Tagged: Education

Projected Effects of the New (March 2026) H-1B Visa Lottery

We project that the new DHS H-1B selection rule, going into effect in March 2026, will shift the H-1B visa allocation toward higher-paid and higher-education foreign-born workers, but by less than alternative designs being debated. Based on data from the current random lottery in the last five years, we estimate that the new DHS rule will have no significant impact on wages of U.S.-born workers, including non-college, college-educated, and STEM workers. Any reduction in competition from fewer STEM H-1Bs is offset by a reduction in productivity growth.

Raising Top Ordinary Rates: Options under TCJA Extension (Updated)

Under current law, the 2017 Tax Cuts and Jobs Act (TCJA) will expire at the end of 2025, raising personal income tax rates back to 2017 levels. Some lawmakers propose extending the TCJA but with higher rates for high-income households. We consider three options.

Biden’s SAVE Plan – Distributional Impact Analysis

The impact of income-driven repayment (IDR) educational financing plans by income, race, and gender is not generally well understood. Our analysis estimates that approximately 43 percent of the subsidies from President Biden’s Saving on a Valuable Education (SAVE) plan will accrue to current Black student borrowers and 71 percent to current female borrowers. While lower- to middle-income student borrowers stand to gain the most, we estimate that about a fifth of the benefits will go to households in the top 20 percent of the income distribution, and borrowers with graduate-level education who benefit from the SAVE plan tend to experience the highest savings on average.

Recent Trends in US Multinational Activity

We examine recent trends in the activities of US multinationals and their foreign affiliates using data from the Bureau of Economic Analysis’s annual survey of US direct investment abroad. Since the passage of the Tax Cuts and Jobs Act (TCJA), multinational activity has become more domestically concentrated, continuing a trend that started before the legislation. This has coincided with a decline in the US effective corporate tax rate and relatively stable foreign effective tax rates.

Analysis of President Biden’s New Plans for Student Loan Debt Relief – April 2024

We estimate that President Biden’s recently announced “New Plans” to provide relief to student borrowers will cost $84 billion, in addition to the $475 billion that we previously estimated for President Biden’s SAVE plan. Moreover, some debt relief in the New Plans accrues to borrowers in households with income more than the SAVE plan coverage.

Explaining the Rise in Prime Age Women’s Employment

The economic costs of the COVID-19 pandemic were widely expected to fall disproportionally on women. Instead, the employment rate of prime age women recovered faster than men’s and rose to its highest point in U.S. history in 2023. We show that the resilience of women’s employment is driven by two long-term trends that predate the pandemic and continued through it: 1) the growing share of women who are college graduates, and 2) the rising labor force participation of college-educated mothers with young children.

Did Tax Cuts and Jobs Act of 2017 Increase Revenue on US Corporations’ Foreign Income?

Despite a complete overhaul of the US system of international corporate taxation in the Tax Cuts and Jobs Act of 2017, taxes on US corporations’ foreign income are about the same after the law’s enactment as before.

Biden’s New Income-Driven Repayment (“SAVE”) Plan: Budgetary Cost Estimate Update

Note (August 2024): Updated budgetary cost for President Biden’s SAVE Plan is available here .

Income-Driven Repayment Plans: Modeling Take-up Rates

Federal student loan borrowers can currently choose between several repayment options. When estimating program costs, government agencies have considered several different behavioral repayment models. We find that the most financially savvy rule – where borrowers select the repayment option that minimizes the present value of their future repayments – best explains current borrower choices among repayment options that exist prior to the new Income-Driven Repayment Plan (IDR) “SAVE” plan to be implemented in July 2024.

The Build It in America Act: Budgetary and Macroeconomic Effects of Title I

PWBM estimates that Title I of the Build It in America Act would add $76 billion to the budget deficit over the next decade and reduce deficits by $18 billion during the subsequent second decade. It would temporarily boost business investment and GDP during the next two years while lowering GDP in subsequent years. If lawmakers made the extensions permanent, the budgetary cost would rise to $1.25 trillion over the next two decades and GDP would largely remain unchanged, as the tax incentive effects and debt effects mostly offset.

The Tax Cuts for Working Families Act: Estimated Budgetary and Distributional Effects

PWBM estimates the Tax Cuts for Working Families Act would reduce federal revenues by $96 billion over a decade, cutting taxes for a majority of households in 2024. Households in the bottom quintile households, and those in the top 1 percent, generally would not benefit. As an illustration, we also consider making the provisions permanent, which raises the estimated ten-year budget cost to be between $419 billion and $527 billion.

Budgetary Effect of “SAVE Students Act”

PWBM estimates that “SAVE Students Act” would cost about $276 billion less over the 10-year budget window relative to the Income-Driven Repayment (IDR) plan proposed by President Biden.

