By Hugo Erken, Philip Marey, Hidde Sevinga and Michiel van der Veen of Rabobank
- While both Trump and Biden want to boost economic growth and reduce unemployment, their approaches are radically different.
- Trump wants to grow the economy by reducing taxes and regulation, whereas Biden seeks to achieve this through increased government spending and investment
- In this report, we try to assess the impact of their policy plans on a range of macroeconomic variables, such as GDP, real income, public debt and trade
- A second term for President Trump would leave our baseline scenario for US GDP growth and the public debt largely unchanged. The upward effect on GDP growth from additional Trump tax cuts would be offset by the cuts in government spending aimed at stabilizing the public debt to GDP ratio
- The tax relief in the Trump administration’s plans results in a rapid pickup of real personal disposable income in the aftermath of the corona crisis from $43,350 per capita by the end of this year to roughly $47,000 in 2025, which is $1,000 more than in our baseline
- Unemployment and trade under Trump would roughly follow the same trajectory as in our baseline
- The Biden plan would boost GDP growth, but also the trajectory of public debt to GDP. In the long run, we expect the US economy to be larger by 3.8% to 4.6% due to the Biden plan tapping into the endogenous growth potential of the economy. However, we expect public debt to arrive at somewhere between 164% and 170% of GDP, which is much higher than the 147% in our baseline scenario
- As Biden imposes higher taxes, by 2025 we project real disposable personal income to barely touch $46,000 per capita, which is even slightly below our baseline. However, as the impact of tax policies start to peter out, we expect a rapid pickup in income after 2025, which is directly related to productivity-enhancing policies which prop up economic growth. Ultimately, we expect real income to be 2.2% to 3.3% higher
- US trade is expected to rise significantly under Biden. As US export do not rise in tandem, this will also result in a widening trade deficit in the long run
- In the short term, Biden’s policy packages push unemployment below levels in our baseline, as positive employment effects of additional government spending outweighs the negative impact of a higher minimum wage. However, mid- decade unemployment is expected to rise above the baseline, partly related to higher corporate taxes and a pickup in labor-saving technological change
Trump vs Biden: two different roads to growth
On 3 November, US citizens will head for the ballot boxes to cast their vote. The Republican and Democrat presidential candidates differ substantially as far as their economic policy plans are concerned. While both Trump and Biden want to boost economic growth and reduce unemployment, their approaches are radically different. Trump wants to grow the economy by reducing taxes and regulation, whereas Biden seeks to achieve this through increased government spending and investment. In this special report we try to assess the impact of their policy plans on a range of macroeconomic variables. How much GDP growth can be generated through their plans and how will this affect the unemployment rate? And what do their plans mean for the public debt to GDP ratio and real disposable income?
Trump’s road to growth has been visible in his first term: large tax cuts and deregulation. In his second term he wants to preserve these tax cuts and go even further. In contrast, Biden wants to raise taxes for corporations and high-income households. This should (partially) pay for increased government investment in clean energy and infrastructure and spending on education, healthcare, childcare and social security. Redistribution of income is clearly a Democratic objective. Meanwhile, the Republicans put a stronger emphasis on fiscal prudence and intend to cut government spending.
Before we kick off with a more detailed discussion of the policy plans, we need to raise an important disclaimer. Given the dynamics in US politics, especially during the campaigning period, there is a chance that we missed certain policy promises in the overviews of either of the presidential candidates; equally we might have included plans that will ultimately end up on the shelf. This is more or less unavoidable, but we do believe that the overviews provide a solid basis of the policy course that each candidate might adopt after the elections.
Many news outlets and economic policy bureaus have already made overviews of the plans of both presidential candidates (e.g. FT, WSJ). Impact studies on the costs of these plans have been published recently, for instance by the Committee for a Responsible Federal Budget (CRFB). Most studies are partial in nature, assessing one specific aspect of the policies, such as the impact on public debt metrics. In this Special we aim to provide an overview of the broader economic ramifications of both policy directions. It is important to stress, however, that it is not a study to assess which candidate has the best policy agenda. We especially want to illustrate the trade-offs between different policy directions. The American people can ultimately decide which direction best fits their preferences.
