An EPI Policy Center analysis of the Congressional Progressive Caucus’s The People’s Budget: A Progressive Path Forward, a budget alternative for fiscal year 2019, shows that the budget would raise wages and put the United States on a path to a fairer, more equal economy. The fiscal boost provided by the People’s Budget would increase gross domestic product (GDP) by 1.2 percent and create 1.8 million jobs over the first two years of its implementation, as long as the Federal Reserve didn’t increase interest rates in response. It would close remaining slack in the labor market while boosting long-run productivity growth through public investment. The budget would increase near-term deficits to boost job creation, but reduce the deficit in 2019 and beyond.
”The People’s Budget invests heavily in sorely needed public investments, including infrastructure, education, child care, and health care,” said EPI budget analyst Hunter Blair. “These investments would create jobs, boost productivity, and help lead to a more equal economy.”
Blair notes that the CPC budget has always included a bold proposal to boost infrastructure spending, and that is true again in this year’s People’s Budget, which increases infrastructure investment to around two trillion dollars.
Blair’s analysis finds that the People’s Budget would have significant, measurable, and positive impacts. Specifically, it would:
- Finally complete and lock in the economic recovery.The People’s Budget would increase economic and employment growth, boosting GDP by 1.2 percent and employment by 1.8 million jobs in the near term. The budget would also ensure that the mixture of spending and revenue changes provides a net fiscal boost long enough to avoid a future fiscal cliff.
- Make necessary public investments. The budget finances roughly $209 billion in job creation and public investment measures in 2018 alone and roughly $610 billion over 2018–2019. This fiscal expansion more than provides the amount of fiscal support needed to rapidly reduce labor market slack and restore the economy to full health. Furthermore, the People’s Budget also aims to hit more ambitious long-term public investment targets, by returning nondefense discretionary spending to its historical average as a percentage of GDP by 2023.
- Facilitate economic opportunity for all. By expanding public investments, boosting public employment, and subsidizing affordable college, child care, and other programs for low- and middle-wage workers, the People’s Budget aims to boost economic opportunity for all segments of the population.
- Strengthen the social safety net. The People’s Budget strengthens the social safety net and proposes no benefit reductions to social insurance programs—in other words, it does not rely on simple cost-shifting to reduce the budgetary strain of health and retirement programs. Instead, it uses government purchasing power to lower health care costs and builds upon efficiency savings from the Affordable Care Act. The budget also expands unemployment benefits and increases funding for education, training, employment, and social services as well as income security programs in the discretionary budget.
- Smartly cut spending. The budget focuses on modern security needs by repealing sequestration cuts and spending caps that affect the Department of Defense but replacing them with similarly sized funding reductions that are less front-loaded and will allow more considered cuts. It ends emergency overseas contingency operation spending in fiscal year 2019 and beyond, and it ensures a slow rate of spending growth for the DOD for the remainder of the decade.
- Increase tax progressivity and adequacy. The budget restores adequate revenue and pushes back against income inequality with a revenue target of $10.9 trillion over fiscal year 2019–2028 to be raised progressively. Possible progressive revenue raisers to reach the target include adding higher marginal tax rates for millionaires and billionaires, equalizing the tax treatment of capital income and labor income, restoring a more progressive estate tax, eliminating inefficient corporate tax loopholes, levying a tax on systemically important financial institutions, and enacting a financial transactions tax, among other tax policies.
- Reduce the deficit in the medium term. The budget increases near-term deficits to boost job creation, but reduces the deficit in fiscal year 2019 and beyond relative to Congressional Budget Office’s current law baseline. After increasing near-term borrowing to restore full employment, the budget gradually reduces the debt ratio in the now full-employment economy over time, reaching a key benchmark of sustainability (of a stable debt-to-GDP ratio during times of full employment). Relative to current law, the budget would reduce public debt by $6.8 trillion—22.9 percent of GDP—by fiscal year 2028.