2018年-PIIE彼得森国际经济研究所_Effects_of_Low_Productivity_Growth_on_Fiscal_Sustainability_in_the_United_States_30页_617kb

Summary of "Effects of Low Productivity Growth on Fiscal Sustainability in the United States"

Core Content

This working paper by Louise Sheiner examines the long-term fiscal implications of a slowdown in productivity growth in the United States, focusing on federal and state and local government budgets. It highlights how slower productivity growth can impact government revenues, spending, and debt dynamics, with a particular emphasis on the federal budget.

Main Viewpoints

• Productivity Growth and Fiscal Sustainability: Productivity growth is a key determinant of living standards and GDP, and it has a direct impact on fiscal sustainability. A slowdown in productivity growth can lead to increased government deficits and higher debt-to-GDP ratios.

• Federal Budget Impact: A 0.6 percentage point slower growth in labor productivity than the CBO's baseline projection would lead to a worsening of primary deficits. This is because government revenues are more responsive to GDP growth than outlays, which are not fully indexed to productivity. The result is that federal debt could reach 146 to 173 percent of GDP by 2042, compared to the baseline estimate of 130 percent.

• Interest Rates and Productivity: The relationship between productivity growth and interest rates is complex. In economic models, interest rates tend to move with productivity growth. However, empirical evidence suggests that this relationship is not always strong or consistent. Sheiner analyzes three scenarios: interest rates move one for one with productivity, two for one, or are unchanged.

• State and Local Budget Impact: Productivity growth has a less significant effect on state and local budgets. Revenues are more closely tied to GDP, and spending is influenced by demographic factors and program eligibility. While a productivity slowdown may increase spending slightly, the effect is likely to be small.

Key Information

Productivity Trends

• Labor productivity growth in the U.S. fell from 2.2% annually between 1996 and 2004 to an average of 1.0% between 2004 and 2015.
• The CBO projects an average annual labor productivity growth of 1.6% over the next 25 years, which is lower than the high-productivity years of the late 1990s and early 2000s.
• A 0.6 percentage point slowdown in productivity growth is considered a reasonable downside risk for analysis.

Federal Revenues

• Individual Income Taxes: A slowdown in productivity growth reduces real bracket creep, leading to a decline in federal individual income tax revenues as a share of GDP. Under a low-productivity scenario, this share would be about 0.6 percentage points lower than the baseline after 30 years.
• Payroll Taxes: Payroll tax collections move close to one for one with wages and productivity. A decline in productivity growth reduces Social Security and Medicare tax revenues proportionally, as these taxes are based on wages and are subject to income caps.
• Tax Summary: Only individual income taxes are expected to decline as a share of GDP due to slower productivity growth. The effect is modest, averaging less than 0.25% of GDP over 25 years.

State and Local Revenues

• Sales Taxes: Sales taxes move one for one with consumption, which is closely tied to GDP and productivity. Therefore, sales tax revenues are likely to remain a constant share of GDP.
• Property Taxes: Property tax revenues are influenced by the ratio of property values to GDP. If interest rates decline more than productivity growth, the share of property taxes in GDP could increase. If interest rates remain stable, the share may decrease.
• Income Taxes: State income taxes are less progressive than federal taxes, and many states have low top tax brackets. As a result, real bracket creep has limited effects on state tax revenues.

Federal Noninterest Spending

• Discretionary Spending: CBO projects that discretionary spending will decline from 6.3% of GDP in 2017 to 5.4% in 2028 under the baseline. A productivity slowdown would increase this share slightly to 5.7% in 2028.
• Social Security: Social Security benefits are indexed to wages, not real productivity. A slowdown in productivity growth would lower the share of Social Security in GDP by about 0.3 percentage points over the next 25 years.
• Medicare: Medicare spending is closely tied to GDP growth. A slowdown in productivity growth would likely have a minimal effect on Medicare spending as a share of GDP, as it is assumed to grow in line with GDP.

Poverty and Means-Tested Programs

• Poverty Rate: The official poverty rate has remained flat since the late 1960s, despite GDP growth. This is because the poverty threshold is indexed to inflation, not GDP growth.
• Means-Tested Programs: Productivity growth can affect means-tested programs in two ways: by increasing the number of people eligible for assistance and by altering the value of benefits. However, the effects are likely to be small in the short to medium term.

Conclusion

The paper concludes that a slowdown in productivity growth will have a more pronounced effect on the federal budget than on state and local budgets. While federal deficits and debt will worsen, the impact on state and local finances is expected to be minimal. The analysis underscores the importance of understanding the relationship between productivity growth and interest rates, as well as the role of tax and spending structures in shaping fiscal outcomes.