America's Talking - Episode 15: Report suggests new spending plan would shrink the economy

Episode Date: September 17, 2021

House Democrats have unveiled a litany of new tax proposals to fund President Joe Biden’s $3.5 trillion federal spending bill, but a new report suggests the spending plan would shrink the economy. The University of Pennsylvania’s business school, Penn Wharton, released a new budget model based on the Democrats’ plan that projects a major decrease in Gross Domestic Product (GDP) in the coming years if the plan were to pass. Support this podcast: https://podcasters.spotify.com/pod/show/america-in-focus/support Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to America in Focus, powered by thecenter square.com. I'm John Spittaro, and this is the 37th week of 2021. Coming up, we'll take a quick look at one of the top stories from the center square.com, and later, executive editor of the center square, Dan McAulib, and DC reporter Casey Harper, will take a deeper dive into some of the top stories of the week, including a new study on the economic impact of a new $3.5 trillion spending bill, push back on a proposed tax increase on tobacco products, and push for vaccine mandates for NFL fans. Coming up right after this on America and Focus, powered by thecentersquare.com. Hi, this is Chris Krug, publisher of the Center Square.

Our team produces the nationally read and recognized news stories at thecentersquare.com, the country's fastest growing, nonprofit, nonpartisan, state-focused news and information site. We deliver essential information with a taxpayer's sensibility through reporting that's easy to understand and easy to share with your friends and family. We know that you need information that allows you to understand what the governor and your local legislators are doing. Get the news that you need to know at thecentersquare.com. That's thecenter square.com. Thecenter square.com. back. Here are the top stories of the past week on the center square.com. A Republican congressman

who voted to impeach President Donald Trump has announced he will not seek re-election in 2022. U.S. rep Anthony Gonzalez cited his family and the, quote, toxic dynamics inside the Republican party as the reasons to why he would not run again. Gonzalez was critical of former President Trump after the Capitol riot on January 6th, saying the president abandoned his duties and how helped organize and inflamed the group that attacked the Capitol. The Ohio Republican Party censored Gonzalez in May for voting to impeach and also passed a resolution asking him to resign. Gonzalez was facing a primary from Max Miller, a former White House and Trump campaign aide who was also endorsed by President Trump. To read more about these stories and many others, visit

thecenter square.com. Now for a closer look, over to Dan McAulb and Casey Harper. Thank you, John, and welcome to America in Focus, powered by the Center Square. I'm Dan McAulb, executive editor of the Center Square Newswire Service. Joining me today, as he does every week is Casey Harper, the Center Square's Washington, D.C. Bureau Chief. Casey, how are things? Things are good, Dan. Thanks for having me every week. It's a lot of fun.

Week in and week out for the rest of time. How about that? Wow, the rest of time. That's a long time. Good stuff. All right. Let's go. Anyway, we've got a few things to talk about this week. Casey, we're recording this on the morning of Friday, September 17th.

Not a surprise, but lots happening in the nation's capital. We've talked on this podcast before about President Joe Biden's $3.5 trillion spending proposal, a proposal that Republicans oppose. Well, there was a study released this week that analyzed what approval of that plan would mean for the overall economy? What can you tell us about that? Sure, this study came as the study you referenced came at the University of Pennsylvania's Penn Wharton Business School and really it just projects a pretty significant decrease in GDP, gross domestic product, which is a favorite economic measure of the size of the economy. It's actually pretty

difficult to really get a handle on how big the economy is, but GDP is one of our best measures. And so this new measure that or this new, you know, I guess report that was released projects as much as almost 5% decrease in GDP by 2050. Now, it varies depending on which, you know, they kind of leave some wiggle room for if there's certain spending cuts. It could be this much. But one of their higher estimates is 4.8%. Wow. Which is very significant. It may not, it may sound like a small percentage. When you're talking about economic growth, you know, a decrease in GDP is a big deal because the GDP is expected to grow every year at a certain rate. And so when you start talking about shrinking GDP, that, you know, that has real consequences.

