One thing missing from the Biden budget: fast growing growth


“We’re a really big economy where really big forces are taking shape for GDP growth,” said Wendy Edelberg, director of the Hamilton Project at the Brookings Institution and a former chief economist at the CBO.

Even these liberal estimates of the Biden administration mean that its policies would increase the growth in economic activity by a few tenths of a percent every year over a decade. This is important when comparing it with the growth that would be expected only by looking at demographic factors and historical averages of productivity growth. The forecast about Mr. Biden’s policies is more naturally optimistic – and his ability to increase productivity and size of the work force – may seem prima facie.

“Claiming that your fiscal policies will boost growth by four-tenths of a point seems optimistic, but I can see how they could get there,” she said.

Former top Obama administration economist Jason Furman said: “I think there’s a problem in people’s heads – more extraordinary ideas about what economic policy can do and how quickly it can do it. When you try to increase productivity When you are talking, you are talking about compounding which becomes a big thing for a long time. “

In other words, the difference of a few tenths of a percent of GDP growth may not be very high for a year, but the size difference that persists for many years has a large impact on the standard of living.

Some policies of the administration will, by design, focus on the long-term impact on the country’s economic potential. For example, the extra money for community colleges can actually reduce the size of the labor force, and thus the GDP, in the short term if more adults go back to school. But after that the productive capacity of those workers will increase, and thus contribute to the development for decades to come.

Conservatives, for their part, see the Biden agenda as likely to stall growth, particularly once tax increases and new regulatory actions are implemented. Trump’s adviser, Mr. Mulligan, said he believed the Biden agenda would reduce the nation’s development path by about 0.8 percent per year compared to the Trump-era trajectory. Douglas Holtz-Eakin, president of the American Action Forum, said he thinks Mr. Biden’s policies could lead to faster growth in the short term but slower growth in the long run due to taxes and spending.

Source link