The Trump team has not released a clear-cut detailed overview containing their policy plans. Instead, it published a list of bullet points on what President Trump’s agenda would be in a second term, as well as a Platinum Plan. As the plans in both documents are not very concrete, we have to rely on the Budget for Fiscal 2021 and previous statements to derive a policy agenda that Donald Trump might roll out if he emerges victorious on 3 November. Table 1 and Appendix A provide an overview of the most important plans that we came across. As we lack details of certain policy plans, for instance, the length of a middle-income tax cut, we adopt a range to assess the costs and economic impact of the entire package. In short: we expect Trump’s tax plans to result in revenue losses through 2030 of between $2,901bn and $4,074bn, whereas the cutbacks in spending would end up ranging between $1,371bn and $3,215bn.
Biden’s policy plans
In contrast to Trump, Biden has released a detailed overview on his website of how his agenda is shaped if he becomes the 46th president of the US. Nevertheless, the campaign website appears to be a maze of information which often overlaps. We also rely for a large part on analyses done by the Tax Policy Center, CRFB, Tax foundation and Penn Wharton Budget Model. Table 2 and Appendix B provide an overview of the most important plans we came across. In short: we expect Biden’s tax plans to result in revenue gains of $3,500bn through 2030, whereas spending is expected to rise between $1,371bn and $3,215bn.
Impact of policy packages on the economy
We use a macro-econometric general equilibrium model NiGEM and a productivity side model to assess the economic impact of the policy plans of both candidates. For more information on the modelling approach, see Appendix E. In this section, we discuss the impact on public debt, economic growth, private consumption, real disposable income, and the labor market.
Public debt has risen substantially as a result of the corona crisis. Carmen Reinhart, World Bank Chief Economist, recently said in an interview on Bloomberg that the COVID-19 crisis is a war and that governments finance their war expenditure however they can. Indeed, the speed at which government debt metrics are deteriorating resembles the pickup we saw during WWII and the Global Financial Crisis in 2008/2009. Before the pandemic, public debt stood at 107% of GDP, but this has already risen to 136% in the second quarter of 2020.
The question is: what the impact of Biden’s and Trump’s policy plans will be on US debt metrics going forward. We find that debt would deteriorate much more under a Biden administration than under a second term with Trump as president (Figure 2). If Biden succeeds in realizing his campaign plans, debt would first end up below the baseline levels (due to a pickup of GDP related to higher government spending and higher government investment). However, in the longer term we expect debt to arrive somewhere between 164% and 170%, depending on the amount spent on education (i.e. $850bn versus $1,900bn). This is considerably higher than the debt ratio in our baseline scenario of 147%.
As expected, debt metrics under the Trump administration are expected to end up in a range around the baseline scenario. In the upper-bound range, we expect debt to end up at 155%. In this scenario, Trump would succeed in realizing all his preferred tax cuts, would have a middle-income tax cut in place for 10 years, would implement an infrastructure package of $2,000 (instead of $1,000) and would not succeed in reducing government spending on healthcare (by $844bn) via his vision on healthcare reform. In the lower-bound range, public debt to GDP would end up at 142%, which is even below the baseline scenario. Furthermore, debt metrics would be on a downward trajectory. Under this scenario, the middle-income tax cut would be in place for 5 years, Trump would choose the more conservative infrastructure package of $1,000 and would realise all his envisioned spending cuts.
The US economy has taken a severe hit from the COVID-19 crisis, far worse than the global financial crisis in 2008/2009 (figure 3). Whoever wins the election in November will start his term dealing with a shackled economy. In our baseline scenario, we expect the US economy to take a second hit in Q4 2020, contracting by -0.25% (q/q). This will weigh on the recovery in 2021, which we currently have pencilled in at a meager 1.5%. Further down the road, in our baseline scenario we expect growth of 2.5% in 2022 and 1.8% on average in subsequent years.
Figure 4 shows our economic growth expectations with the policy packages of Trump and Biden in place. Trump’s GDP trajectory is almost identical to our baseline (both in the high and low Trump scenario). This implies that the additional effect of the tax cuts and government spending cuts more or less cancel each other out. What does occur, though, is a significant shift in income from the public to the private sector.
Economic growth under a Biden administration is expected to be higher than our baseline scenario, as the impact of higher public spending is expected to exceed the impact of higher taxes for the high-income groups. So, higher growth is partly achieved at the expense of public debt metrics. Ultimately, we expect the US economy to be 3.8% to 4.6% bigger compared to our baseline scenario. Furthermore, we expect the economic growth differential against the baseline to widen from 2027 onwards, due to Biden’s aim to invest in productivity-enhancing factors, such as public R&D and education, which will bear fruit in the longer term.
