Excited to announce the appointment of Dr. Diane Lim as senior advisor to the Penn Wharton Budget Model.
The Effect of the U.S. - China Trade War on the U.S. Economy
PWBM’s Efraim Berkovich, the Wharton School’s Marshall Meyer and Mary Lovely of the Maxwell School of Syracuse University discussed how the recently imposed tariffs on Chinese goods are raising prices for consumers, disrupting supply chains and weighing down economic growth in the long-run.
Are Tariffs a Drag? Trade War Pushes Interest Rates Up, Economy Down
We find that, excluding times of intervention by the Federal Reserve, interest rates on U.S. government debt are higher when levels of effective openness to foreign capital flows are lower, increasing the government’s borrowing costs.
The Trade War Trade-Off: Foreigner Ownership of American Business Actually Rises
We project that, although a trade war initially lowers the share of U.S. capital owned by foreigners, the trade war will actually increase the amount of American business capital owned by foreigners, by almost $1 trillion by 2028. Over time, the foreign owned share of business capital rises from about 29 percent today to over 34 percent in 2049.
The Trade War Trade-Off: Short Term Gains Then Long Term Losses
We project that even if the recently imposed tariffs are removed, GDP will be permanently smaller relative to having had no trade war. Extending the current trade war by several more years will lead to smaller losses in GDP in 2020 but will reduce GDP by more in the long run.
Policymakers Cite PWBM Estimates About Indexing Capital Gains to Inflation
On July 12, 2019, Senator Sherrod Brown (D-OH) and Ron Wyden (D-OR) wrote a letter citing PWBM to the Steve Mnuchin, Secretary of the Treasury, to reject a plan to change tax law so that capital gains would be adjusted for inflation. The law change would cut taxes paid on the sale of assets such as stocks, real estate, and other investments. The
Differential Tax Rates Create Opportunities for Tax Avoidance
On June 7, Hill staffers, fiscal experts, and PWBM gathered to discuss the federal revenue loss created by tax avoidance. The U.S. has different tax rates for different income streams, thus there are opportunities for individuals and businesses to reduce their tax bills by recharacterizing income to pay a lower rate.
The Effects of Growing Federal Debt on the United States’ Economy
In today’s low interest rate environment, the cost of federal debt is lower than it used to be. However, long-run concerns loom. PWBM projections show that policies that reduce federal debt over time produce more economic growth than current policy.
Projections for the Evolution of the Unauthorized Immigrant Population in the United States
PWBM projects the number of unauthorized immigrants to fall from a peak of 4 percent of the U.S. population in 2007 to under 2.5 percent in 2050. In recent years, fewer unauthorized immigrants have arrived from Mexico while more have arrived from Central America. PWBM projects that future growth of the population of unauthorized immigrants will be driven by visa overstays.
Projections for the Evolution of Naturalized Citizens in the United States
PWBM projects that by 2050 one in ten U.S. citizens will be foreign-born, up from 7 percent today. We account for different historical naturalization patterns of immigrants from different countries, including the time immigrants reside in the U.S. Thus, this increase reflects shifts in the origins of lawful immigrants. In particular, we project that the shift away from immigrants arriving from Mexico and toward immigrants arriving from Asia to continue.
The Effects of Changes to Immigration Policy on the United States’ Population
We project that increasing annual net legal immigration leads to a younger and more educated U.S. population. These population changes are likely to have a positive impact on entitlement finances and tax burdens relative to current policy. In contrast, decreasing annual net legal immigration likely has the opposite effects.
2020 Presidential Campaign Proposals for Immigration Policy: Indicators of the Economic Impact on Each State
Introducing PWBM’s Interactive 2020 Campaign Issue State Maps. We use data to inform people about the impact of campaign proposals on their states. Here we present six indicators focused on immigration policy for each state. Although PWBM has shown that increasing immigration boosts economic growth for the U.S. as a whole, these indicators imply that the impact of changes to immigration policy on a state will depend on the demographics of that state.
Policy Options to Increase Charitable Giving Using Tax Incentives
By substantially expanding the standard deduction, the Tax Cuts and Jobs Act reduced the incentive to make charitable contributions. We make use of data on non-tax itemizers to examine several potential policies designed to increase tax incentives for charitable giving. In particular, we project that a non-refundable credit for charitable contributions for filers who don’t itemize would expand giving by $208 billion (5.2 percent) and reduce tax revenue by $267 billion (0.6 percent) over the 10 year budget window. Other reforms produce smaller increases in giving along with smaller losses in revenue.
Marty Feldstein: Influential Advisor to Policymakers, Economists & Students
Marty Feldstein was the most influential U.S. economic policy adviser during the past half century. He was incredibly generous with his time, he pushed students to think about the economic intuition of their ideas. The teaching of sensible economics stands the course of time, and Marty was a steadfast defender of it.
PWBM Projections In-Line with Official Government Estimates
In the Congressional Research Service’s report on the economic effects of the 2017 tax bill, Senior Specialist in Economic Policy Jane Gravelle and Specialist in Public Finance Donald Marples analyzed the effects of the Tax Cuts and Jobs Act (TCJA) on output and growth.
Federal Debt Still Matters
Lower interest rates since 2008 have reduced the cost of federal debt per dollar relative to the period before 2008. However, PWBM projects that the sheer size of federal debt will reach 190 percent of GDP by 2050 under present law. Even with low borrowing rates, stabilizing the debt-to-GDP level at its current value could increase GDP in 2050 by one to three times more than the projections we previously provided for the 2017 Tax Cuts and Jobs Act.
Seven U.S. Economic Models Project Rapid Growth of Federal Debt
At the National Tax Association Spring Symposium, PWBM participated in a roundtable with other economic modelers. All modelers showed the results of cutting Social Security benefits by one-third in 2031. All models found that even with a benefit cut, by mid-century the U.S. still has a sizable debt-to-GDP ratio.
Tariff Increases Will Cost U.S. Households
In Trump’s tariffs are equivalent to one of the largest tax increases in decades CNBC’s Steve Liesman analyses data from the Treasury Department to find that tariffs proposed by President Trump will raise $72 billion in revenue. Previously, PWBM has estimated the economic costs of a trade war and that the impact of a trade war could wipe out economic gains from last year’s tax cuts.
The Expansion of the EITC Across States
An interactive map shows the history of state-level expansion of the Earned Income Tax Credit (EITC) across the United States. States with Democrat governments and Democrat-Republican mixed governments are more likely to expand state-level EITC programs.
Effects of the Closure Rule in PWBM’s Dynamic OLG Model
The closure rule is a necessary model assumption that prevents the debt-to-GDP ratio from exploding in the long-run. PWBM finds that each closure year assumption delivers similar results for macroeconomic variables over the next two decades.