Moody's Analytics released The Macroeconomic Consequences: Trump vs. Biden, summarizing the macroeconomic effects of Donald Trump and Joe Biden's proposals to change the tax code, government spending, and other policies.
Moody's finds that a Democratic sweep will result in 7.4 million more jobs by 2024 than a Republican sweep, resulting in GDP that is $960 billion, or 4.5 percent, higher. The country has 4.0 million more working-age civilians in 2024 under the Biden plan. In both scenarios, federal debt-to-GDP is just shy of 130 percent by 2030.
There are two main reasons that Moody's results show a more significant difference between Trump's and Biden's policies than other models such as CBO's dynamic model would.
First, Moody's notes that while the economy remains far from full employment "the Federal Reserve will maintain its zero interest rate policy and long-term interest rates will remain low." As a result, Moody's does not expect government spending on things such as infrastructure to increase interest rates in the near term. In contrast, CBO generally assumes that the Federal Reserve does not have the power to set interest rates and thus limit the interest costs which slow economic growth.
Second, Moody's captures demand side effects, reflecting the fact that the economy is not at capacity. In their model, "Greater government spending adds directly to GDP and jobs, while the higher tax burden has an indirect impact through business investment and the spending and saving behavior of high-income households." In contrast, CBO generally assumes that the economy is operating at capacity, so government spending detracts directly from household spending and saving.