Real disposable income and private consumption
As Trump and Biden adopt a completely opposite strategy as far as taxing is concerned, the impact on real disposable income also moves in opposite directions (Figure 5). The tax relief in the Trump administration’s plans results in a rapid pickup of real personal disposable income in the aftermath of the crisis from $43,350 per capita by the end of this year to roughly $47,000 in 2025, $1,000 more than in our baseline. As Biden imposes higher taxes, by 2025 we project personal income to barely touch $46,000 per capita, which is even below our baseline scenario. The effect of higher minimum wages does not offset the impact of higher taxes.
However, as the impact of tax policies starts to peter out, we see a rapid pickup in real personal disposable income after 2025 in the Biden scenario, which is directly related to productivity-enhancing policies which prop up economic growth. In the Trump scenario, growth of real personal income slows down after 2026 to roughly 0.1% annually. Ultimately, the policy packages of both Trump and Biden result in real disposable income being higher in 2030 vis-à-vis the baseline. In the case of Trump, this would lie in the range of 1.2%-2.5%, whereas in the case of Biden, we expect a range of 2.2% to 3.3%.
The tax policies of both candidates are also likely to result in a shift in the income distribution among different income groups. For instance, 45% of Trump’s middle-income tax cut would end up being absorbed by people earning more than $100,000 per annum, and 25% would end up with people earning more than $150,000. The distributional impact of the policy plans on household and personal income, however, is a subject that we do not discuss extensively in this report, and that should be examined in further detail separately.
Not surprisingly, private consumption in the Trump scenario ends up being higher than the baseline in the first few upcoming years (Figure 6), whereas Biden’s plans gain traction on private consumption only in the second half of this decade.
Due to COVID-19, unemployment spiked to unprecedented post-WWII levels of 14.7% in April 2020. Although we have seen a fast leveling off to 7.9% in Q3, we expect an uptick in Q4 related to the projected double-dip in economic growth in Q4 (figure 7).
In the short term, Biden’s policy packages push unemployment below our baseline levels . The positive employment effects of additional government spending outweigh the negative impact of a higher minimum wage. In the CBO’s median estimate, a rise of the minimum wage to $15 would result in 1.3 million workers becoming jobless. As positive spending effects start to peter out around mid-decade, unemployment stabilizes towards the equilibrium unemployment rate and is expected to pick up. This is partly related to higher corporate taxes and an increase in labor-saving technological change, which both come at the expense of structural employment. These latter effects are absent in the Trump scenario, which results in unemployment being equal to our baseline and even being pushed slightly below the baseline levels in the long term.
Trade under both policies will follow a different course as well. In our exercise, trade is only affected by domestic policies and disregards the impact of additional protectionist measures that might be installed by either candidate. For this exercise, we assume that there will not be a radical change in trade policy against the baseline scenario. Hence, we assume that both Biden and Trump will adopt a harsh stance against China and will not start a full-fledged trade war with the EU (see also final remarks).
Higher economic growth achieved under the Biden administration will also affect US imports positively (figure 9). We expect US import to be pushed up against the baseline by 6-7% in the medium to longer term. This is also in line with the more willing geopolitical approach that Biden wants to adopt: he strongly favors the multilateral route compared to Trump’s preferred bilateral stance.
As US export does not rise in tandem with the increase of US import under Biden, we also expect the US trade deficit to widen against our baseline scenario ultimately by $250bn in the long term (Figure 10). Under the Trump regime we expect the deficit to hover around the baseline. Keep in mind though that in this scenario we also expect a large deficit in absolute terms between -$850bn and -$900bn.
