafting a budget from the August 2021 Senate reconciliation framework that satisfies the Senate rules of reconciliation (“Byrd Rule”) will require a decrease in new outlays or a large increase in revenues (or both) after the standard 10-year budget window. One such potential reduction in spending would allow the new non-healthcare related discretionary spending provisions to expire after 2031. With this reduced spending in 2031, we project that the reconciliation package will decrease GDP by 4.0 percent in 2050. Without this spending decrease (and where the Byrd Rule is not satisfied), we project a 4.8 percent fall in GDP in 2050. For more information, please see our full analysis.
PWBM Economic Outlook
The PWBM Economic Outlook projects that the pace of economic growth this year remains closely tied to the spread of the virus, evolution of variants, and distribution of vaccines, as reflected in our estimates for the year 2021 and part of 2022. Over time, we project that economic growth will stabilize to its pre-pandemic level with demographic changes playing a larger role.
Recovery Rebates in the American Rescue Plan Act of 2021 (House of Representatives Version)
The House of Representatives passed the American Rescue Plan Act of 2021, a COVID-19 relief bill that includes direct payments (“recovery rebates”) to families. The rebate value is set to $1,400 per person (including dependents), phasing out over an income range of $75,000 to $100,000 for single filers ($112,500 to $150,000 for head of household filers and $150,000 to $200,000 for married filers). PWBM projects that this provision would cost $428 billion, with 93 percent of families receiving a payment.
Recovery Rebates in the American Rescue Plan Act of 2021 (Senate Version)
The Senate is currently negotiating its own version of the House-passed American Rescue Plan Act of 2021, a COVID-19 relief bill that includes direct payments (“recovery rebates”) to families. Reports indicate that the Senate version of the rebates will phase out more quickly than the House-passed version. The rebate value is set to $1,400 per person (including dependents), phasing out over an income range of $75,000 to $80,000 for single filers ($112,500 to $120,000 for head of household filers and $150,000 to $160,000 for married filers). PWBM projects that this provision would cost $416 billion, with 90 percent of families receiving a payment.
Epidemiological and Economic Effects of the COVID-19 Vaccine in 2021
Please see our previously published analysis.
Biden Administration COVID Relief Payments
Among other provisions, the Biden administration’s proposed stimulus plan includes another round of Economic Income Payments (EIPs). The EIPs would provide direct payments of $1,400 per person (dependents would also receive the full value), phasing out at a rate of 5 cents per dollar above $75,000 in income ($150,000 for married filers). PWBM projects that this provision would cost $477 billion, with 95 percent of families receiving a stimulus check.
Congressional Democrats' COVID Relief Payments
Congressional Democrats released an alternative to the Biden administration’s proposed stimulus plan that would narrow eligibility of the stimulus checks. The plan would offer direct payments of $1,400 per person (dependents would also receive the full value), phasing out at a rate of 5 cents per dollar above $50,000 in income ($100,000 for married filers). PWBM projects that this provision would cost $439 billion, with 91 percent of families receiving a check.
GOP COVID Relief Payments
Several GOP senators have proposed an alternative to the Biden administration’s proposed COVID relief bill. Among other provisions, the plan would offer direct payments of $1,000 per adult (with an additional $500 for dependents), phasing out at a rate of 10 cents per dollar above $40,000 in income ($80,000 for married filers). PWBM projects that this provision would cost $225 billion.
Dynamic Distributional Analysis of the Biden Platform
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. Please refer to our analysis of the estimate for more information.
Macroeconomic effects of Biden’s immigration policy
Using PWBM’s dynamic model, we show the macroeconomic effects of Presidential candidate Biden’s immigration proposal. By 2050, GDP increases by 1.7 percent in 2050 relative to current law while GDP per capita stays the same. Please refer to our analysis of the estimate for more information.
The Long-Run Fiscal and Economic Effects of the CARES Act
PWBM estimates that the CARES Act increases GDP by about 5 percent in 2020 while lowering GDP by 0.2 percent in 2030.
Short-Run Economic Effects of the CARES Act
We estimate that the $2.3 trillion CARES Act will dampen the fall in GDP in the second quarter of this year (2020 Q2) from an annualized rate of 37 percent to 30 percent, and will produce around 1.5 million additional jobs by the third quarter (2020 Q3).