The Fiscal Responsibility Act of 2023: Budget Cost Estimates of the Debt Ceiling Agreement

We estimate the Fiscal Responsibility Act (“FRA”) of 2023 will reduce noninterest spending by $1.3 trillion over the 10-year budget window using standard scoring assumptions. If discretionary spending in Fiscal Year 2026, after sequestration is no longer in effect, deviates from standard scoring assumptions, the spending reduction could be as low as $234 billion or as high as $1.8 trillion.

The Long-Term Budget Effects of Permanently Extending the 2017 Tax Cuts and Jobs Act’s Expiring Provisions

Several revenue and spending provisions in The Tax Cuts and Jobs Act (TCJA) are scheduled to expire (“sunset”) by the end of 2025. We estimate that “extenders” (“no sunset”) would increase the federal debt held by the public from 226.0 percent of GDP to 261.1 percent of GDP by 2050.

Budgetary Cost of Newly Proposed Income-Driven Repayment Plan

We estimate President Biden’s newly proposed Income-Driven Repayment (IDR) Plan will cost between $333 to $361 billion over the 10-year budget window, more than twice as much as the cost estimate released by the Biden Administration. These costs are in addition to the one-time cost of direct loan forgiveness that we previously estimated at $469 billion .

The Biden Student Loan Forgiveness Plan: Budgetary Costs and Distributional Impact

President Biden’s new student loan forgiveness plan includes three major components. We estimate that debt cancellation alone will cost up to $519 billion, with about two-thirds of the benefit accruing to households making $88,000 or less. Loan forbearance will cost another $16 billion. The new income-driven repayment (IDR) program would cost another $70 billion, increasing the total plan cost to $605 billion under strict “static” assumptions. However, depending on future IDR program details to be released and potential behavioral (i.e., “non-static”) changes, total plan costs could exceed $1 trillion.

Forgiving Student Loans: Budgetary Costs and Distributional Impact

We estimate that forgiving federal college student loan debt will cost between $300 billion and $980 billion over the 10-year budget window, depending on program details. About 70 percent of debt relief accrues to borrowers in the top 60 percent of the income distribution.

Senate-Passed Inflation Reduction Act: Estimates of Budgetary and Macroeconomic Effects

PWBM estimates that the Senate-passed version of the Inflation Reduction Act would reduce non-interest cumulative deficits by $264 billion over the budget window. The impact on inflation is statistically indistinguishable from zero. GDP falls slightly within the first decade while increasing slightly by 2050. Most, but not all, of the tax increases fall on higher income households.

Inflation Reduction Act: Comparing CBO and PWBM Estimates

PWBM and CBO find an almost identical impact of the Inflation Reduction Act of 2022 (“IRA”) on the budget, with small differences stemming from the timing of the corporate minimum tax revenue. The impact on inflation is statistically indistinguishable from zero for either estimate.

Inflation Reduction Act: Preliminary Estimates of Budgetary and Macroeconomic Effects

PWBM estimates that the Inflation Reduction Act would reduce non-interest cumulative deficits by $248 billion over the budget window with no impact on GDP in 2031. The impact on inflation is statistically indistinguishable from zero. An illustrative scenario is also presented where Affordable Care Act subsidies are made permanent. Under this illustrative alternative, the 10-year deficit reduction estimate falls to $89 billion.

Mortality by Education—an Update

In 2018 and 2019, age-specific mortality rates for ages 60 through 80 continued to decline by 0.5 percent annually. For the same age group, age-specific mortality increased for those without a high school diploma but decreased 2.5 percent for those with a BA or advanced degrees.

The Decline in Fertility: The Role of Marriage and Education

We relate the decline in the birth rate to two demographic factors closely associated with women’s fertility patterns: marriage and educational attainment. Married women are at least three percentage points more likely to have a child than unmarried women, and simultaneously marriage rates among women 25 to 29 declined 15.9 percent since 2006. Women who complete 4 years of college are less likely to have a child, while completion rates of 4 years of college rose 10 percent for women over the past decade.

Total Cost of Universal Pre-K, Including New Facilities

We estimate that each new preschooler for a universal pre-K program requires about $21,000 in new construction costs for facilities expansion. Including non-construction costs, a universal pre-K program for three- and four-year-olds will cost about $351 billion over the 10-year budget window. If made permanent after 10 years, this program will have essentially no impact on long-run GDP. A pre-K program for just four-year-olds reduces the 10-year cost to $196 billion and slightly increases long-run GDP, if that program is made permanent.

Analysis of Carbon Emission Reductions in Build Back America

Build Back Better (BBB) Act allocates about $550 billion to climate change policies. Provisions that are funded with user fees can grow the economy while deficit financing can shrink the economy.

The Impact of the Build Back Better Act (H.R. 5376) on Inflation

PWBM projects that the spending and taxes in the Build Back Better Act (H.R. 5376), as written, would add up to 0.2 percentage points to inflation over the next two years and reduce inflation by similar amounts later in the decade. As an illustrative alternative, if temporary major spending provisions were made permanent, the bill would add up to a third of a percentage point to near-term inflation and have a negligible impact on inflation later in the decade.

