President Biden’s newly released infrastructure package would cost $2.7 trillion over a decade and reduce both GDP and debt in the long term, according to a study released on Wednesday.
Taken together, the tax and spending provisions in Mr. Biden’s plan would increase government debt by 1.7% by 2031 but decrease it by 6.4% by 2050 - while also decreasing GDP by almost a percentage point down the road, according to the Penn Wharton Budget Model.
The model included the roughly $2.3 trillion in spending the White House outlined, plus as much as $400 billion in clean energy credits the administration is reportedly weighing.
Penn Wharton projected that Mr. Biden’s tax proposals, which include increasing the U.S. corporate tax rate from 21% to 28%, would generate roughly $2.1 trillion over a 10-year period.
The White House estimated that the plan would ultimately balance over 15 years and then reduce the debt after that.
Compared to a baseline scenario, overall GDP would be 0.9% lower in 2031 and 0.8% lower in 2050, driven in part by the “investment-disincentivizing effects” of the business tax increases in the plan, according to the study.
“The decline in capital makes workers less productive despite the increase in productivity due to more infrastructure, dragging hourly wages down by 0.7 percent in 2031 and 0.8 percent in 2050,” the study concluded.
The White House has touted a study from Moody’s Analytics that projects the plan would create about 2.7 million additional jobs above a baseline scenario over the next decade.
The White House had to revise administration officials’ earlier statements that the plan would create 19 million jobs; Moody’s projected that the U.S. economy would add about 16.3 million jobs even if Congress doesn’t pass the plan.
Moody’s projected that the 10-year spending would total $2.6 trillion and the tax increases would total $1.8 trillion for a net deficit impact of about $800 billion by 2031.