We should note that there is a limit to what can be calculated by the available economic models. We want to address three caveats. First, it is difficult to incorporate the impact of regulation. This means that we have not taken into account the positive impact on GDP growth from the deregulation in the Trump plan and the negative impact of increased regulation in the Biden plan. Second, we have not factored in a radical change in foreign trade policy in our scenarios, although the risk of trade tensions flaring up again is much higher under a Trump regime. We expect that both candidates will take a firm stance against China, but Biden will likely adopt a more cooperative approach towards the EU. When push comes to shove, however, we do not expect Trump to start an outright trade war against the EU either. Third, we have not factored in international knowledge spill-overs from US innovations in our scenario. The Biden scenario is especially prone to such a positive effect. In the past, US innovations, such as the laser, chemotherapy, smartphones and the internet, drastically changed lives across the globe and pushed up global productivity growth. We do not rule out that a similar scenario might unfold, as Biden’s plans aim to boost domestic innovation considerably. Technological change will also stimulate economic growth overseas, which could positively affect US export. From this perspective, we might be a bit too gloomy on the trade perspective in the Biden scenario.
All in all, a comparison between the two plans should take a margin of error into account. A robust result is that as much as the Biden policies would boost GDP growth, they would also raise the trajectory of public debt to GDP. Interestingly, Biden’s boost to economic growth does not primarily come from a demand impulse through government spending, but rather from tapping into the economy’s endogenous growth potential through government investment. Whether this is worth the increasing public debt is a choice for the voters
Appendix A: details on Trump’s policy plans
Bringing jobs back home
President Trump wants to cut back reliance on China and bring back jobs to US shores. Two measures aimed at achieving this are an unspecified ‘Made in America’ tax break and allowance of 100% expensing deductions for essential industries, such as the pharmaceutical and robotics industry. For the fiscal costs of both measures we use estimates by the CRFB. They assume costs of the ‘Made in America’ tax credit of $50bn based on “the cost of extending the foreign-derived intangible income (FDII) deduction at its current rate after 2025”. Details on the expensing deductions measure have not been revealed either, but the CRFB assumes it would encompass the extension of the current expenses policy and could cost $350bn in total until 2030. Under the current policy, full expensing of equipment, research and experimentation is allowed, which companies can amortize over five years from 2022 onwards.
Lower individual taxes
The Trump team has also hinted at lowering taxes, all of which would result in tax revenue losses for the government. First, there is a clear wish to extend the provisions of the Tax Cuts and Jobs Act, which are due to sunset in 2026. Although none of the campaign plans talks of a TCJA extension, the Budget for fiscal 2021 does factor-in the extension. Moreover, the Republicans see the TCJA as one of the Trump Administration’s biggest achievements in the first term, so it hard to imagine Trump would not want to continue this policy. The costs of an extension are estimated to be $1,370bn (Office of Management and Budget).
President Trump also aims to expand so-called opportunity zones. This initiative was launched under the Tax Cuts And Jobs Act and provides capital gains relief for investment in poor neighborhoods, i.e. opportunity zones. The CRFB assumes that the idea is to extend the deadline for repaying deferred capital gains from 2026 to 2030 and enable expansions which would cost$50bn over ten years.
In light of the COVID-19 crisis, the White House published a memorandum to call for forgiveness of payroll taxes between 1 September and 31 December. The Penn Wharton Budget Model (PWBM) estimates the forgiveness to cost $122bn.
Finally, the Budget for fiscal 2021 mentions a number of fiscal revenue bolstering measures, such as closing the tax gap, the requirement of a social security number for tax credits and the sale of government assets. As many of these plans are rather vague, we only factor-in revenue gains of the social security obligation in the upper bound calculations, whereas all gains are taken into account in the lower bound estimate.
Apart from statements on higher infrastructural investment, Trump has not been concrete on raising government spending. Although the campaign text speaks of establishing a permanent manned presence on the moon, sending people to Mars and building a missile defense system, these plans are not backed by any hard figures. Therefore, we have to rely to a large extent on plans and hard figures in the Budget for fiscal 2021.
In the Budget for fiscal 2021, the government has booked a reduction of government spending on healthcare by a staggering $1,600bn. These spending cuts are partly backed by concrete plans, such as the Senate Finance Committee’s prescription drugs bill, but more than half of the cost reduction is booked in the Budget under the “President’s health reform vision allowance”. The CBO has refused to take these cuts into account due to their lacking specificity. We only take into account the full spending reduction in our lower bandwidth range, whereas we drop this post in our high-range estimate and only factor-in a reduction of healthcare costs of $769bn in total in 2030.
In order to cover the costs of the large tax cuts, the Trump administration might push ahead with reducing discretionary non-defense spending, which has been included in the Budget: for instance by applying Trump’s Two Penny Plan, where the idea is to shrink the cap on domestic spending. According to calculations by the CBO and OMB, this plan would reduce government spending by $1,180bn to $1,330bn in total through 2030. Moreover, the Budget proposes to freeze defense spending, which saves another $400bn in spending against the Budget baseline.
