NEW REPORT: Congress must go big on upcoming investments; Economists warn of costly long-term consequences for America’s future if Congress fails to act

April 8, 2021

NEW: Economists Adam Hersh and Mark Paul show that inadequate fiscal policy cost the economy at least $8 trillion over past decade – more than $32,000 in lost income per adult

Paper calls American Jobs Plan “a step in the right direction,” cites economists’ calls for up to five times the spending in proposed bill – up to $10 trillion – to get economy on track 

Washington, DC Today, Groundwork Collaborative released a new report from Dr. Adam Hersh, Director of Washington Global Advisors, LLC and a Research Associate at the Political Economy Research Institute, University of Massachusetts Amherst, and Dr. Mark Paul, Assistant Professor of Economics and Environmental Studies at New College of Florida, highlighting the costs of underspending in the wake of previous recessions and the need for massive investments from Congress to bring the economy back to full employment and broad-based recovery and growth.

The new report argues that we can’t afford to repeat the mistakes of the Great Recession by cutting off government investments too early or aiming too low. The authors find that running the economy “too cold” after the Great Recession created at least an $8.2 trillion gap over the past decade that left millions of potential workers out of the labor force, prevented wage growth, and deterred investments that would boost long-run efficiency, productivity and prosperity. In short, the costs of inaction outweigh the risks of borrowing to take action — by trillions of dollars.

The report demonstrates how by running the economy “hot” with up to $10 trillion in additional investments, Congress can ensure recovery achieves broad-based job creation and boosts productivity to raise America’s long-term economic prospects. It also highlights how the Congressional Budget Office (CBO) consistently underestimated “potential output” and overestimated future interest rates, which exaggerated budgetary costs and led policymakers to hit the brakes on spending far too early in past recoveries.

Key excerpts from the paper (read the full paper here)

Findings from the “Room to Run” paper include: