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.
As part of PWBM’s “Democratizing the Budget Contest,” Andrew Biggs, Ph.D. proposed a package of Social Security reforms centered around gradually transitioning the program to a flat benefit for new retirees. PWBM projects that this proposal would reduce the program’s conventional 75-year imbalance by 2.44 percent of taxable payroll, leaving a remaining imbalance of 0.8 percent of current law taxable payroll. The proposal would decrease GDP by 0.6 percent in 2030 while increasing GDP by 0.6 percent in 2050.
The TEACHUP program, proposed by Rick Miller, Ph.D. as part of the PWBM Democratizing the Budget Contest, would give grants to states in order to provide full-day preschool for four-year-old children at or below 200 percent of the poverty line. On a conventional basis, PWBM projects that TEACHUP would cost $92.4 billion over ten years and a total of $282.53 billion by 2050. However, on a dynamic basis that includes productivity effects and expansion of the tax base, PWBM estimates that the program would effectively pay for itself by 2050 by holding public debt nearly constant.
We estimate the average cost of a COVID-19 infection for four Philadelphia-area counties at $8,000 to $13,000, less than half of our national average cost estimate ($27,230). We estimate a trade-off between cost of infections to the community from in-person schooling versus the lost future earnings to students from closing schools. For example, if Montgomery county had implemented full in-person school in the fall, we project the costs of infection would have been at most $429 million. However, closing schools costs students as much as $4.4 billion in present value of future wages.
As of mid-November, there have been 700,000 more business applications in 2020 than at the same point in 2019, especially concentrated in pandemic-affected industries such as online retail. Accounting for this change in industry composition, we project that the 600,000 additional applications in the first three quarters of 2020 will result in 27,000 more employer businesses formed by Q3 2021 and about 120,000 additional jobs.
This post is part of a series that explains tax concepts. The highest 1 percent of earners are responsible for 71 percent of capital gains realizations. President Trump has proposed lowering the top rate on income from capital gains and dividends, while former Vice President Joe Biden has proposed increasing the top rate for taxpayers with more than $1 million in income.
We estimate that each month of school closures in response to the COVID pandemic cost current students between $12,000 and $15,000 in future earnings due to lower educational quality. We also estimate total value-of-life, medical, and productivity costs per infection at $38,315 for September 2020. Using these costs, we calculate the cost-benefit threshold to keeping schools closed for October at over 0.355 new expected infections in the community per student kept out of school.
The Biden healthcare plan focuses on expanding access and affordability of insurance and decreasing prescription drug prices. We estimate that by 2030, relative to current law, the Biden plan would decrease the uninsurance rate from 10 percent to 6 percent, decrease private insurance premiums by 23 percent and out-of-pocket spending by 16 percent, and decrease the percent of the population that forgoes medical care from 7 percent to 4 percent. The Biden healthcare plan would increase net spending by $352 billion over ten years but would reduce debt by 4.5 percent over that period due to dynamic growth effects.
PWBM estimates that reducing the top preferential rates on capital gains and dividends from 20 percent to 15 percent will cost $98.6 billion dollars over the ten year budget window. This tax cut will only benefit tax units in the top 5 percent of the income distribution, with 75 percent of the benefit accruing to those in the top 0.1 percent of the income distribution.
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.
