So what is the heist? Rutgers-Camden researcher explains pros and cons of Biden administration’s $ 1.75 trillion spending program: Rutgers-Camden Campus News

28 October 2021

By Tom McLaughlin

As the Biden administration signals it’s time to complete negotiations on its $ 1.75 trillion social spending program, Congress continues to weigh the short- and long-term benefits of the bill against its cost. considerable.

However, some caveats Rutgers – Camden University searcher Michael hayes, any kind of action will have a positive impact with relatively minimal short-term cost, but could also lead to unintended consequences.

“To sum up the whole debate, there is no such thing as a free lunch,” says Hayes, associate professor of public policy and administration. “I don’t envy our representatives in Congress having to strike that delicate balance.”

So what is the heist?

Michael hayes

“To sum up the whole debate, there is no free lunch.” – Michael Hayes

Hayes, whose research expertise includes budgeting and public finance, and national and local tax policy, postulates that the resistance to the bill’s price is due in part to how Democrats market – or don’t not market – the bill. He notes that not all of the $ 1.75 trillion would be paid at once, but instead cost around $ 175 billion per year over a 10-year period. He adds that the real cost of borrowing, adjusted for inflation, is currently historically very low.

However, the real challenge, says Hayes, is that the federal government continues to increase the deficit without knowing the economic reality of the future. It therefore remains to be seen how the cost of the package will hamper the government’s ability to service its long-term debts, as well as deal with geopolitical events over the next decade that may require additional spending.

“We might need to increase defense spending or there could be a trade war with China; we just don’t know, ”says Hayes. “I think this uncertainty has a lot to do with the reluctance on the bill that we are seeing right now.”

Equally important, notes researcher Rutgers-Camden, it’s hard to say how fragile the economy is right now, so there are potential pitfalls, such as inflation and supply chain disruptions. , at any attempt to restart it.

“Ultimately, however, the only certainty remains that the actual cost of borrowing is close to zero,” he says.

Whatever the cost of revenues, Hayes warns, the bill will require deficit funding over the next 10 years. He argues that Bill’s call to raise the tax rate of Americans earning over $ 400,000 from 37% to 39.6% would have a minimum economic impact on these upper-middle-class households, which are actually doing well during the pandemic. He notes that the economic recovery has been K-shaped – meaning different segments of the economy are recovering at different rates – with low-income households suffering the worst economic effects.

“Marginal household tax rates of $ 400,000 and over are not such a big jump to justify a major economic effect,” he says.

Hayes further notes that the spending bill also provides for an increase in the corporate tax rate from 21% to 26%. Companies have historically high levels of liquidity on their balance sheets, he argues, and can handle any short-term increases with minimal effects. However, it is still unclear what the impact will be on businesses in the long run.

“If I’m a business executive, I’m more concerned with long-term inflation than a marginal tax hike,” says Hayes.

So what are the provisions at play, and what does the Rutgers-Camden researcher see as the pros and cons of these measures?

Universal Pre-K

The bill would allocate $ 450 billion to provide two years of free pre-kindergarten to children aged 3 and 4. Hayes says empirical evidence suggests this type of investment has huge returns, especially for low-income households and their children.

“Being able to enter kindergarten and first grade with some basic skills helps reduce the achievement gaps, not only in the initial part of their education, but in a child’s life in the future,” says Hayes.

Childcare

The law would provide free childcare for each family for children aged 0 to 5.

The legislation would provide free childcare for each family for children aged 0-5. Hayes argues that the affordability of child care is a major issue, affecting the ability of many households to enter the workforce.

“As the price of child care increases, it becomes more difficult for two members of low-income households to both participate in the labor market to the extent that they want to,” he says.

However, notes Hayes, one challenge to watch out for is the ever-growing shortage of child care workers. Any further investment in this area could increase the demand for these services. If the supply of childcare services is fixed and less likely to increase accordingly with this demand, this could result in a potential increase in the cost of childcare services or a decrease in the places available in these establishments.

“That’s the only concern I would have,” says Hayes. “Are we going to create a situation where demand exceeds supply and there are waiting lists or reductions in the quality of child care services?” “

Extended health insurance

Hayes says the same concern for overload services can be applied to the bill’s plan to expand Medicare to cover dental, health and vision services. He says rising inflation and a shortage of workers, coupled with increased demand for these services, could overload these markets.

Community college

One of the measures that would have been removed from the most recent version of the bill would have allowed all students, regardless of family income, to spend two free years at university. Hayes argues that, overall, it is essential that all young adults receive some form of education and empirical evidence suggests that imposing ceilings or eligibility requirements on that education does not make sense. .

Rutgers University – Chancellor of Camden Antonio D. Tillis notes that by making education more affordable, the benefits will last a child’s life.

“Students who have access to higher education and the resources to earn a four-year degree will be more competitive in the job market and have more career success,” says Tillis. “This is why Rutgers – Camden is proposing the Bridging the gap program, which helps eligible New Jersey students reduce their college fees by up to 100%. This innovative program is the first of its kind in New Jersey, making Rutgers-Camden a premier destination for students who wish to receive a world-class education with little to no student debt.

Child tax credit

The bill would expand the child tax credit which grants families – individuals earning up to $ 75,000 and couples earning up to $ 150,000 – $ 3,600 per child under age 6 and 3,000 $ per child aged 6 to 18.

Hayes argues that if the goal of the program is to reduce homeownership – as some representatives have espoused – then it makes no sense to extend credit to households earning $ 100,000 or more per year, since the Median household income in the United States is about $ 60,000 per year.

“So that means people who earn 50% above everyone else would still be eligible. I don’t know if that reduces poverty, ”he says. “It appears that this would essentially be a transfer of income from wealthy households to upper middle class households.”

Conversely, he says, if the purpose of the tax credit is to give people more money to support the economy, then the funds might not be used as intended, given that the rate of savings in the United States are the highest for decades.

Climate change

The legislation includes a $ 150 billion clean electricity performance program, which would offer utility companies an incentive to increase renewable energy materials by 4% per year and fine those who fail to meet. not these criteria.

Hayes postulates that one of the main uncertainties affecting decisions on the bill is the impact of climate change on economic, political and geopolitical challenges going forward. He argues that it is imperative that the United States be a “leading player” in the competitive arena of climate change.

“We see our competitors like China investing more and more in energy, and we don’t want to be left behind,” he says. “These new technologies and industries, especially clean energy, are vital not only for our economy, but also for our national security.”

In a May 2021 article, “The labor pool is empty on the Jersey Shore, but why?, “ Hayes discusses the factors that may prevent some from returning to work.


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