WASHINGTON — Top Democrats on Wednesday touted a Moody’s Analytics report saying the emerging $4.1 trillion combo package of spending on physical infrastructure and education, health care, child care and other aid to households would grow the economy and create jobs despite being offset with tax increases.
The report, penned by Moody’s Chief Economist Mark Zandi, says that enacting the $579 billion “hard” infrastructure piece —with money for roads, bridges, transit, rail service, broadband and more — on its own would actually be a drag on growth in the short term because some of the offsets would take effect immediately while the spending is slower to roll out. But by 2023, inflation-adjusted economic growth would be 0.6 percentage point higher, with 650,000 new jobs created by mid-decade.
If lawmakers follow up with the $3.5 trillion budget reconciliation package under discussion, any negative growth effects in 2022 would be canceled out and real economic growth could be nearly 1 percentage point higher, Moody’s said.
The report, which Zandi co-wrote with Moody’s assistant director Bernard Yaros, says the aid to lower-income households would be spent quickly while tax increases on the wealthy and corporations would have a “much smaller and slower impact on investment and consumer spending.” As a result, by mid-decade enactment of the reconciliation package could create as many as 2 million jobs and cut the unemployment rate by 0.5 percent.
The White House blasted out Moody’s findings to its press list, while Senate Majority Leader Charles E. Schumer urged lawmakers to read the analysis.
“I hope my colleagues are listening to those benefits — long-term economic growth, easing inflation pressures, lifting productivity, strengthening the labor force, reducing income inequality,” the New York Democrat said on the floor. “That’s what one of the nation’s leading economists predicts our two infrastructure bills will achieve. The report by Moody’s should light a fire under all of us.”
Child care, education benefits
The budget package would make it more cost-effective for more parents to work thanks to the extra time and flexibility created by more affordable child care, the analysis found. The boost for employment would be especially strong for single mothers, mothers with young children and low-income mothers.
The analysis also said there would be macroeconomic benefits in labor productivity because more of the workforce would be educated thanks to universal pre-K, two years of free community college, expanded Pell Grants and other education benefits. These would boost the economy beyond the 10-year budget window “given greater educational attainment and higher labor force participation.”
The Moody’s analysts also said the distribution of income wouldn’t “skew meaningfully” in the direction of well-off households as it has in recent decades. Wealthier Americans have “arguably never been in a better financial position” than they are today, driven in part by “surging stock values and house prices.”