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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.
Background: Marginal Propensities to Consume in the 2021 Economy
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.
Macroeconomic Effects of the $1.9 Trillion Biden COVID Relief Plan
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 Budget Contest: A Flat Benefit for Social Security
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.
PWBM Budget Contest: TEACHUP Early Childhood Education Grants
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.
School Reopening During COVID-19: A Cost-Benefit Analysis for Philadelphia Suburbs
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.
Startups and Job Creation in the COVID-19 Economy
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.
How Are Capital Gains and Dividends Taxed?
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.
COVID: Trade-offs in School Reopening
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.