It means a decrease in, you know, federal revenue. It means the stock market taking a hit people's 401Ks. It means all the unfunded liabilities, the debt that the federal government has, you know, are we going to be able to pay those? And really it means are we going to create enough jobs to keep pace with all the new people because the population increases, obviously. And so the economy has to grow just to provide new jobs for the people turning 18 or entering the workforce every year. And so there's a lot of different ways to look at this. But this, you know, Penn Wharton is by no means some, you know, conservative Republican project that's just throwing things out there. It's a pretty, very credible study. So people are paying attention. So the danger then is, if you take this

this study at its word, which there's no reason not to. The danger is if Democrats in Congress and both the House and the Senate are able to get this package through, which includes the $3.5 trillion in new spending, but it also includes a series of tax hikes, which we're going to talk about some of those here in a minute. If Congress gets those through, President Biden has said he supports the plan, so he would sign it into law that over the decade, the America's economy would actually shrink GDP or some big words and whatnot, but essentially that means the America's economy would shrink.

Yeah, this plan would, yeah, would shrink the economy. And that's, you know, it's interesting for, I mean, many reasons, some of which are already been laid out. But, you know, federal, there's this meme or this school of thought, you know, people call it Keynesian economics, that federal spending by default always grows the economy. It's like kind of this broken windows philosophy. You can go break a window.

And if you pay somebody to fix it, you've actually grown the economy because somebody has a job now. There's more money in the economy. The window gets fixed after all. And so as long as you're just injecting money into the system, it actually helps it go. You know, people were encouraged to spend their stimulus checks. You remember to stimulate the economy, right? That the federal money would actually get out into the hands of people. You may even remember a while back George W. Bush,

encouraging people to spend as their patriotic duty. And so there's this idea that the more cash that you inject into the economy, the more it will grow. But the downside of this is that there's debt. But it's just, you know, the idea that this plan could spend $3.5 trillion and have taxes around $2 trillion in revenue and shrink the economy is really interesting. And, you know, we can talk about some of the tax increases, but whether all those get through or not is a question.

And even whether this plan at all gets through or not is a question because Senator Joe Manchin, Kirsten Cinema, they're really putting that into doubt. So Biden's quite a fight. Yeah, Senate Democrats. Even some Senate Democrats are saying this plan is too expensive. So we'll see. We'll see what happens. And you referenced debt just a minute ago.

Of course, debt is, and you're also referenced the, the stimulus money, the stimulus checks to boost the economy. While that might boost the economy in the short term, American taxpayers are going to be on the hook for this debt. So longer term, that's money that's going to be taken out of Americans' pockets to pay down this debt. So it does kind of make sense as to why this study speculates that the economy would shrink if such a massive spending plan was put in place. Let's talk about the tax increases. We're going to talk about the tobacco tax here in a second. What are some of the other tax increases that are being pitched proposed in this massive spending plan? Sure. Just one thing I want to say before getting on the

taxes to your point is, you know, of debt taking money out of people's pockets is it is also directly tied to inflation, which is something we've talked a lot about on this podcast. But the way that the federal government deals with increasing debt is, you know, there's like technical terms for it. But they basically print more cash and then use the, that to pay debt. And so the ongoing, the inflation increase is directly tied to having to print money to pay the debt, to really simplify it. And so the inflation, which is really another tax on Americans, because everything you buy becomes slightly more expensive every year. And the recent data, which we've talked about and written about on the center square.com,

shows that inflation has significantly increased in the last year, last 12 months, much higher than previous years, even as this federal spending has taken off. But to the taxes in this plan, the plan would include a 25% tax on dividends and capital gains, right? What does that mean? What does that mean? Dumb that down for me? Sure. It has a lot to do with really when you sell investments that you have and how much money you get after you sell them. And so the 25% tax would apply to, this is kind of interesting here, because a lot of people say this is a marriage penalty. but if you're a single person making more than $400,000 a year, you'll end up having to pay this 25% tax on capital gains and dividends. But which fits Biden's pledge, you know, he made it, has famously repeated over and over that his taxes will not affect anyone making, you know, less than $400,000 a year, right?

