How did pandemic stimulus under Biden compare in long‑term GDP and employment impact to Trump’s 2017 tax cuts?
Executive summary
The 2017 Tax Cuts and Jobs Act (TCJA) delivered a near-term boost to GDP growth and corporate after‑tax profits but reduced federal revenues by roughly 0.7 percent of GDP and widened deficits, while pandemic stimulus under Presidents Trump and Biden produced a far sharper, short‑run GDP rebound and rapid re‑employment that carried important but different long‑run tradeoffs for inflation and public finances [1] [2] [3]. Experts disagree about the persistence of those effects: some analyses credit the TCJA with modest, lasting gains in output and jobs, whereas multiple studies and contemporaneous Fed work suggest pandemic aid largely restored lost output and employment but left only limited durable productivity gains [4] [5] [2].
1. What the policies actually were and their scale
The TCJA was a large, permanent‑style tax overhaul enacted in 2017 that the Congressional Budget Office and tax analysts estimate lowered revenues by about 0.69–0.7 percent of GDP on average and added roughly $1.9–$3.8 trillion to deficits over different windows depending on scoring assumptions [1] [2] [6]. Pandemic-era fiscal intervention—chiefly the CARES Act in 2020 and the American Rescue Plan Act in 2021—routed cash and tax relief to households and businesses totaling trillions more in concentrated, short‑term stimulus and temporary tax changes, with ARPA’s first two years alone ranking among sizable historical tax reductions when measured by short‑run GDP share [1] [7] [2].
2. Measured effects on GDP: magnitude and durability
The TCJA coincided with an acceleration of GDP from 2.4 percent in 2017 to 2.9 percent in 2018, but growth moderated thereafter and researchers find it hard to ascribe durable productivity gains to the cut, with some model scenarios projecting modest long‑run increases in GDP if extended but major deficits as the cost [5] [4]. By contrast, GDP under Biden surged as the economy rebounded from the pandemic—real GDP rose sharply in 2021, peaking at a reported 6.2 percent rebound from 2020’s collapse—largely reflecting the temporary fillip from reopening plus heavy fiscal support rather than structural output gains [3] [2].
3. Employment outcomes: jobs created versus jobs restored
The TCJA period saw job growth, yet independent observers found little evidence wages or job creation overwhelmingly flowed to typical workers as promised, and broader gains were modest relative to forecasts [8] [4]. Pandemic stimulus, by contrast, played a central role in restoring millions of jobs lost in 2020—employment returned to pre‑pandemic levels and continued adding jobs in 2021–2022 as stimulus encouraged consumer demand and hiring—though much of that hiring reflected replacement of pandemic losses rather than net long‑term structural job creation [3] [2] [9].
4. Inflation, debt and the tradeoffs to growth
Both policy packages worsened deficits; the TCJA materially lowered revenue as a share of GDP and added substantially to projected debt, while pandemic relief raised spending sharply and has been linked by some researchers to upward pressure on inflation when combined with supply shocks and monetary policy settings [1] [2] [6]. Fed‑area researchers and commentators tied portions of the post‑pandemic inflation surge to stimulus that raised demand by several percentage points, underscoring that powerful near‑term demand boosts can carry inflation‑and‑financing tradeoffs [2].
5. Why attribution is contested and what models say about “long‑term” impacts
Estimating long‑run effects requires isolating policy from contemporaneous shocks; analysts differ because the TCJA overlapped with a pre‑pandemic expansion and ARPA overlapped with an unprecedented pandemic downturn and recovery, making counterfactuals fraught—some models project the TCJA could raise long‑run GDP modestly if extended, while others emphasize negligible wage effects and heavy fiscal costs; pandemic aid is widely judged to have shortened the recession and restored employment but less likely to generate comparable secular productivity growth [5] [4] [8].
6. Political narratives, implicit agendas and the evidence
Partisan sources frame outcomes to fit agendas: Republican committees hail TCJA “boon” claims and aggressive long‑run GDP projections for extending cuts, while liberal analysts stress regressivity and deficit risk from TCJA and highlight ARPA’s role in poverty reduction and recovery; both sides understate uncertainties about persistence and ignore that external forces—trade shocks, pandemic supply constraints, and Fed policy—shaped the realized outcomes [10] [4] [8].
7. Bottom line
In short, the TCJA produced modest short‑term GDP upticks and longer‑term fiscal costs with contested labor market gains, while pandemic stimulus generated a far larger, rapid restoration of output and jobs but at the cost of bigger near‑term inflationary pressures and higher deficits; long‑run productivity and employment advantages from either are limited in the evidence and remain a matter of modeling assumptions and political interpretation [1] [2] [3] [8].