PWBM’s Jon Huntley and Richard Prisinzano discussed how the financing of a federal infrastructure plan influences its effect on economic growth. Even though infrastructure investments increase productivity, plans that are deficit-financed can reduce GDP relative to current policy.
We estimate that a one-year “payroll tax holiday” would cost the federal government between $141 and $151 billion over the standard budget window and increase GDP by 0.3 percent in 2020, with effects eventually turning slightly negative over time with higher deficits.
PWBM introduces a new measure of distribution that corrects numerous deficiencies in existing distributional measures that are commonly used to evaluate policy analysis.
Using PWBM’s new dynamic distributional analysis, we find that the Social Security 2100 Act benefits wealthy, retired households at the expense of young, high-income households.
This legacy brief is available as a downloadable PDF.
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.
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.
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.
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.
This legacy brief is available as a downloadable PDF.