But for married couples, if you're making $450,000 a year, you'll have to pay this tax, which, is actually a lot of critics are saying this violates Biden's pledge because there's two people in this marriage, right? And so in some scenario where either one person's making $450 and the other's making zero or maybe they're splitting it $2.25 each, you know, a husband and wife both making $225,000 each are paying this tax and they're not making $400,000. Now, some people don't have much sympathy for them. But, you know, there is a lot of... a little bit of the hypocrisy argument here. And also, you know, different, making $225,000 a year in New York City doesn't go nearly as far as in other places in the country. So sometimes salaries

are a lot higher because the cost of living is just so much higher in those areas. I mean, to buy a, you know, a home in Washington, D.C. where I am, you're not, you're going to be spending, you know, a million dollars. And where I grew up in East Texas, that same home might be $150,000. Right. And you can throw a number of, I mean, a number of, I mean, a number of, locales into that equation. Los Angeles, San Francisco, Austin, Texas. Right. Right. And the other thing is these things add up. So it's like, oh, one, 25 percent tax, but you start adding up the other ones, which is, so basically the ways and means Democrats have said they want to raise the top income tax rate to 39.6%. It's currently 37%. And so that would, and that would affect the same thing. So if you're, you know, a married couple,

And let's say, you know, the wife makes $350,000 and the husband makes $100,000. This husband who makes $100,000 is going to be paying, you know, 25% tax on dividends. He's going to be paying a 39% tax rate on his household income. So, you know, it adds up. It does add up. And yeah, I understand why some people may not have some people, but these little, you know, you pass a few percentages here and there. And a lot of the times these people in these higher income brackets are the ones who are employers.

And so one of the first places they look to cut their cost is in hiring. And so it does have this trickle-down effect. Well, let's talk about this criticism of President Biden, when he's been both on the campaign trail, since he's been president. He said his tax increase proposals are only going to affect the wealthy. Well, another one of the tax proposals in this plan has to do with increasing taxes on tobacco and vaping products. about that. Yeah, and this plays into our argument of things adding up.

You know, it's, you don't have to pay $400,000. You won't have to pay taxes unless you make more than $400,000. Oh, well, unless you're married and unless you consume tobacco products and, you know, things start that up. So basically one of the many taxes proposed to help fund at least part of the $3.5 trillion bill has been a tax hike on nicotine and tobacco products like cigars, cigarettes, pipe tobacco, vapes, those kind of things. And so, you know, it's estimated this could raise nearly $100 billion.

You know, those kind of tax estimates are very, you have to really stress estimate because in my experience, you know, the taxes often don't end up really hitting the estimates because people change behavior, you know, and different things like that. But that would, like you said, there's the vast majority of people who consume tobacco products make less than $400,000 a year. And so a lot of critics are saying, here's another example. Where does this stop?

Also, anyone who works in the tobacco industry, whether you're in sales or in manufacturing, your employers now have a lot more taxes to pay. And does that mean you don't get a raise? Does that mean you might lose your job? These are the kind of things that people in that industry are going to have to be thinking about now. Right.

Tobacco users, they could be folks making minimum wage. They could be people making, you know, 30,000, 40,000, you name the thing. So this absolutely would affect lower and middle income individuals and families. Yeah. And, of course, the more taxes you pay on something like that, the less discretionary dollars you have in your pocket that you can spend on other things to stimulate the economy. Right. And all to fund a bill that, you know, as according to the report. port is going to shrink the economy. So the taxes have a big part in shrinking the economy,

