President Joe Biden claimed last Wednesday that the last five leaders of the Federal Reserve had declared that his American Jobs Plan proposal will increase economic growth.
The American Jobs Plan, which you can read about here, would spend roughly $2 trillion on infrastructure projects and other initiatives. Biden has proposed to pay for the spending by increasing the statutory corporate tax rate from 21% to 28% and to make a variety of other tax changes, including a major increase in tax enforcement against corporations.
“And, by the way, you saw — you know, the — the last five leaders of the Fed coming out and saying — what’d they say? They said, ‘Biden’s plan is going to grow the economy,'” Biden said in his Wednesday speech at the White House.
Facts First: Biden’s claim is false. As a White House official acknowledged to CNN when we sought comment on Monday, Biden was inaccurately referring to an opinion article published in the Washington Post that day by five former leaders of the Internal Revenue Service, not five former leaders of the Federal Reserve; only three past chairs of the Federal Reserve are even alive. The former IRS commissioners did not say anything about how Biden’s plan would affect economic growth. Rather, they said Biden’s proposals — including a well-funded effort to crack down on the non-payment of taxes owed — would make the tax administration system “far fairer and more effective” and “produce a great deal of revenue by reducing the enormous gap between taxes legally owed and taxes actually paid.”
Even if this was an accidental mix-up by Biden, it was a substantial mix-up. A positive economic forecast from former tax chiefs is almost certainly less likely to sound impressive to the public than a positive economic forecast from people who ran the US central bank and are among the nation’s best-known economic figures. And, again, there was no economic forecast at all in the tax chiefs’ article.
The most recent past leader of the Fed, Janet Yellen, is now Biden’s Treasury Secretary. Her predecessor, Ben Bernanke, now a distinguished fellow at the Brookings Institution think tank, said in an email to CNN on Monday: “I have not made any public remarks on the infrastructure plan, so far as I can recall.” The other living past Fed chair, Alan Greenspan, has also not weighed in on the plan; he could not immediately be reached for comment on Monday.
An exaggeration on the pay gap between CEOs and workers
Biden claimed in a speech in Louisiana on Thursday that “it used to be that a corporate CEO got paid 36 times as much as the average employee in their corporation in the Fortune 500; now, it’s 456 times.” He made a similar claim at the White House the day prior, saying that the average CEO of Fortune 500 companies now makes “over 450 times” what the average employee makes.
Facts First: Biden’s “456 times” figure was wrong based on the most recent available data, as the White House official acknowledged to CNN on Monday — though he was broadly correct that the gap between CEO pay and worker pay has skyrocketed over time. The Economic Policy Institute, a progressive think tank, found that in 2019, CEOs of the 350 US companies with the largest sales earned 320 times more than the typical worker at those companies, not 456 times. Biden was in the ballpark on the situation in decades past; the same think tank found that there was a 21-to-1 ratio between CEO and worker pay in 1965 and about a 31-to-1 ratio in 1978.
As the White House official noted on Monday, Biden accurately cited the Economic Policy Institute figure in his late-April address to Congress, saying then: “According to one study, CEOs make 320 times what the average worker in their corporation makes. It used to be in the — below a hundred.”
A misleading jobs claim is back
On May 2, we pointed out that, after early-April fact checks from CNN and others, Biden’s team had stopped wrongly claiming or suggesting that economic firm Moody’s Analytics found that the American Jobs Plan proposal would create 19 million jobs.
Well, Biden made a version of the claim last week. In a slightly different form than the original, but that new form was misleading too — and Biden added an additional inaccuracy this time.
In his Thursday speech in Louisiana, Biden said, “All the economists, including the liberal as well as conservative think tanks, point out what we’ll create when we pass this Jobs Plan — we’ll create up to 16 million good-paying jobs.” And in the White House speech the day prior, Biden said, “You have Moody’s talking about increasing it up to — I don’t know what the most recent one is — 16 million new jobs.”
Facts First: Biden was wrong when he suggested in Louisiana that liberal and conservative economists and think tanks all agree that the American Jobs Plan will create up to 16 million jobs; there is no consensus of any kind on how many jobs the plan will create. And contrary to Biden’s suggestion at the White House, even Moody’s did not say the plan would create up to 16 million jobs. Rather, Moody’s estimated in May that the economy will create about 16.5 million jobs between the fourth quarter of 2020 and the fourth quarter of 2030 if the American Jobs Plan is not passed, or create about 19.2 million jobs if Biden’s plan is passed. In other words, Moody’s found that the passage of the American Jobs Plan would produce 2.7 million additional jobs, not up to 16 million.
In fairness, Biden didn’t explicitly say that the American Jobs Plan itself would create up to 16 million jobs; he said in Louisiana that “we’ll create” up to 16 million many jobs when the plan is passed. This is why we don’t call this version of the claim flatly false. But as in April, when Biden used a “19 million jobs” figure, the President’s artful language last week led listeners toward an inaccurate conclusion — Moody’s says passing the Biden plan means 16 million more jobs! — that is more favorable to him than the truth: Moody’s says passing the Biden plan means 2.7 million more jobs.
Biden was more careful in his address to Congress in April. He said in that speech that the plan will create “millions” of jobs.
Not a consensus
It is obviously not true that “all the economists, including the liberal as well as conservative think tanks,” have come to the same conclusion on the potential impact of the American Jobs Plan.
One example of the non-consensus: Michael Strain, director of economic policy studies at the American Enterprise Institute, a conservative think tank, told CNN on Monday that he thinks Biden’s plan will not produce a net result of any additional jobs
Strain said it’s good that Biden’s plan aims to make long-term infrastructure improvements over a period of years rather than trying to give the economy a quick jolt through immediate spending on so-called “shovel-ready” projects. But Strain said that, because the economy is already likely to be at full employment over this extended time horizon, the number of additional jobs the Biden plan will create “is zero.” The plan, Strain argued, is likely to merely shift jobs toward industries “favored by the infrastructure plan,” such as clean energy, while shifting them away from other industries.
There’s no need here to interrogate Strain’s opinions. The point is that, clearly, not everyone across the political spectrum and economic spectrum shares the Moody’s assessment that the plan will produce 2.7 million jobs by the end of 2030 — let alone Biden’s suggestion that it will produce up to 16 million jobs.
Another analysis, by the firm S&P Global, also came to a different conclusion than Moody’s. S&P did not look at the particulars of Biden’s plan, but it estimated that a hypothetical $2.1 trillion in infrastructure spending — more than Biden is proposing, whatever definition of “infrastructure” you use — would result in a net 713,000 additional jobs by 2029. (The analysis found that there would be 2.3 million additional jobs by 2024 as infrastructure projects were completed, but that the jobs impact of the plan would decline later in the decade.)