ACE

Author: Jia Williams

  • Introduction to Corporate Average Fuel (CAFE) Standards

    Introduction to Corporate Average Fuel (CAFE) Standards

    Overview of CAFE Standards

    Corporate Average Fuel Economy (CAFE) standards are government-set standards regulating how far vehicles should be able to travel on a gallon of fuel. The three different classifications of vehicles, light-, medium-, and heavy-duty, have different CAFE standards. Higher standards mean vehicles should be able to travel further on a single gallon of fuel. CAFE standards for light-duty vehicles are the most relevant to the average consumer, as the category includes passenger cars and light trucks. The standards are set and enforced by the National Highway Traffic Safety Administration (NHTSA) under the Department of Transportation. The Environmental Protection Agency (EPA) calculates average fuel economy levels and sets greenhouse gas emissions standards that accompany CAFE standards.

    CAFE standards aim to increase fuel efficiency in vehicles and reduce total energy consumption. They are thought to improve the nation’s energy security, save consumers money, and reduce greenhouse gas emissions. 

    Recent Policy History

    CAFE standards were first established by Congress in 1975 under the Energy Policy and Conservation Act. They were primarily created in response to the 1973 oil embargo, which posed challenges to the foreign oil-dependent U.S. economy. Congress hoped CAFE standards would double the average fuel economy of new vehicles by 1985 and reduce the country’s dependence on foreign oil imports. Standards then remained largely unchanged until the Energy Independence and Security Act of 2007. The legislation, passed under the Bush administration, raised the fuel economy standards of light-duty vehicles to an average of at least 35 miles per gallon over the next 10 years. 

    In the early 2000s, higher levels of driving and an increased market share of less-efficient SUVs and light trucks contributed to increased oil consumption in the U.S. To combat this, the Obama administration worked with the auto industry to create a two-phase national program to increase fuel efficiency and create greenhouse gas emissions standards for light-duty vehicles. The program is governed by the NHTSA, which oversees CAFE standards, and the EPA, which sets greenhouse gas emissions standards. 

    However, many of the standards set under the Obama administration were rolled back by the Trump administration. In place of CAFE standards, the Trump administration created Safer Affordable Fuel-Efficient (SAFE) standards to give manufacturers more freedom and reduce the quality-adjusted prices of vehicles by an average of $2,200. While SAFE 1 still increased fuel economy standards, it did so at a slower rate than the standards proposed by Obama’s administration. SAFE 1 also proposed that manufacturers comply with the standards by focusing on greenhouse gas emission standards because of the subsequent ability to help reach CAFE standards. SAFE 1 ultimately sought to loosen the annual fuel efficiency increase from 5% to 1.5% through 2026.

    SAFE 1 has since been repealed by the Biden administration for overstepping the agency’s legal authority and for not taking local and national interests into account. Under the new administration, the NHTSA finalized CAFE standards for model years 2024-2026 on March 31, 2022. These recently passed standards require about 49 miles per gallon for all light-duty vehicles by 2026 by increasing fuel efficiency by 8% annually for the years 2024 and 2025, and 10% annually for the year 2026.

    Arguments for CAFE standards

    The NHTSA has found that the recently set CAFE standard of 49 miles per gallon can save consumers nearly $1,400 in total fuel expenses over the lifetime of compliant vehicles and save 234 billion gallons of gas between 2030 and 2050. They’ve also found that the standards reduce greenhouse gas emissions, air pollution, dependency on oil, and will diversify energy usage to increase energy security. The Department of Transportation states that CAFE standards will increase the availability of alternative fuel vehicles and promote the advancement of innovative technologies.

    Scholars argue that CAFE standards have kept U.S. gasoline consumption at a low annual growth rate of 0.2% a year, playing a crucial role in reducing oil imports and dependency. In general, they estimate that the standards have saved consumers two trillion gallons of gasoline since first established. They also argue that these regulations are more effective than a gas tax because they move responsibility and decision-making from the consumer to the manufacturer. This prompts manufacturers to use technology to make their products more fuel-efficient and eventually save consumers money on fuel, despite higher initial costs. On average, a more fuel-efficient vehicle costs $4,800 more than current models, but the savings from reduced fuel consumption are almost four times the additional cost. 

