The Biden administration has proposed two massive spending and tax plans.
They call for more than $4 trillion in increased government spending funded by an equal amount of tax increases on individuals and corporations. These plans are on top of the $2 trillion stimulus plan enacted in March. According to the White House, this more than $6 trillion in spending increases and the trillions of dollars of tax increases will produce significant economic returns, boosting productivity and economic growth.
A Congressional Budget Office study released this spring shows that the administration spending and tax increase plans will more likely reduce, not increase, long-term economic growth.
To be clear, the CBO study did not analyze the specific White House proposals. It was released on March 22, 2021, before the details of the plans were released. Rather, the CBO study analyzed the long-term economic impact of financing a plan similar to the administration plan, a large and permanent increase in government spending, with large tax increases.
The paper, the “Economic Effects of Financing a Large and Permanent Increase in Government Spending,” was from the CBO’s Working Papers Series and represents independent research by CBO analysts.