One of Trump’s campaign promises back in 2016 was to invest $1,000bn in infrastructure in ten years’ time, but his plans failed to pass Congress. In response to fighting the coronavirus, Trump has repeatedly raised the idea to launch a $2,000bn infrastructure plan. We assume that Trump would definitely try to push for a new infrastructure plan in a second term.
Other spending cuts
On education, the Trump Administration has repeatedly proposed to slash budgets. In the Budget for fiscal 2021, the Administration proposed to lower education spending by $125bn, for instance by eliminating subsidized student loans and eliminating the standard repayment cap. Other cuts in mandatory outlays include reduced farm subsidies and a reduction of the Supplemental Nutrition Assistance Program (SNAP). Taken together, we expect the Administration to cut spending of mandatory outlays by another $660bn.
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Appendix B: details on Biden’s policy plans
In order to finance their ambitious investment plans, the Biden team wants to increase taxes for high-income households and corporates. To assess the impact on the budget balance, we average the estimates of the Tax Policy Center and Tax Foundation.
Raise corporate taxes
Biden proposes to increase corporate taxes from the current 21% rate to 28% resulting in $1,300 billion revenue gains over the next ten years. Moreover, large corporations would pay a minimum tax of 15% on book income and a doubling of the minimum tax of 10.5% on profits of foreign subsidiaries of US firms. These two measures are expected to raise additional tax revenues for the government of $550bn through 2030.
Raise taxes for highest-income groups
The Biden team also aims to raise taxes for households earning $400,000 or more. First, he wants to raise the top tax rate from currently 37% to 39.6%. Second, he wants to treat dividends and capital gains as ordinary income for households earning more than $1 million. The gains would effectively be taxed at the new 39.6% tax rate instead of the current 20% rate. Third, the TCJA allows business owners to deduct 20% of Qualified Business Income. Biden wants to phase out these deductions completely for high-income earners. Fourth, taxpayers can currently choose between a standard deduction or itemized deductions. Deductions that can be itemized are for instance interest rate costs on mortgages, charity donations, dental expenses, etc. Of all taxpayers, 90% choose the standard deduction, but more than 50% of the highest-income groups chooses to itemize (CRFB). Biden wants to cap the rate for itemized deductions to 28% and also wants to restore so-called Pease Limitations, which bring down the amount that people can deduct above a certain threshold. According to estimates by the Tax Foundation and Tax Policy Center, these measures taken together would generate roughly $1,200bn of additional government tax revenues.
Other tax measures
Social security is currently funded by a 12.4% payroll tax on incomes up to roughly $140,000. Biden wants to apply the payroll tax to people earning $400,000 or more, thereby generating substantial additional funds for the social security program of $885bn. Biden also floated the idea to introduce a risk fee for financial institutions with more than $50bn of assets. As the Biden campaign did not release any details about the fee, we do not take this measure into account.
Biden wants to introduce two measures that will result in fiscal costs. First, to support housing affordability, he wants to install a permanent tax credit (with a maximum of $15,000) for first-time homebuyers and a new tax credit for renters. Second, Biden wants to increase the tax credit for parents with children with disabilities in order to partially compensate for expenses. Estimates show that these two measures would cost $400bn.
Childcare and education
Biden is eager to make childcare more accessible and feasible to lower-income families through, among other proposals, forgiving the existing Child and Dependent Care Tax. Next, he wants to increase spending on education. In conjunction with several other smaller proposals, this investment includes more funding for public schools and setting lower-income families free from tuition for public colleges and universities. These plans are all aimed at encouraging equality of opportunities. As the Biden campaign website does not provide any concrete numbers regarding his education investment, we rely on CRFB and Wharton as our sources. Yet, they estimate the amount invested as respectively $850 billion and $1,900 billion. Given the fact that these figures differ widely, we have decided to include two scenarios for Biden’s education investment.
Biden’s healthcare plans contain several proposals to make healthcare more affordable. First, he wants to introduce public insurance options. Second, he wants to extend contemporary subsidies. Third, he wants to provide lower-income families with a premium-free coverage. Next to those plans, he also seeks to lower the overall healthcare costs for individuals. Biden seeks to achieve this through the withdrawal of the law which prohibits setting drugs prices directly. We expect the total costs of these plans to be around $750 billion as this is precisely in the middle of the estimations done by CRFB and Wharton.
