“We’re a very large economy where there are really great forces shaping what happens to GDP growth,” said Wendy Edelberg, director of the Hamilton Project at the Brookings Institution and former chief economist at CBO.
Even these moderate projections of the Biden administration imply that its policies will increase the growth of economic activity by a few tenths of a percent each year for a decade. This is significant when compared to the growth that would be expected by simply looking at demographics and historical averages of productivity growth. Forecasts are more inherently optimistic about Mr Biden’s policies – and their potential to increase productivity and workforce size – than they appear at first glance.
- A new year, a new budget: Fiscal year 2022 for the federal government begins October 1, and President Biden has revealed what he would like to spend on that date. But any expenditure requires the approval of both houses of Congress.
- Ambitious total expenditure: President Biden would like the federal government to spend $ 6 trillion in fiscal 2022 and total spending to reach $ 8.2 trillion by 2031. This would take the United States to its highest sustained levels of federal spending since World War II, while running deficits exceeding $ 1.3 trillion over the next decade.
- Infrastructure plan: The budget outlines the president’s first year of investment in his U.S. Jobs Plan, which aims to fund improvements to roads, bridges, public transportation and more with a total of $ 2.3 billion. dollars over eight years.
- Family package: The budget also addresses the other major spending proposal Biden has already rolled out, his U.S. Plan for Families, to strengthen the U.S. social safety net by expanding access to education, reducing costs. childcare and supporting women in the labor market.
- Compulsory programs: As usual, mandatory spending for programs like Social Security, Medicaid, and Medicare is a significant portion of the proposed budget. They increase as the US population ages.
- Discretionary spending: Funding for the individual budgets of executive agencies and programs would reach approximately $ 1.5 trillion in 2022, an increase of 16% over the previous budget.
- How Biden would pay him: The president would largely fund his agenda by raising taxes on corporations and high incomes, which would begin to reduce budget deficits in the 2030s. Administration officials said the tax increases would fully offset the projects. jobs and families over a 15-year period, which the budget request supports. Until then, the budget deficit would remain above $ 1.3 trillion each year.
“To say that your fiscal policies will boost growth by four tenths of a point sounds optimistic, but I can see how they might do it,” she said.
Jason Furman, former chief economist in the Obama administration, said: “I think there’s a problem people have in their heads – more outlandish ideas about what economic policy can do and how quickly. she can do it. When you talk about improving productivity, you are talking about composition which becomes a big deal for a long time.
In other words, the difference of a few tenths of a percent in GDP growth may not mean much for a single year, but a gap of this size that persists for many years has a big impact on the level. of life.
Some of the administration’s policies, by design, would focus on the very long-term impact on the nation’s economic potential. For example, additional funding for community colleges could actually reduce the size of the workforce, and therefore GDP, in the short term if more adults return to school. But it would then increase the productive potential of these workers, and therefore their contribution to growth, for the decades to follow.
Conservatives, for their part, see the Biden program as likely to hold back growth, especially once tax increases and new regulatory measures take effect. Mr Mulligan, Trump’s adviser, said he believed the Biden program would reduce the country’s growth trajectory by about 0.8 percentage point per year from its trajectory during the Trump era. Douglas Holtz-Eakin, president of the American Action Forum, said he believes Mr Biden’s policies could create faster growth in the short term but slower growth in the long term because of taxes and spending. .