    The Alliance to Save Energy also argues that the standards save consumers money, predicting that by 2025 consumers will have received roughly $8,200 in net savings over the life of the vehicle. Altogether, this results in $1.7 trillion in savings nationwide. In addition, buyers of 2017 vehicles are expected to save money more than 94% of the time, given that ¼ of all new model year 2017 cars would have greater fuel economy and cost less than their 2011 counterparts. On a national scale, the standards are also thought to enhance U.S. competitiveness. Innovative vehicle manufacturers have a first-mover advantage, helping them achieve greater economies of scale and benefit from technological learning. 

    Arguments Against CAFE Standards

    Alternatively, the Heritage Foundation found that to compete with foreign automakers, manufacturers will have to move production oversees, putting thousands in the auto industry out of jobs. This negative economic impact is compounded by the fact that CAFE standards are only cost-effective if fuel prices are high. Without high fuel prices, the cost of research and development and replacing low-efficiency vehicles outweighs the financial benefits of more fuel-efficient vehicles. In addition, CAFE standards may incentivize reducing the weight and steel content of a vehicle, leading to more unsafe cars and designs and increased fatalities. 

    There are a few challenges facing CAFE standard implementation, including the time horizon over which these policies take effect. Since standards apply only to new vehicles, it can take a long time for the full effects to be realized. It currently takes about 15 years for the benefits of CAFE standards to truly take effect and permeate the entire vehicle fleet. It is also difficult to understand the full long-term impact of fuel efficiency on emissions because of the potential for the “rebound” effect, which occurs when greater fuel efficiency encourages more driving, subsequently offsetting any emission reductions resulting from the standards. Another pressing challenge is the lack of coherency in CAFE standards across administrations.

  • President Biden’s Student Loan Forgiveness Plan

    President Biden’s Student Loan Forgiveness Plan

    This brief was originally published by Jia Williams on November 11, 2021. It was updated and republished by Thomas Lee on June 20, 2022.

    Introduction

    In recent decades, about 45 million college-educated Americans have collectively amassed $1.75 trillion in student loan debt, leading to decreased national Gross Domestic Product, sustained generational inequality, and increased loan delinquencies. In the past decade alone, student loan debt has increased by 91% from 2011. This increase in national student loan debt is not a new development, as the cost of higher education has been on the rise since President Reagan cut federal spending on higher education by 25% in the 1980s. It rose again after the Great Recession of 2007, when the government cut higher education spending once more. The effects of these budget cuts are seen in higher tuition, less aid to low income students, and more student debt than ever before. 

    President Biden’s Policies So Far

    The election of President Joe Biden has brought on a resurgence of demand for student loan forgiveness in many different capacities. So far, Biden has only enacted targeted loan cancellation for three groups of student loan borrowers—borrowers with total and permanent disabilities (TPD); borrowers under the Borrower Defense to Repayment Rule (BD Rule); and most recently, students under the Public Service Loan Forgiveness Program (PSLF). As of May 27, 2022, Biden has canceled over $18.5 billion in student loans for targeted groups. 

    Students under the TPD borrowers category have a disability that prevents them from earning an income and subsequently paying their loans. Eligible borrowers under this program automatically had their loans discharged if they passed a data match between the Department of Education (DoE) and the Social Security Administration or between the DoE and the Department of Veteran Affairs. Borrowers who believe they qualify as a TPD borrower can also obtain certification from a licensed doctor to confirm that they are totally and permanently disabled. 

