This interactive page presents estimated budgetary, economic, and distributional effects for a wide array of policies and policy packages that would reduce the federal debt.
Explainer: Capital Crowd Out Effects of Government Debt
Government spending redirects real resources in the economy and can crowd out private capital formation. An additional $1 trillion debt this year could decrease GDP by as much as 0.28 percent in 2050.
Republican and Bipartisan Infrastructure Proposals: Budget and Economic Effects
We estimate that Sen. Capito’s $330 billion infrastructure package, funded by user fees over 8 years, would increase GDP by about 0.05 percent in 2050. A $579 billion infrastructure investment being considered by a bipartisan group of senators, would increase output in 2050 by 0.1 percent if funded by user fees or have roughly zero net effect on GDP if deficit financed.
Explainer: Economic Effects of Infrastructure Investment
Public infrastructure investment boosts the productivity of private capital and labor, leading to higher output, but this positive effect can be offset if the investment is financed with additional government borrowing. PWBM estimates that an illustrative 10-year, $2 trillion public investment plan will raise public capital by 4.6 percent but lower private capital by 0.8 percent in 2040, with a net zero effect on GDP in 2040.
COVID-19 School Closures: Long-run Macroeconomic effects
PWBM estimates that the learning loss from school closures reduced GDP by 3.6 percent in 2050. Extending the 2021-22 school year by one month would cost about $75 billion nationally but would limit the reduction in GDP to 3.1 percent. This smaller reduction in GDP produces a net present value gain of $1.2 trillion over the next three decades, equal to about a $16 return for each $1 invested in extending the 2021-22 school year.
President Biden's American Families Plan: Budgetary and Macroeconomic effects
PWBM projects that the American Families Plan (AFP) would spend $2.5 trillion, about $700 billion more than the White House’s estimate, over the 10-year budget window, 2022-2031. We estimate that AFP would raise 1.3 trillion in new tax revenue over the same period. By 2050, the AFP would increase government debt by almost 5 percent and decrease GDP by 0.4 percent.
Map: Income Underreporting by State
We estimate a state-level decomposition of income underreporting in the US to be over $1.3 trillion for tax year 2018. We present these numbers separately by income type (wages and salaries, partnerships and S-corps, capital gains and dividends, interest, schedule C, and other). Most (69 percent) of underreported income is underreported Schedule C (sole proprietorship) income.
Revenue Effects of President Biden’s Capital Gains Tax Increase
PWBM estimates that raising the top statutory rate on capital gains to 39.6 percent would decrease revenue by $33 billion over fiscal years 2022-2031. If stepped-up basis were eliminated—as proposed in President Biden’s campaign plan—then raising the top rate to 39.6 percent would instead raise $113 billion over 2022-2031.
Corporate Debt: Historical Perspective and Options for Reducing Interest Deductibility
While corporations are at historically high levels of debt relative to assets, leverage remains close to its historical average relative to firms’ market value and relative to interest expense as a fraction of cashflow. In PWBM’s dynamic firm model, reducing the deductibility of interest expenses by 10 percentage points decreases corporate output by 0.26 percent while decreasing corporate debt by 6.76 percent.
President Biden’s $2.7 Trillion American Jobs Plan: Budgetary and Macroeconomic Effects
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.
Demographic and Economic Effects of President Biden's Proposal to Legalize Immigrants
PWBM projects that by 2050, the legalization provisions of the U.S. Citizenship Act proposed by President Biden would increase the size of the U.S. population by 4.21 percent, increase GDP by 0.5 percent, but decrease GDP per capita by 0.2 percent. More specific legalization proposals targeted at farm workers, DACA recipients, and essential workers would each increase GDP per capita by 0.1 percent in 2050.
Health and Economic Effects of Reducing COVID-19 Vaccine Hesitancy
PWBM projects that vaccinating all those eligible by reducing vaccine hesitancy would prevent up to 8.3 million cases in 2021, increase employment by 2.6 million in December 2021, and boost Q4 2020 to Q4 2021 GDP growth by 2 percentage points. In fact, failure to reduce vaccine hesitancy could lead to a “perfect storm” if people also become optimistic and increase their social contact rates beyond the baseline rates that we previously projected. Indeed, increasing social contact rates to 85 percent of pre-COVID levels by the end of 2021 would lead to up to 4.6 million additional COVID-19 cases in 2021.
Budgetary and Economic Effects of Senator Elizabeth Warren’s Wealth Tax Legislation
PWBM projects that the Ultra-Millionaire Tax Act of 2021, introduced by Senator Elizabeth Warren, would raise $2.1 trillion over the standard 10-year budget window (2022-2031) under scoring conventions used by government agencies. Incorporating the effects of enhanced IRS enforcement, our projection rises to $2.4 trillion over 2022-2031 and $2.7 trillion over 2023-2032. Also incorporating macroeconomic effects of the Act reduces estimated revenue to $2.0 trillion over 2022-2031 and $2.3 trillion over 2023-2032. We estimate that the Act would reduce GDP by 1.2 percent in 2050.
COVID-19: Cost of virtual schooling by race and income
PWBM estimates that schools in the Philadelphia and surrounding suburb districts with more Black students are less likely to reopen with in-person instruction relative to schools with more White students, even after controlling for differences in income by district. By March 2021, Black students in grades K-5 have incurred a 11.9 percent loss in lifetime income from school closures while White students have lost 10.4 percent. Students educated in the city face larger losses than students educated in the surrounding suburbs.
Incentive Effects of the Romney and Biden/Neal Child Tax Credit Proposals
This post compares effective marginal tax rates (EMTRs) under the Family Security Act proposed by Sen. Romney and the Child Tax Credit (CTC) expansion proposed by Rep. Neal and President Biden. Married families with children and less than $45,000 in income would face EMTRs 4.4 percentage points higher under the Romney proposal and 6 percentage points higher under the Biden/Neal proposal.
Epidemiological and Economic Effects of the COVID-19 Vaccine in 2021
This brief analyzes the epidemiological and economic effects of maintaining, increasing, or decreasing the current pace of daily COVID-19 vaccinations. PWBM projects that doubling the number of vaccine doses administered daily would boost employment by more than 2 million and real GDP by about 1 percent over the summer of 2021, with smaller effects later in the year.
Interactive Map: New Data on 2020 CARES Act Stimulus Checks
This post presents new state-level data on the $271.4 billion of stimulus checks in the CARES Act as of March 2020, breaking down the 161.9 million payments by amount, method of receipt, and recipient household type.
PWBM Budget Contest: Privately-Organized Universal Health Insurance in the U.S.
This brief analyzes the impact on health insurance premiums, out-of-pocket spending, and the economy for the healthcare proposal from Daniel Evan McGary as part of the PWBM Democratizing the Budget Contest.
Response to the White House’s Critique of PWBM’s COVID Relief Analysis
On February 3, 2021, PWBM released three analyses of the $1.9 trillion Biden COVID relief plan: a budgetary analysis of the direct aid provisions, a macroeconomic analysis of the full relief package, and a background report on the 2021 economy. Critiques of our analysis have focused on two conclusions from this background document: 1) our assessment of the current state of the economy and 2) our results that suggest 27 percent of stimulus checks would be spent on consumption. As always, PWBM welcomes responses to our work, and we are glad for this opportunity to provide additional clarity on our analysis and its results.
Direct Aid in the Biden COVID Relief Plan: Budgetary and Distributional Effects
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.