An Analysis of Vice President Biden’s Economic Agenda: The Long Run Impacts of Its Regulation, Taxes, and Spending
by Kevin Hassett, Casey B. Mulligan, Timothy Fitzgerald, Cody Kallen
Tuesday, October 13, 2020
Hoover InstitutionClick here to download this report.
EXECUTIVE SUMMARY
This report explores the potential impact of Democratic presidential candidate Joe Biden’s proposals on the economy as a whole. We conclude that in the long run, Biden’s agenda would reduce full time equivalent employment per person by about 3 percent, the capital stock per person by about 15 percent, real GDP per capita by more than 8 percent, and real consumption per household by about 7 percent. Relative to the CBO’s 2030 projections for these variables, this suggests there will be 4.9 million fewer employed individuals, $2.6 trillion less in GDP, and $1.5 trillion less consumption in that year alone. Median household income in 2030 would be $6,500 less.
While these effects may seem large, they are actually conservative estimates of the negative impact of the full Biden agenda.
Our report specifically assesses the impact of policies in four areas: taxation, health insurance, regulation, and energy policy. It estimates the changes in incentives that the policies produce, and then incorporates those changes into a macroeconomic model commonly relied upon in the academic literature.
We reach three key conclusions:
First, transportation and electricity will require a lot more inputs (including 1.3 million net additional energy workers) to produce the same outputs because of Biden’s ambitious plans to further cut the nation’s carbon emissions. Because these industries are a nontrivial share of the overall economy, that means 1 or 2 percent less total factor productivity overall. These effects would be significantly larger —likely dwarfing the (nontrivial) rest of the agenda—if the energy goals are taken literally. The costs would also be concentrated geographically.
Second, labor wedges (the amount of the value created by additional work that goes to third parties) are increased by proposed changes to regulation as well as to the Affordable Care Act (ACA). The quantitative findings for the ACA should be no surprise given the findings from previous efforts in the United States and other countries to expand health insurance coverage.
Third, Biden’s agenda reduces capital intensity by increasing average marginal tax rates on capital. ...
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