The Cost of Bidenomics: A new study on Biden’s tax, health-care, energy and regulation proposals predicts $6,500 less in median household income by 2030.

Wall Street Journal ^ | October 18, 2020 | WSJ Editorial Board

[karpov]

Joe Biden has shrewdly kept the campaign focus on Covid-19 and President Trump, which has helped him avoid having to talk much about his own policies. That’s especially true of his economic proposals, which a new study out Sunday from the Hoover Institution shows will have a damaging impact on growth, job creation and household income.

Mr. Biden often cites Moody’s, the credit-rating service, for saying his economic plan will yield faster growth and more jobs. “Wall Street,” he likes to say when he mentions Moody’s, as if that’s a conservative stamp of approval, even as he claims Mr. Trump is a captive of Wall Street.

But everyone knows most economists at today’s big financial institutions have a Keynesian bias that posits consumer demand and government spending as the main drivers of growth. That’s certainly true at Moody’s, whose chief economist is Mark Zandi, who in our view underestimates the impact of higher tax rates and regulation in his economic calculations. This isn’t a personal criticism, but a factual statement about his economic model.

We are also not predicting a “depression,” as Mr. Trump does, if Mr. Biden wins the election. On dire economic predictions, Mr. Trump is the mirror image of Paul Krugman on the left. The data show that the U.S. economy is recovering from the pandemic shutdowns faster than most economists predicted. Democrats may attempt to portray the economy as a disaster that requires trillions of dollars in new spending, but Mr. Biden would inherit an economy with strong growth momentum.

[karpov]

Full article. The study is An Analysis of Vice President Biden’s Economic Agenda: The Long Run Impacts of Its Regulation, Taxes, and Spending, which starts as follows:

We estimate possible effects of Joe Biden’s tax and regulatory agenda. We find that transportation and electricity will require more inputs to produce the same outputs due to ambitious plans to further cut the nation’s carbon emissions, resulting in one or two percent less total factor productivity nationally. Second, we find that proposed changes to regulation as well as to the ACA increase labor wedges. Third, Biden’s agenda increases average marginal tax rates on capital income. Assuming that the supply of capital is elastic in the long run to its after-tax return and that the substitution effect of wages on labor supply is nontrivial, we conclude that, in the long run, Biden’s full agenda reduces fulltime equivalent employment per person by about 3 percent, the capital stock per person by about 15 percent, real GDP per capita by more than 8 percent, and real consumption per household by about 7 percent.