Investment in clean energy and infrastructure
The Biden campaign website disclosed various investment plans regarding infrastructure, support for the US working class and taking up arms against global warming. Part of those plans is to invest in R&D and establish protected procurement and investments in housing facilities. However, there is a maze of information and it is not entirely clear to what degree the plans overlap.
The Biden Plan to invest in middle class competiveness includes a $1,000 investment package in infrastructure. The plan on his website speaks of $1,300bn, but also mentions that $300 is allocated towards housing. The program contains investments in roads, bridges, (school) buildings, etc. However, the main focus of the plans is on sustainability by investing in, for instance, a high-speed rail network and making the road network user-friendly for electric vehicles. Biden also aims to invest $1,700bn in sustainability via the Biden plan for a clean energy revolution and environment justice. The objective is to make the US a net zero-emission country by 2050. This will partly be achieved through the related goal of reducing the emissions of the electricity sector to zero by 2035. Biden seeks to obtain this by encouraging the installation of new solar panels and wind turbines. Additionally, a part of the plan is to invest in innovative technologies such as carbon capture and storage, advanced nuclear facilities, green hydrogen, and grid-scale batteries. This has to be done through new research funding and tax incentives. The Biden plan to ensure the future is “made in all of America” by all of America’s workers contains procurement investment of $400 billion and R&D investment of $300 billion. The investment in R&D is meant to induce “breakthrough” innovation with a strong focus on technology associated with energy provision. The procurement investment will encompass federal purchases from American-based manufacturers to support the domestic industries. Additionally, 25% has been awarded to small business and enterprises. Finally, the Biden plan for investing in our communities through housing is a $300 billion investment package in housing facilities. The latter includes several plans to extend access to affordable housing and the support of homeless people.
Minimum wage and social security
Biden wants to expand social security through a $290 billion investment over the next ten years, as estimated by Wharton. The expansion is especially aimed at low-income households. Furthermore, Biden aims to increase the minimum wage from $7.25 to $15. In Appendix D, we discuss the impact of this policy in more detail.
Appendix C: impact of middle-income tax cut
Although President Trump is light on detail regarding his plans for his second term, he has revealed through several channels that he wants to lower the marginal tax rate for individuals from 22% to 15%. In this appendix, we assess the potential impact of this measure on private consumption as well as lower tax revenues.
We assume that the middle-income tax cut is benefiting all taxpayers who fall within the 22% tax bracket. To clarify, this means that individuals with an income exceeding the $85,000 threshold of the 22% tax bracket (which is: $40,000-$85,000) will also receive the tax break on the proportion of the tax paid over the income that falls within the 22% bracket (which is $45,000). Figure A.1 displays the personal income distribution in the US.
For our calculation of the effects, we obtain data from the U.S. Census Population Survey regarding the number of individuals per personal income group as well as the average personal income. The calculation of the economic impact of the middle-income tax cut for three income brackets is illustrated in Table A.1.
First, we subtract $40,000 from the average income in the $40,000-$85,000 bracket to obtain the average personal earnings eligible for Trump’s middle-income tax cut. Next, we multiply the proportion of income by the number of individuals per income group to obtain the total income per bracket on which we apply the tax cut (which is equal to 7ppts: 22% - 15%). Applying the 7% tax cut gives us the tax relief per income bracket. To gauge the effects of the tax relief on the economy, it is essential to know which proportion of the higher income (due to the tax cut) will actually be spent. We know from the literature that lower-income groups have a higher marginal propensity to consume (MPC), which basically means that a larger proportion of every additional dollar of earnings is spent on goods and services. Carroll et al. (2017) have calculated the MPC for different income groups in the US.
According to our calculations, the cost of the tax relief amounts to $192bn annually.1 Assuming the tax cut is in place for 5 or 10 years, the total costs would range between $960bn (low scenario) and $1920bn (high scenario). These costs are more or less in line with calculations by the Tax Foundation, which found total costs of $770bn through 2025. Moreover, the tax relief results in higher private consumption of $38bn annually, which is equal to $190bn if the tax cut is installed for 5 years and twice that size if it is adopted for the whole decade.