    The BD Rule covers borrowers who were defrauded by their schools or who’s schools were closed before they could complete their degree. Students who were defrauded by their schools were intentionally misled by their universities about the education programs offered or attended universities that violated state laws such as consumer protection statutes. Other qualifying conditions under the BD Rule include employment rates that differ from what was advertised, misrepresentation of the transferability of credits, and misrepresentation of graduate placement rates and salaries, among others. In March of 2021, about 72,000 borrowers under the BD rule were awarded a total of $1 billion in loan cancellations. Borrowers received an additional $500 million for 18,000 borrowers again in June, and received another $1.1 billion in late August for an additional 115,000 borrowers who were defrauded..

    The PSLF Program was started by Congress in 2007, but has been underutilized due to its complexity and poor management. The purpose of the program is to cancel student debt for public servants after they’ve paid 120 on-time monthly payments for 10 years. On October 6th, the DoE announced a waiver that would allow borrowers in the program to count payments from federal loan programs and repayment plans that were not previously eligible under the program. The waiver is temporary and will be accepted only until October 31, 2022. The DoE expects this waiver to bring 550,000 borrowers a total of $1.74 billion in student loan relief.

    In total, Biden has canceled $7.8 billion for more than 400,000 student loan borrowers with a TPD, $2 billion for 105,000 student loan borrowers under the BD Rule, and $6.8 billion for 113,000 borrowers under the PSLF Program. Along with the loan cancellations, the administration has extended student loan relief for temporary student loan forbearance through August 31, 2022. Temporary student loan forbearance suspends or lowers student loan payments temporarily for borrowers. 

    Future Policies from the Biden Administration

    In the future, Biden hopes to improve student loan financing for student loan borrowers, hold student loans servicers accountable, enact more student loan cancellation programs, improve policies concerning student loan debt collection, streamline the process of applying for student loan debt forgiveness and cancellation, as well as hold colleges and universities accountable for misleading students about education programs and loan financing. There are a multitude of ways his administration plans on accomplishing these goals. To start, the DoE aims to establish a committee that will be tasked with rewriting regulations to improve the student loan crisis. Their responsibilities entail addressing issues in the BD Rule, in interest capitalization on federal student loans, in Pell Grant eligibility for prison education programs, and in the PSLF Program, as well as exploring TPD charges further. They also aspire to make student loan forgiveness more accessible by eliminating the required application and 3-year monitoring period for people who qualify for TPD. 

    After months of internal discussion over how to structure loan forgiveness for tens of millions of Americans, it appears that President Biden plans to forgive $10,000 in student debt per borrower. Canceling $10,000 in federal student loans for every borrower would wipe out the student loan debt for over 16 million people, representing around a third of all borrowers, according to the Center for American Progress. However, the White House plans to limit debt forgiveness to Americans who earned less than $150,000 in the previous year, or less than $300,000 for married couples filing jointly. Biden’s executive action to cancel student loans would almost certainly be limited to federal student loans only. It is still unclear whether Biden would limit the relief further to only Direct federal student loans or government-owned federal student loans, or whether it could also include commercially-held FFEL-program student loans as well. The Department of Justice is currently reviewing his executive authority to cancel all student loan debt. If it is concluded that he does not have authority to do so, responsibility will fall on Congress to pass legislation that will enact widespread student loan forgiveness.

    Arguments For Student Loan Forgiveness

    Progressive Democrats believe that full student loan forgiveness is possible under the Biden administration and are advocating for student loan forgiveness of up to $50,000 per borrower who earns less than $250,000 a year. At the head of the push for student loan forgiveness are Massachusetts Senator Elizabeth Warren and Senate Majority Leader Chuck Schumer of New York. They, along with Representative Ilhan Omar of Minnesota and Representative Alexandria Ocasio-Cortez of New York, believe that student loan debt is preventing a generation of student loan borrowers from advancing in life. They cite recent research that shows current generations are getting married and starting families at older ages than previous generations. Overall, they believe that student loan debt cancellation, in any capacity, is necessary to decrease generational and racial wealth disparities and increase opportunities for young Americans. Biden is hesitant to forgive $50,000 per borrower, but has expressed a willingness to forgive up to $10,000 per borrower.