H.R. 5376, Build Back Better Act: Budget and Macroeconomic Effects

PWBM estimates that H.R. 5376, the Build Back Better Act, would increase spending by $2.1 trillion over the 10-year budget window while increasing revenue by $1.8 trillion, for a 10-year deficit of $274 billion. By 2050, the proposal would decrease GDP by 0.2 percent, relative to current law.

COVID-19 Learning Loss: Long-run Macroeconomic Effects Update

Using recently available data on learning loss from pandemic school closures, PWBM estimates that projected 2051 GDP is 1.4 percent lower than it would have been without the learning loss. Extending the 2021-22 school year for all public schools by one month would cost $78 billion and limit the reduction in 2051 GDP to 1.0 percent—a net present value gain in GDP of more than $1 trillion over the next three decades, equal to a $15.14 return for each $1 invested.

College Employment and Student Performance

Working part-time or full-time while enrolled in college is not uncommon, but students who do so tend to fall behind their peers in terms of grades or spending more time in undergraduate study, even after controlling for other characteristics such as household resources.

Household Finances and Post-Secondary Enrollment

Even after accounting for differences in observed student ability, students coming from lower-income households are less likely to attend college. If they attend college, lower-income students are also more likely to attend a two-year community college.

Is Income Implicit in Measures of Student Ability?

Measures of student ability typically used for college admissions implicitly reflect differences in family income across students. However, high school GPA reflects differences in income noticeably less than SAT and ACT scores. However, SAT and ACT scores do capture aspects of student ability missed by school-specific rankings alone.

Student Ability and Post-Secondary Outcomes

Student performance in high school is a strong predictor of future success at college, including performance at two-year and four-year colleges, the likelihood of transferring from two-year colleges to four-year colleges, and eventually obtaining degrees.

Economic Effects from Preschool and Childcare Programs

By 2051, we find that a combination of targeted preschool and targeted childcare programs increase GDP by 0.1 percent relative to current policy, even if deficit financed. Universal versions of these programs are more costly and would instead reduce GDP by 0.2 percent by 2051.

Who Attends Community College?

About 30 percent of students who first attend two-year community college are from families with incomes above the median income for students attending four-year colleges. Moreover, upwards of one-fifth of top students from relatively small and large high schools first attend a two-year institution.

Effects of President Biden’s Unauthorized Immigrant Legalization Proposal on SNAP and Payroll Tax

PWBM projects that the legalization provisions of the U.S. Citizenship Act proposed by President Biden would increase per capita spending on the Supplemental Nutrition Assistance Program (SNAP) by 1.2 percent in 2031 and 0.7 percent 2050 relative to the current policy baseline. Per capita payroll taxes would increase by 1.3 and 0.2 percent relative to the current policy baseline, in 2031 and 2050 respectively.

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.

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.

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.

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.

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.

The Increasing Mortality Gap by Education: Differences by Race and Gender

Additional education is associated with similar reductions in mortality rates for men and women—in 2016, for example, men and women with high school degrees had mortality rates 16 percent and 14 percent lower, respectively, than those without degrees. That same year, however, the mortality advantage of completing a high school degree was 18 percentage points higher for White people than for Black people.

The Increasing Mortality Gap by Education

Over the last two decades, a mortality gap has opened up across education levels. For those born after 1950, each additional level of educational attainment is associated with at least an 18 percent lower mortality rate.

The Long-Run Fiscal and Economic Effects of the CARES Act

PWBM estimates that the CARES Act increases GDP by about 5 percent in 2020 while lowering GDP by 0.2 percent in 2030.

Small Business and Coronavirus Relief

In an attempt to prevent and reverse layoffs due to coronavirus, the recently-passed CARES Act established a new lending program targeted at businesses with 500 or fewer employees. These businesses account for 99.7 percent of all firms, 47.3 percent of employment, 40.7 percent of annual payroll, and about one-third of the growth in employment and wages. These businesses also account for 60 percent of employment in the leisure and hospitality sector, which has been disproportionately harmed by the pandemic’s effects.

New Charitable Deduction in the CARES Act: Budgetary and Distributional Analysis

The CARES Act establishes a new, temporary charitable deduction (limited to $300) in tax year 2020 for taxpayers who claim the standard deduction. PWBM projects that this provision would cost about $2 billion and would have little effect on total donations. More than half (53 percent) of the benefit would accrue to families in the 60th to 90th percentiles of the income distribution.

The Social Security 2100 Act: Who Wins and Who Loses?

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.

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.

More Gains to Moving for College Educated Workers

Lower Corporate Debt Projected Under the Tax Cuts and Jobs Act

Analyzing the Budgetary and Incentive Effects of Senator Kamala Harris’s Proposed LIFT Act