On Thursday, Moody’s Analytics released an assessment of the projected macroeconomic impact of both the federal infrastructure and Build Back Better reconciliation bills. The analysis found the bills would have significant positive effects on economic growth and employment, improve labor force participation, and could ease inflationary pressures — while failure to pass the bills would prolong the economic recovery for years.
If both bills become law by the end of the year and are implemented early in 2022, Moody’s finds real GDP growth would average 3.2% through late 2024, compared to 2.8 percent in the absence of the bills. Moody’s projects there would be 2.4 million more jobs by mid-decade if the bills pass and unemployment would be a full percentage point lower; and that passage of both bills would return the country to full employment by the end of next year while failure to pass the bills would mean the country wouldn’t return to full employment until after 2031.
In response to the status of inflation, the analysis emphasizes that the infrastructure and reconciliation legislation is designed to boost longer-term economic growth. Specifically, it notes the bills’ spurring of new housing construction, reduced prescription drug costs, and expanded child care and elder care are likely to ease the burden of inflation for households with lower and middle income. These findings corroborate the Biden administration’s assertion that the Build Back Better reconciliation bill will lower working Maine families’ expenses on child care, home care, education, health care, and housing.
Thursday’s report follows a Moody’s analysis from September of the macroeconomic impacts of the expanded home and community-based services proposed in the budget reconciliation bill. That analysis found that, without additional government support, the system providing care for the elderly and people with disabilities could fail under growing future needs, which would inhibit workers’ ability to take jobs and remain in the workforce.
This week’s analysis found no reason for concern that the proposed legislation’s tax increases on large multinational corporations would dampen economic growth. It notes there is little evidence that corporate tax cuts signed by President Trump had a meaningful positive impact on investment, hiring, or wages, and therefore the current proposed increases in corporate taxes are unlikely to hurt growth. In addition, the investment in infrastructure, child care, and other economy boosting programs is a clear winner for economic growth. The report concludes, “the policies being considered would direct the benefits of the stronger growth to lower-income Americans and address the long-running skewing of the income and wealth distribution.”