    Arguments Against Student Loan Forgiveness

    Republican politicians have been actively opposing this view and believe it will promote fiscal irresponsibility. Representative Steve Stivers of Ohio explains that borrowers will incur student debt rashly if they assume the government will cancel it. Senator John Thune of South Dakota, also advocates against student loan forgiveness for this reason. Republican politicians also believe that the federal government cannot afford canceling student debt, especially during a time of economic downturn due to the COVID-19 pandemic. Full student debt cancellation does not address the root causes of the student debt crisis and could even potentially exacerbate the issue due to irresponsible debt accrual. Some also raise the point that total student loan forgiveness is regressive because of its disproportionate benefits for high-income earners who took out more loans to pay for higher levels of education. These individuals are already more likely to pay off student loans without the added advantages of federal student loan forgiveness, leading many to believe that widespread student loan forgiveness is an uneven wealth transfer.   

    An analysis from the Brooking Institute addresses the concerns of both perspectives and asserts that student loan forgiveness could be progressive and reduce social inequities and increase economic opportunity—but only if debt cancellation is contingent on post-college earning and family income. For example, someone earning $170,000 a year with $65,000 in student loan debt is comparatively in a better position to pay off loans than someone earning $60,000 a year with the national average of $36,000 in student loan debt. The proposal to cancel all student loan debt is estimated to cost $1.6 trillion, making it one of the largest wealth transfers in U.S. history, greater than 20 years of spending on unemployment insurance, the Earned Income Tax Credit, and Food Stamps. As opposed to these programs, widespread student debt cancellation would largely benefit higher income, better educated, likely white borrowers. From this perspective, targeted student loan cancellation based on post-college earnings would be less costly than widespread loan cancellation, while still helping to mitigate racial disparities and generational inequity.

  • Introduction to Renewable Portfolio Standards

    Introduction to Renewable Portfolio Standards

    Overview of Renewable Portfolio Standards (RPS)

    A renewable portfolio standard (RPS) is a standard that requires a set percentage of a state’s electricity utilities to come from renewable sources. Currently, 31 states, Washington D.C, and two U.S. territories have created RPS to help their states diversify their energy portfolios and reduce emissions. Eligible renewable energy sources included in most RPS standards include solar, wind, geothermal, biomass, and some hydroelectric facilities. However, the exact mix of eligible sources, as well as specific RPS targets, varies by state. Most states have existing requirements around 40%, but many, including Virginia, Washington, Nevada, and New Mexico, are beginning to renew and increase their requirements to 100%. The metric used to measure standards also differs by state, but the most common is the percentage of retail electric sales, followed by specific amounts of renewable energy capacity, and percentage of peak demand.

    Another set of related energy policies that have risen in popularity in recent years are clean energy standards (CES). Though similar to RPS, some “clean” energy sources under CES are not also “renewable,” enabling the distinction. A “clean” energy source is one that is carbon-free, and a “renewable” energy source is one that is not depleted when used. Nuclear energy is one such “clean” energy source because it has zero carbon emissions, but it is not renewable. Due to the broader definition of CES, most CES policies also have an RPS component. For example, if a CES policy sets a 90% requirement, a sub-RPS policy might require 30% from renewable sources and the remaining 60% can come from any eligible carbon-free or carbon-neutral source.

    Arguments in Favor of RPS  

    Proponents of RPS argue that its policies provide a valuable opportunity for economic growth, diversification of state energy sources, and carbon emission reductions. Though increased adoption of RPS has positive impacts on the environment, most states view environmental impact as a secondary goal. Instead, many states are pursuing RPS policies as an opportunity for economic development through diversification of their respective energy supplies. Due to their positive economic impact, most RPS policy proposals have bipartisan support, but some questions posed by their rising popularity include: How high should future targets be set? And should favored status be given to some renewable energy sources that aren’t as popular because of higher costs to promote their development? 

