The American Jobs Plan will decrease GDP by 0.8% by 2050
PHILADELPHIA, April 7, 2021––On March 31, President Biden announced The American Jobs Plan–a $2.7 trillion plan to invest in American infrastructure. The plan includes spending provisions aimed at rebuilding various sectors of American infrastructure and financing provisions which would increase business taxes, notably raising the corporate tax rate from 21% to 28%.
The Penn Wharton Budget Model (PWBM) at the Wharton School of the University of Pennsylvania today released a report analyzing the budgetary and economic effects of the plan’s changes to the tax code and $2.7 trillion in public investment.
PWBM estimates that:
- President Biden’s American Jobs Plan (AJP) would cost $2.7 trillion and raise $2.1 trillion over the 10-year budget window 2021-2030.
- 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.
For more information, read the full report: President Biden’s $2.7 Trillion American Jobs Plan: Budgetary and Macroeconomic Effects
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About the Penn Wharton Budget Model
PWBM is a nonpartisan, independent applied research organization housed at the Wharton School of the University of Pennsylvania. PWBM works directly with policymakers and staff, serving as an honest broker by providing accurate, accessible, and transparent economic analysis of the fiscal and economic impact of public policy without advocacy. PWBM’s estimates are regularly referenced by policymakers and top news outlets. For more information, visit https://budgetmodel.wharton.upenn.edu/.
About the Wharton School
Founded in 1881 as the world’s first collegiate business school, the Wharton School of the University of Pennsylvania is shaping the future of business by incubating ideas, driving insights, and creating leaders who change the world. With a faculty of more than 235 renowned professors, Wharton has 5,000 undergraduate, MBA, executive MBA and doctoral students. Each year 13,000 professionals from around the world advance their careers through Wharton Executive Education’s individual, company-customized, and online programs. More than 99,000 Wharton alumni form a powerful global network of leaders who transform business every day. For more information, visit www.wharton.upenn.edu.