- The Washington Times - Monday, May 24, 2021

The Biden administration is leveraging rosy projections and a bit of budget trickery to make the math work on the president’s $4 trillion-plus economic agenda, which is getting bogged down on Capitol Hill as lawmakers eye the typically sleepy summer months.

The White House has pointed to projections from Moody’s Analytics, a major economic-analysis firm, that say Mr. Biden’s broader economic agenda would boost labor force participation by nearly 1 percentage point over the next decade.

Other analyses, including from industry groups such as the National Association of Manufacturers, have taken a much more pessimistic view of how Mr. Biden’s proposed tax increases would affect the economy.

Doug Holtz-Eakin, president of the American Action Forum, a center-right think tank, said his group gave the White House the benefit of the doubt on how efficiently money would be spent on provisions such as infrastructure and research and development — and that they still don’t see the kind of projected economic growth the administration assumes.

“We assumed that they did really disciplined spending programs and still came out negative,” said Mr. Holtz-Eakin, a former director of the Congressional Budget Office. “It’s hard to get from there to what we’re going to see in the White House budget, because they’re not going to assume negative. They can’t.”



The White House says the president’s $2.3 trillion infrastructure package and $1.8 trillion families plan would lead to economic growth and cut the federal debt in the long run when paired with Mr. Biden’s proposed tax increases on corporations, wealthier individuals, and investors.

The administration projects that the bulk of the spending would be doled out over eight years, while the overall plans would take about 15 years before they balance and start cutting down on the debt.

That budgetary jujitsu assumes future Congresses won’t try to roll back the planned tax increases after all the projected spending is out the door.

Mr. Biden will fill in more details on his economic assumptions later this week when he lays out a more detailed blueprint of federal spending priorities for the budget year that starts Oct. 1.

The White House is releasing his budget plan the Friday before a holiday weekend — a time slot usually used for news lawmakers don’t necessarily want to get outsize attention.

“This is not a budget designed to enlighten us,” Mr. Holtz-Eakin said.

The Penn Wharton Budget Model, meanwhile, found that Mr. Biden’s jobs and families plans would cut economic growth in the long run, with the negative effects from planned tax increases crowding out some of the positive effects on jobs and wages associated with the new spending.

The White House says such studies undercount the stimulative effects of provisions like child care and free community college.

“Moody’s, for instance, arrived at deficits even lower than the administration when it came to the effect of the [Families] Plan,” an administration official said this month. “As we’ve said, the Families and Jobs Plans are fully paid for over the next 15 years and reduce deficits over the long-term.”

Brian Marks, who teaches economics at the University of New Haven, said it’s not unusual for administrations to do a bit of cherry-picking when they pitch major economic plans.

“The estimates that are proposed by any administration are generally the ones that are most optimistic and most in line with if all assumptions come to fruition,” Mr. Marks said. “We will see over time which estimate is more accurate than not, but I will definitely say in all likelihood, the answer is somewhere in between.”

Some liberal economists agree with the Biden administration’s contention that provisions like boosted child nutrition programs and free community college have positive effects on the broader economy that are difficult to capture in a vacuum.

The Center on Budget and Policy Priorities, a left-leaning think tank, projected that Mr. Biden’s families plan would provide free school meals to more than 9 million additional children.

“The American Families Plan’s child nutrition proposals could usher in a new era in which food hardship is much rarer among school-age children than before COVID-19, reducing the risk of long-term adverse consequences associated with even short periods of food insecurity during childhood,” wrote CBPP’s Zoe Neuberger.

The White House has been trading infrastructure offers with Senate Republicans in recent weeks, but neither side has projected confidence in a breakthrough any time soon.

Republicans have already vowed to oppose the tax increases Mr. Biden wants to use to fund his agenda, saying they would kill jobs at a vulnerable time for the economy.

Some Democrats, like Sen. Joe Manchin III of West Virginia, have suggested increasing the corporate tax rate to 25% — up from 21% — instead of the 28% rate the president has offered.

Among other changes, Mr. Biden also wants to effectively double the capital gains tax rate for top earners to bring it in line with his new top individual income tax rate of 39.6% — up from 37%.

Sen. Mark Warner, Virginia Democrat, said he can “live with” slightly higher tax rates on wealthier individuals.

“I’m not sure that raising capital-gains taxes to the ordinary rates is the right answer,” Mr. Warner told reporters recently. “I do think at some point you get to a point that you could actually see this rise in capital gains tax end up being a revenue loser and that’ll be part of the negotiation going forward.”

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2021 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.

 

Click to Read More and View Comments

Click to Hide