Today, the Economic Policy Institute Policy Center released its analysis of the Congressional Progressive Caucus’ Better Off Budget. The analysis, by EPI Senior Policy Analyst Joshua Smith, shows the CPC’s budget addresses the nation’s most pressing economic challenges—including the ongoing jobs crisis. The near-term economic stimulus within the Better Off Budget would boost gross domestic product (GDP) by 3.8 percent and employment by 4.6 million jobs at its peak level of effectiveness (within one year of implementation), while ensuring that fiscal support lasts long enough to avoid fiscal cliffs that could throw recovery into reverse. The Better Off Budget would rapidly restore the unemployment rate near to prerecession levels of 5 percent, in line with what the Congressional Budget Office (CBO) regards as full employment. And it would finance roughly $485 billion in job creation and public investment measures in 2014 and roughly $1.35 trillion over 2014–2016, consistent with the amount of fiscal support needed to rapidly shrink the output gap—the gap between actual and potential GDP—and restore the economy to full health.
“Instead of continuing current austerity measures that have stymied a full economic recovery, the Better Off Budget invests heavily in job creation measures aimed at putting people back to work, while addressing the shortfalls in physical infrastructure and human capital investments,” said Smith.
The Better Off Budget aims to boost economic opportunity for all segments of the population by expanding tax credits and other programs for middle- and working-class workers, restoring fairness to the tax code, boosting public employment, and incentivizing employers to create new jobs. It proposes no benefit reductions to social insurance programs, but saves money by using government purchasing power to lower health care costs—the largest threat to long-term fiscal sustainability—and builds upon efficiency savings from the Affordable Care Act. And the CPC budget would reduce public debt by $3.6 trillion (13.8 percent of GDP); after increasing near-term borrowing to restore full employment, the budget gradually reduces the debt ratio to a fully sustainable 65.5 percent of GDP by FY2024.
“Implementing the economically responsible proposals in the Better Off Budget would improve the living standards for the majority of America’s families,” said Smith. “The country’s unrelenting jobs crisis and depressed levels of economic activity are hindering present and future living standards. Ensuring a rapid return to full employment is a crucial step in achieving a full economic recovery for all Americans.”