AFP would increase federal debt by 4.6% and decrease GDP by 0.4% in 2050
PHILADELPHIA, May 5, 2021—On April 28, 2021, President Biden released the second phase of his administration’s infrastructure plan, the American Families Plan (AFP). The AFP is a $1.8 trillion proposal focusing on federal investment in childcare, education, and healthcare. The proposal includes new taxes on high-income households and provisions to expand the IRS’s power and resources to enforce taxation. 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 $1.8 trillion in public investment.
PWBM estimates that:
- President Biden’s AFP would spend $2.5 trillion over the 10-year budget window (2022-2031), about $700 billion more than the White House’s estimate.
- The AFP would raise $1.3 trillion in new tax revenue over the same period, including almost $480 billion in additional revenue from enhanced IRS tax collection enforcement.
- By 2050, we estimate that the AFP would increase government debt by almost 5 percent and decrease GDP by 0.4 percent, as the effects from larger debt on the economy outweigh the productivity gains associated with the new spending programs.
For more information, read the full report: President Biden’s American Families Plan: Budgetary and Macroeconomic Effects.
For analyses of President Biden’s other recent proposals, read PWBM’s previous reports: Revenue Effects of President Biden’s Capital Gains Tax Increase, 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.
U.S. News & World Report, 5/5/21
Bloomberg Balance of Power, 5/6/21