President Biden’s $2.7 Trillion American Jobs Plan: Budgetary and Macroeconomic Effects

From Penn Wharton.

"Key Points

• PWBM projects that President Biden’s American Jobs Plan (AJP) would spend $2.7 trillion and raise $2.1 trillion dollars over the 10-year budget window 2022-2031.
  
  

• The spending provisions of the AJP, in absence of any tax increases, would increase government debt by 4.72 percent and decrease GDP by 0.33 percent in 2050, as the crowding out of investment due to larger government deficits outweighs productivity boosts from the new public investments.
  
  

• The tax provisions proposed in the AJP, in the absence of any new spending, would decrease government debt by 11.16 percent in 2050. Despite the reduction in public debt, the AJP’s tax provisions discourage business investment and thus reduce GDP by 0.49 percent in 2050.
  
  

• Considered together, the tax and spending provisions of the AJP would increase government debt by 1.7 percent by 2031 but decrease government debt by 6.4 percent by 2050. The AJP ends up decreasing GDP by 0.8 percent in 2050."