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Models Predict Cost Overshooting in Biden's American Families Plan

US
  • Penn Wharton's budget model predicts Biden's American Families Plan will cost ~$700bn more than advertised due to underestimations in the cost of its child-care & education policies.
  • The plan, which includes child tax credits, paid leave and tuition-free community college, would boost government spending by $2.5tn over a decade, vs $1.8 trillion previously estimated.
  • The program's tax increases on wealthy households and corporations would raise $1.3tn in revenue over the next decade vs the $1.5tn expected by govt, if implemented in full. It would also trim about 0.3% off GDP by 2031.
  • The plan is widely expected to undergo some revisions in Congress where Biden has the narrowest of majorities.
  • The higher price-tag may give ammunition to Republican critics or Democrats seeking to lower its cost.
  • Moody's also found that while Biden's plan may cost a bit more than expected (almost $2tn after combining direct spending and tax credits) it would largely pay for itself by raising more than $1.7tn in revenue
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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