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Can Biden Build Back Better? Yes, If He Abandons Fiscal "Pay Fors"

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  • Yeva Nersisyan
  • L. Randall Wray

Abstract

President Biden's proposals for investing in social and physical infrastructure signal a return to a budget-neutral policymaking framework that has largely been set aside since the outbreak of the COVID-19 crisis. According Yeva Nersisyan and L. Randall Wray, this focus on ensuring revenues keep pace with spending increases can undermine the goals internal to both the public investment and tax components of the administration’s plans: the "pay for" approach limits our spending on progressive policy to what we can raise through taxes, and we will only tax the amount we need to spend. Nersisyan and Wray propose an alternative approach to budgeting for large-scale public expenditure programs. In their view, policymakers should evaluate spending and tax proposals on their own terms, according to the goals each is intended to meet. If the purpose of taxing corporations and wealthy individuals is to reduce inequality, then the tax changes should be formulated to accomplish that--not to "raise funds" to finance proposed spending. And while it is possible that general tax hikes might be needed to prevent public investment programs from fueling inflation, they argue that the kinds of taxes proposed by the administration would do little to relieve inflationary pressures should they arise. Under current economic circumstances, however, the president's proposed infrastructure spending should not require budgetary offsets or other measures to control inflation in their estimation.

Suggested Citation

  • Yeva Nersisyan & L. Randall Wray, 2021. "Can Biden Build Back Better? Yes, If He Abandons Fiscal "Pay Fors"," Economics Public Policy Brief Archive ppb_155, Levy Economics Institute.
  • Handle: RePEc:lev:levppb:ppb_155
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    References listed on IDEAS

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    1. L. Randall Wray, 2024. "Modern Money Theory," Springer Books, Springer, edition 3, number 978-3-031-47884-0, June.
    2. Yeva Nersisyan & L. Randall Wray, 2021. "Can we afford the Green New Deal?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 44(1), pages 68-88, January.
    3. L. Randall Wray & Mathew Forstater (ed.), 2006. "Money, Financial Instability and Stabilization Policy," Books, Edward Elgar Publishing, number 3902.
    4. L. R. Wray, 1990. "Money and Credit in Capitalist Economies," Books, Edward Elgar Publishing, number 474.
    5. L. Randall Wray, 2024. "Policy for Full Employment and Price Stability," Springer Books, in: Modern Money Theory, edition 3, chapter 0, pages 243-273, Springer.
    6. Edward Lane & L. Randall Wray, 2020. "Is It Time to Eliminate Federal Corporate Income Taxes?," Economics Working Paper Archive wp_979, Levy Economics Institute.
    7. L. Randall Wray, 2016. "Why Minsky Matters: An Introduction to the Work of a Maverick Economist," Economics Books, Princeton University Press, edition 1, number 10575.
    8. L. Randall Wray, 1998. "Understanding Modern Money," Books, Edward Elgar Publishing, number 1668.
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    Cited by:

    1. Qin, Meng & Su, Yun Hsuan & Zhao, Zhengtang & Mirza, Nawazish, 2023. "The politics of climate: Does factionalism impede U.S. carbon neutrality?," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 954-966.

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