    Evidence suggests state RPS policies have helped reduce carbon emissions while also boosting the economy. A recent study found that the greenhouse gas and air pollution reductions from state RPS policies saved the U.S. $7.4 billion in 2013, while a different study from the same team found average annual costs to be about $1 billion, indicating that the benefits outweigh the costs. In addition, 200,000 jobs centered around renewable energy were created in 2013, partially due to the increasing adoption of state RPS. Some smaller benefits from state RPS include lower national water consumption.

    One state that has been particularly successful with RPS is Texas. Similar to most states, Texas’s eligible mix of resources was determined by its existing mix of energy and the potential sources of renewable energy given location. Wind energy quickly emerged as a prime area for energy development as a result of high wind speeds in West Texas. The 1999 legislation that put an RPS into place for the state established a robust system for the success of renewable energy in the state including a renewable energy credit program, a transparent market transaction process, and an alternative compliance mechanism. The state has since renewed their RPS many times and now has a standard of 10,000 megawatts of renewable energy. 

    Given the success of most state RPS, some scholars suggest a national RPS is necessary to more efficiently promote renewable energy and reduce greenhouse gas emissions. Keeping RPS policies at the state level allows for states to utilize their most abundant natural resources to create an energy portfolio that minimizes costs for their specific state. States like Texas can utilize naturally occurring high wind speeds and states like Florida and California can create robust solar energy systems. The challenge, though, is that state-based RPS allows for some states to choose not to implement or renew their RPS, thereby not contributing to the national transition to renewable energy. Due to its larger scope, a national RPS would allow for the benefits of renewable energy to be distributed nationwide without the need for individual state action. 

    Challenges Facing RPS

    In general, RPS is thought to encourage economic development through the increased production of domestic energy. However, skeptics of RPS have argued against the adoption of a national RPS for a few primary reasons. First, “renewable” and “low greenhouse gas emissions” are not synonymous, as there are other cheaper forms of electricity with low CO2 emissions, such as nuclear energy, that are not renewable. Second, the spread out locations of renewable energy sources requires building infrastructure to get energy to people, which is unlikely to happen due to time and resource constraints. Wind and solar energy collection farms, in particular, need to be sited in areas with low population density, but demand for energy in these areas is low compared to further areas with higher population density. To transport the energy to areas with higher demand would require robust transmission line infrastructure, which can be costly and time-intensive to buil.

    Following these broad concerns are a few logistical challenges. The first is that areas with a lot of renewable energy and low population density, means that supply of renewable energy can and likely will exceed demand. This presents an even larger problem given the variability of primary renewable energy sources. Supply of these resources is dependent on non-controllable factors such as weather and time of day. As a result, resources such as wind and solar power do not generate energy during times of peak demand. Another resulting logistical issue is that variable energy generation poses challenges for the electricity grid as operators seek to match levels of electricity supply and demand. Variable energy generation increases the risk of supply disruptions and blackouts. Because the grid is highly interconnected, disturbances can quickly spread and impact larger regions. Another problem is that a national RPS policy would likely rely heavily on expanding wind energy. Wind and geothermal energy have the nation’s highest growth percentage among renewable energy sources, however wind is more cost-effective. For its cost-efficacy and high rate of growth, wind will likely become a key vehicle for expanding RPS. Consequently, setting a national RPS requirement of even 15% would mean wind would have to expand exponentially in a short period of time. 

    Siting issues also present a challenge for the rollout of renewable energy technology. Siting issues could also lead to public discontent in states with high population density around viable sites. Wind and solar farms require large areas of land to generate significant amounts of energy, which can alter habitats for wildlife and result in aesthetic degradation.

