In his Wall Street Journal column James Freeman highlights a Wharton study:
A new analysis of the president’s “American Jobs Plan†from the University of Pennsylvania’s Wharton School finds that over the next decade the Biden scheme would reduce U.S. economic growth, capital stock, wages and hours worked. But there is something that the plan would increase—federal debt. In short, it’s a disaster for U.S. investors, workers and taxpayers.
The Wharton crew doesn’t think the results would get all that much better in succeeding years, with one significant exception. The analysis does see a benign impact on the federal budget after 2031 because the plan’s spending is scheduled to end while the new taxes are intended to last forever. But how often do massive Washington subsidy schemes fail to get renewed by Congress?
He goes on to quote from the study itself:
The decline in capital makes workers less productive despite the increase in productivity due to more infrastructure, dragging hourly wages down by 0.7 percent in 2031 and 0.8 percent in 2050. Overall, GDP is 0.9 percent lower in 2031 and 0.8 percent lower in 2050.
One of the problems is that much of what is being billed as “infrastructure” is in fact just consumption. That won’t result in increases in productivity. As Lincoln quipped no matter what you call it a tail is not a leg.
But there will be those who benefit from these spending programs: preferred vendors, SEIU union leaders, and lots of political backers. The promises that are being made will be enough to make these programs popular. At least for a while. If Mr. Biden is lucky, their popularity will hold out past the midterms.
