Bipartisan infrastructure deal would decrease debt in long run: analysis

The bipartisan infrastructure deal President Biden announced last week would decrease government debt and increase gross domestic product (GDP) in the long run, according to an analysis released Wednesday by the Penn Wharton Budget Model (PWBM).

“It will take us a long time for the infrastructure to become productive, but it will provide a small but significant increase in output over the long term,” Jonathan Huntley, one of the authors of the analysis, told The Hill.

Biden and a bipartisan group of senators last week announced an agreement on an infrastructure framework that calls for $579 billion in new spending over five years, and a total of $1.2 trillion in spending over eight years. The spending would focus on areas such as roads and bridges, water infrastructure and broadband internet.

The new spending would be financed through means such as unspent coronavirus relief funds and increased tax enforcement.

The PWBM estimated that in the framework’s first decade, GDP would be about the same as under the current-law baseline and the debt would increase by 0.4 compared to the baseline. That’s because the new spending would outpace the revenue increases in the near-term.

But in 2050, the framework would increase GDP by 0.1 and decrease debt by 0.9 percent compared to the baseline. The authors of the report said that over time, the spending would decline while the strengthened IRS enforcement would continue, and the increase in GDP would generate additional revenue that would contribute to debt reduction.

The PWBM previously released analyses of the infrastructure and social spending plans that Biden unveiled earlier this year. The researchers estimated that Biden’s earlier infrastructure plan would reduce GDP as well as debt in the long run because that plan’s corporate tax increases would disincentivize investment. The PWBM estimated that Biden’s plan focused on helping families would increase government debt and decrease GDP.

In addition to seeking to pass legislation based on the bipartisan infrastructure framework, Biden and congressional Democrats are hoping to pass a Democratic-only package this year that includes many of the aspects of Biden’s two plans that aren’t in the bipartisan deal.