  • President Biden’s 2022 Budget Explained

    President Biden’s 2022 Budget Explained

    Introduction

    This past May, President Biden released his proposed budget plan for Fiscal Year 2022 (FY2022). The budget differs from budget plans in previous years in several notable ways. Itt proposes a temporary 15.5% increase in spending on non-emergency, non-defense appropriations—also known as non-defense discretionary (NDD)—which includes a wide array of services such as:

    • Education 
    • Job training
    • Medical care for veterans (the largest program under NDD spending)
    • Scientific and medical research
    • Public health measures, particularly in the context of COVID-19
    • Treatment for substance abuse disorders
    • Housing and other assistance for families in need
    • National parks
    • Weather forecasting
    • The Coast Guard
    • International assistance
    • Air traffic control
    • Rural development 
    • Upgrades to wastewater and drinking water treatment

    This is a proposed increase in the NDD level excluding emergency funding distributed to address the pandemic, such as the American Rescue Plan Act enacted earlier this year. The FY2022 budget plan does not propose any further spending on emergency services. 

    This significant growth in NDD spending follows the recent expiration of the 2011 Budget Control Act, which capped the amounts spent on both NDD and Defense appropriations through FY2021. Due to the act’s stringent legal limits on the levels of both discretionary and non-discretionary spending, the only NDD category that saw an increase in appropriations through this decade was veteran’s medical care. Spending in this particular category was raised because of rising costs of healthcare and pre-existing shortcomings in the quality of healthcare available to veterans. More spending in veteran’s medical care led to tighter constraints for other NDD categories. The act caused 2021 NDD funding to be about 10% below what it was in 2011 once adjusted for inflation and population growth.

    Overall, Biden’s new plan, free from the limit imposed by the Budget Control Act, focuses on using federal funds to begin addressing the racial and wealth inequalities currently present in the U.S. His administration plans to do this through the American Families Plan which substantially increases funding to education, child care, and housing assistance. The budget aims to foster equity in elementary and secondary school education, increase financial aid for college students, strengthen the public health system, meet healthcare obligations to tribal nations, address mental health and substance abuse, and make housing assistance and legal services for low-income people more accessible.

    The budget also reflects significant reinvestment into critical institutions by increasing spending on federal research and development through the Center for Disease Control and Prevention and the Department of Health and Human Services. It also raises spending on environmental protection, reversing a decade of environmental funding cuts, particularly from President Trump’s presidency. It increased operating funds awarded to various agencies so that they could manage Social Security benefits, administer tax laws, and enforce laws that protect civil rights, labor standards, and workplace health and safety. 

    Effect on GDP and the Deficit

    The Biden Administration estimates debt will grow to 117%  of Gross Domestic Product (GDP) by the end of FY2031. In nominal dollars, this means the current debt of $22 trillion would reach $39 trillion. The increase in debt is due to the higher projected spending percentage of GDP relative to the revenue percentage. At present, the budget plan’s spending is 24.5% of GDP, while revenue is 19.3% of GDP. The percentages are higher than the 50-year averages of 20.6% of GDP for spending and 17.3% of GDP for revenue. Federal deficits would also rise to nearly $1.6 trillion over the next decade. However, Biden’s administration has announced plans to finance this deficit by gradually raising taxes for corporations and individuals with incomes over $400,000. In addition, the administration will continue to allow tax cuts for low to middle income earners that were originally put in place by the Trump administration. 

    Skeptics of the sustainability of Biden’s budget plan also cite his administration’s own low predictions for GDP growth despite tremendous investments in the nation. After accounting for inflation, the administration predicts the economy will grow about 2% a year—equal to  the average rate of growth over the past 20 years. To this, Biden has said that current low interest rates and our unique position post-recession is the ideal time to invest in the nation. If his plan is approved, the government would be spending almost 25% of the U.S. output every year and would be collecting almost 20% of the total economy in tax revenue.  

    Committee for a Responsible Federal Budget and the Tax Foundation Analysis

    The Committee for a Responsible Federal Budget is one such skeptic of the proposed budget plan. Their analysis concludes that the budget adds an unsustainable amount of debt over the next ten years while doing nothing to address high and rising debt in the long term. The Tax Foundation’s General Equilibrium Model echoes these concerns and further estimates that the budget plan will reduce GDP by 0.9%, and Gross National Product (GNP) by 1%, and also lead to 165,000 fewer jobs over time. Some of the primary contributors to these estimates are:

    • the increase in corporate income tax from 21% to 28%; 
    • the 15% minimum corporate book income tax—which places a 15% minimum tax on the adjusted financial incomes of large corporations; 
    • raising capital gains rates; 
    • the increasing pass-through business income taxes, which increases taxes for businesses that are not subject to corporate income taxes. 