obviously, but if those funds aren't spent efficiently, then which the government kind of, in some ways, is incapable of, but there's a sliding scale of how well they can do that. And if so the money isn't spent well, then it's even more of a drag it economy because you can almost be just throwing it away. All right. Casey, new unemployment data released this week shows actually week over week unemployment claims, new unemployment claims rising. I thought we were getting out of this pandemic-driven recession. Yeah, I mean, I think a lot of people thought that. People have been hoping that for months now, as I've been covering this issue. But like you said, for the week ending September 11th,

first time filers of unemployment increased to $332,000, which is an increase of $3,000. 20,000 in just one week. A lot of people had gotten hope from recent, you know, weeks where I had gone down. Some of the highest unemployment rates are in places like California and New Jersey, where I am in the District of Columbia, Illinois, where we have a big presence, Illinois podcast on your. That's where I, yeah, in New York and Rhode Island. I don't know if you notice any trends in those things, places I just listed.

That's new with blue? It might be. They're feeling pretty blue there. I think it's because their unemployment rates are definitely were the highest rates for the week in the August. But anyway, this all plays into this bigger debate that we've been talking about for a few weeks here on the podcast. And it's do federal unemployment benefits help or hurt Americans in the economy?

So in response to COVID, this is a refresher. In response to the pandemic, you know, there was a lot of compassion for people who lost their jobs because of the shutdown, you know, the lockdown. things were locked down you literally could not go to work and so congress uh passed these weekly three hundred dollars a week federal unemployment benefits which is really double like you know there's a average of 300 dollars a week that the states will give you if you varies from state to state but roughly average right right right and so i have to say basically unemployment benefits nationwide were doubled um and so someone's getting 300 they start getting an extra 300 a week you know that's

6, 12, 18, 2,400 a month, which is, you know, a lot of money. And depending on where you live, you might be able to live off that alone. But the question has been, are the benefits so generous that people are not going back to work? Now, the economy is reopened. There's, you know, over 10 million available jobs, actually nearly 11 million open jobs in the United States, according to recent data. And yet unemployment is remaining. ranked high and the latest reporting showed that it increased. So we have, you know, we have almost very, very high number of job openings compared relatively. And we have increasing unemployment.

Right. Right. The problem is and people are trying to figure it out. A lot of Republicans, actually more than two dozen Republican governors have said it's because of these federal unemployment benefits. People have felt they don't have to go to work. There's actually a morning consult poll that was taken a few months ago that found this at 1.8 million Americans reported they had actually turned down job opportunities because they would rather receive unemployment benefits. So, you know, that's actually a really important piece of data that's backed up what Republicans are arguing. Those federal supplemental benefits now, they did expire earlier this month just a couple of weeks ago. Yes. So Republicans who have been railing against them saying they

are disincentivizing people to go back to work, they're hoping that with the expiration of those federal, that extra $300 a week that Americans out of work had been getting, will incentivize people to go back to work and these unemployment numbers should come down. It certainly would take a little bit of time to see if that actually occurs. But there's also now pressure in commerce, particularly from a prominent Democrat who wants to re-extend those federal supplemental unemployment benefits. That's right. Alexandria Ocasio-Cortez, the DOC, aOC, Democrat from New York, has basically announced this week that she has introduced legislation to retroactively extend those benefits through basically February 1st of next year. So if that passed,

people would get their back benefits and it would reinstate the $300 weekly benefits. There hasn't been much push from Biden nor really many other Democrats for this to happen. They've just kind of let that expire without much of a fight. But she's probably going to make this a big issue. Obviously, a lot of people want the benefits back when it's kind of human nature. So I'm sure she'll get some support and people rallying around this. But you're right that it would probably take a few weeks to really see the effect now that these benefits have expired. one thing to keep in mind, though, is that Biden has also enacted the monthly child tax credit.

