The Fiscal Recovery Act of 2023: Macro Impacts, Micro Evidence

CBO score:

Note that the reduction in the deficit in the table only begins in FY2024. The reduction is about 0.25 percentage point of GDP in fiscal year 2024 and about 0.37 percentage point in fiscal year 2025.

macro impact? Compared to a deadlock without a debt crisis, from Bloomberg:

Mark Zandi, chief economist at Moody’s Analytics, said that peaking later next year, real GDP will fall by 0.15%, with 150,000 job losses and an unemployment rate that will increase by about 0.1 percentage point. “Given the uncomfortably high recession risks, this is undesirable, but manageable,” he said.

How does the plan affect fiscal stimulus? Fiscal policy will be a drag (even if neutral in 1Q23) until a deal is reached. With little change in spending through fiscal 2024, this trajectory remains largely unchanged.

source: Brookings Hutchins Centeraccessed May 31, 2023.

micro. Why didn’t job requirements have a bigger impact (and actually why did spending increase)? CBO explained.

Work requirements
Part C of the bill would amend the job requirements for SNAP and TANF. The CBO estimates that the rules would increase federal spending by about $2.1 billion between 2023 and 2033, including a $2.1 billion increase in SNAP and a $5 million decrease in TANF. These estimates are based on a 2022 CBO report that examined the impact of work requirements on enrollment and earnings of means-tested program participants. 7

Supplemental Nutrition Assistance Program. Under current law, to receive SNAP benefits for more than 3 months within a 36-month period, able-bodied adults under the age of 50 who do not live with any dependent children must work or participate in a training program for at least 80 hours per month . States may waive the SNAP work requirement for people who live in areas where there are not enough jobs and, at the state’s discretion, may use a limited number of monthly waivers for people who would otherwise be subject to the requirement. Under current law, states can renew any unused discretionary exemptions indefinitely.

HR 3746 will introduce several changes to job requirements. The requirement will expand first (in FY 2024) to able-bodied adults ages 50 to 52 not living with dependent children, and then (in FY 2025 and beyond) to able-bodied adults under age 54 without children living with Dependent children live together. Several new groups will be exempt from the work requirement: the homeless, veterans and 18- to 24-year-olds placed in foster care at age 18. These changes will end on October 1, 2030.

The bill would also permanently reduce the number of monthly discretionary waivers states can use for those who would otherwise be subject to work requirements, and would prevent states from carrying forward unused waivers for more than one year.
The CBO estimates that all changes to SNAP job requirements will increase direct spending by $2.1 billion between 2023 and 2033. Between 2025 and 2030, when those under age 54 will be subject to work requirements and the new exclusions go into effect, an average of about 78,000 people per month will receive benefits, net (increasing approximately 0.2% of

The CBO estimates that these changes are the result of multiple offsetting effects. First, expanding the work requirement to adults under the age of 52 in 2024 and under the age of 54 in 2025-2030 itself would reduce SNAP spending by $6.5 billion over the 2023-2033 period. Second, by itself, excluding several groups would result in an increase in spending of $6.8 billion over the same period.

The CBO expects further increases in direct spending as the rules are enacted at the same time. The new exclusions apply not only to some beneficiaries under the age of 50 who would otherwise be subject to work requirements under the existing law, but also to some beneficiaries aged 50 to 54 who would otherwise be subject to the work requirement under the Act Constraints required by the job. As a result, the CBO estimates an additional $1.8 billion in direct spending. The CBO estimates that the changes to the discretionary waiver will result in negligible reductions in SNAP spending.
Temporary assistance for needy families. Under current law, to receive the full federal block grant from TANF, states must ensure that at least 50 percent of adult recipients in single-parent households and 90 percent of two-parent households are engaged in work-related activities. The percentages are lower for states that have reduced TANF caseloads since 2005 and for states that have spent more than needed state funds to support TANF recipient activities. The Department of Health and Human Services (HHS) may reduce state funding for non-compliance percentage requirements unless the agency determines that the state has approved reasons for non-compliance or that the state is following a corrective plan.

Title I of Part C sets the base year for caseload reductions at 2015 (rather than 2005) and would prevent people who received less than $35 in state assistance for a period determined by the HHS Secretary from being included in the state’s accounting. Work requirements. The CBO estimates that HHS will slightly reduce state funding because some states do not meet work requirements and do not comply with remedial plans, and HHS will not approve their reasons for non-compliance. The CBO estimates that the resulting reduction in the Block Grant will reduce direct spending by $5 million between 2023 and 2033.

Footnote 7 refers to this CBO Working Papers By Justin Falk.

Relative to debt default, we have avoided the unimaginable world recession.

chance of passing. Market betting as of yesterday.

source: Investment Networkaccessed May 31, 2023 at 1:20 pm Central.