    The foundation estimates that the fall in GDP caused by the higher corporate taxes will offset any increase in GDP that may result from improved infrastructure and investment. The GNP, which is often used as a measure of American household incomes, is also expected to fall because of increased taxes on savers. However, Biden’s intent to only increase taxes for individuals earning over $400,000 in income and instead expand refundable tax credit programs for low- and middle-income earners indicates this will primarily impact high-income earners and savers. The taxes proposed in the budget support this estimate, and indicate the budget will lead to a 15.9% increase in the after-tax income of the bottom 20% of income earners. The model used by the foundation uses

    1. A tax simulator to produce conventional revenue and distributional estimates, 
    2. A neoclassical production function to estimate capital stock and people’s responses to policy and how it impacts long-run output, 
    3. And a demand function to estimate people’s choices between labor and leisure as well as their choices between saving and consumption. 

    All together, the three components produce revenue estimates of tax policy and estimates how policy can impact GDP, wages, employment, and other indicators of economic performance. Similar to the Tax Foundation’s General Equilibrium model, the University of Pennsylvania’s Penn Wharton Budget Model looks more at the long-run effects up to 2050. This model predicts that the budget plan will result in a 7.3% decrease of public debt from what it is today. Overall, however, it estimates a 1.1% fall in GDP between now and 2050. 

    The Economic Policy Institute Analysis

    The Economic Policy Institute (EPI) offers an alternative analysis, stating that Biden’s budget plan would have a host of positive effects if spending proposals not funded by increased taxes could be financed with debt. Their analysis indicates that the budget would result in an unemployment rate of 4.1% or lower over the 10 year period, reduced inequality through higher corporate taxes and better distribution of the benefits of economic growth, and a historically low public debt burden. This impact on equity is more difficult to measure and often is not easily translated into economic measures of success, which the EPI takes into consideration with their analysis. They further state that the Federal Reserve is not able to recover from recessions as quickly or efficiently as policymakers believe. A factor in this observation is the almost zero interest rate, which means it wouldn’t be sustainable to cut interest rates further, and subsequently indicating that fiscal policy can and should be a key contributor to economic recovery. Particularly given that this budget increases government spending and progressive taxes, it has the potential to be expansionary. The potential comes from its plan to make the budget deficit-increasing in the short term and deficit-decreasing in the long term. In addition, the budget entails a large growth in capital income taxes, which can reduce commuting time and increase quality of education when redistributed, ultimately making the economic growth more equitable. Finally, the EPI asserts that using the ratio of public debt to GDP is not an effective measure of fiscal burden because it is entirely retrospective and it divides a static stock measure—debt in a snapshot of time—by an income flow (meaning GDP) . It provides information about past budget deficits and does not take current policy into account. Using this retrospective measure as an indicator of budget success does not show the impact on equity.    

    Conclusion

    Biden’s many goals coupled with the expiration of the 2011 Budget Control Act have resulted in unique deviances from past budget plans, including an increase in NDD spending relative to defense spending. His budget plan has also begun to center equity and reparations through education, public health, and housing assistance. However, the increase in funding required to further these goals have been called unsustainable by some and necessary by others.

  • Jia Williams, University of Virginia

    Jia Williams, University of Virginia

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    Jia (she/her) is a third-year student at the University of Virginia from Annandale, Virginia. She is currently double majoring in Public Policy and Economics and minoring in data analytics. Through her research at ACE, she hopes to learn more about the influence of economics on policy initiatives in various policy areas. She also has special interests in environmental and housing policy. On Grounds, she is involved in the Sustainability Advocates Program and is a writer for The Cavalier Daily, the student newspaper. In her free time, Jia enjoys reading, hiking, and cooking for her friends and family.