So I think this could kind of muddy the waters on this because basically, you know, the thing that's happening basically through like July to the end of this year is the monthly child tax credit. So Biden increased how much money you get per child, you know, as a tax refund, and he made it where you automatically receive that monthly unless you opt out of it. of it. And so it's roughly, you know, $250, $300 a kid depending on their age. So if you have, you know, four kids, and you also are getting state unemployment and you are getting federal unemployment. So you have four kids, that's going to be $1,200 a month plus, you know, the $2,400 we laid out. So, you know, that's $3,600. So you are getting $3,600 a month, and all of a sudden

federal unemployment benefits expire. So you just lost. lost $1,200, but you still got, you know, more than $2,000 a month coming in because of the child tax credit. And so it'll be really, I don't think it's going to be quite so cut and dry because to say, like, oh, the benefits expired and then people started to go back to work because there have been other federal benefits that are giving people even more money for kids and different things that are going to kind of maybe make it possible for them to still not go back to work, if that makes sense. Interesting. Yeah, with free money, it's hard to hard to give up that free money. Of course, we both know that I'm kind of kidding. It's taxpayer dollars,

and there's a cost to that. But we have time for one more story here, Casey, as we've talked about the last couple weeks, President Biden's national vaccine, COVID-19 vaccine mandate that affects about 100 million people nationwide. A new survey came out, new polling came out this week that says Americans aren't, most Americans don't support it. Tell us more. Yeah. So basically several, almost 30, I believe governors have said they're going to stand up to the vaccine mandate that Joe Biden announced.

And so, you know, there's already been some legal challenges to that mandate. And a poll polling from Convention of States Action released this week showed that 58.6% of those survey do not believe that Biden has the constitutional authority. basically to force these private businesses to require vaccine mandates for employees. And so they also show that 29% of voters, see that Biden does have it, 11.7% are unsure. So less than a third of Americans really think Biden has the constitutional authority to do what he did. And so that's this is a really important stat because this is going to be an ongoing issue. It's definitely going to face these legal challenges.

It could very possibly go to the Supreme Court. It's really, you know, interesting because it is in some ways you could argue it's a public health emergency. And so the executive has broader authority. But this Supreme Court, you know, was not friendly to Biden's eviction moratorium, though that is kind of a different issue. So it'll be really interesting to see, especially if this goes to Supreme Court. But at least for now, Americans don't think the president has the constitutional authority to do it. And just as a matter of fact, just yesterday, Thursday, September 16th, the attorney general's, attorneys general, excuse me, from 24 states, co-signed a letter to the Biden administration, explicitly saying they are going to legally challenge his vaccine mandate that he does not have the

constitutional authority to put it into place via executive order. So we'll see how that plays out too. In a case, you an NFL fan? I am, I am. You have a team? Oh, Dallas Cowboys all the way, of course. It's just one more great character trait I have than one of the record. All right.

Well, these vaccine mandates actually are hitting NFL fans. If you go to the stadium, if you go to an NFL football game on Sunday, you might be impacted by that vaccine mandate. What can you tell us? Yeah, there's been several teams now that are announcing that you have to have proof of vaccination to attend games in their stadium. So, you know, the Buffalo Bills, which of course is in New York, a New York NFL team announced that basically when you came to game, you have the show proof that you received a vaccine. This is interesting because in President Biden's

announcement of the vaccine mandate, he actually had a lot of other parts. It was a very wide-ranging plan. And part of what he did was call on public venues, sports venues. any places of entertainment to require vaccination to attend. And so now I think, you know, we're up to four or five NFL teams that have said they're going to do this. The bills are the most recent one. Los Vegas Raiders. Los Vegas Raiders, New Orleans Saints and Seattle Seahawks or the other, which means

probably more are coming. I don't know that for sure, but it's likely as more and more teams do this that it's just going to have a contagious effect. Yeah, I think you're right. Contagious, no pun intended. But it's a slow creep on with the vaccine. And I think that's what Biden had in mind. If it becomes normalized, you kind of hit a tipping point where pretty much everyone or more than half of places are requiring it, it becomes kind of a norm.

And then you get this inertia and the mandate he's hoping I think will continue to spread. Right. Well, that's about all the time we have this week, Casey. Thank you, as always, for joining us on the America In Focus podcast. We'll talk to you again next week.