Penn Wharton Budget Model

Penn Wharton Budget Model. It is a nonpartisan, research-based initiative that provides economic analysis of public policy proposals for policymakers, journalists, and the public. Housed at The Wharton School of the University of Pennsylvania, the model uses advanced computational techniques to project the fiscal and economic impacts of legislation on the federal budget, economic growth, and household finances. Its analyses are frequently cited in major media outlets and congressional testimony, aiming to inform the national debate on issues like tax reform, healthcare, and climate policy.

Overview

The initiative operates as a non-advocacy unit within The Wharton School, one of the world's leading business schools. Its core mission is to produce accessible, data-driven analyses of major fiscal policy proposals, distinguishing itself through transparency in its modeling assumptions. The team consists of economists, data scientists, and research analysts who work to simulate the long-term effects of policy changes. Key areas of focus include the Tax Cuts and Jobs Act of 2017, the Affordable Care Act, and proposals like the Green New Deal. Its work is often presented in interactive online tools and detailed reports for a broad audience.

History and leadership

The model was formally launched in 2016 under the leadership of faculty director Kent Smetters, the Boettner Professor of Business Economics and Public Policy at The Wharton School. Its creation was motivated by a desire to bring academic rigor and computational power to the public discourse on federal budgeting, an area often dominated by partisan estimates from organizations like the Congressional Budget Office and the Joint Committee on Taxation. The initiative builds upon decades of academic research in dynamic scoring and overlapping generations models pioneered by economists including Alan Auerbach and Laurence Kotlikoff. Key staff have included former analysts from the U.S. Department of the Treasury and the Federal Reserve.

Research and publications

The team regularly publishes analyses of pending and enacted legislation, with reports covering topics from immigration reform to student loan forgiveness. Notable publications have provided detailed estimates of the budgetary effects of the Inflation Reduction Act, the CHIPS and Science Act, and various proposals from the Biden administration and members of United States Congress. These reports are frequently cited in outlets like The New York Times, The Wall Street Journal, and CNN. The initiative also publishes working papers and hosts events featuring experts from institutions like the Brookings Institution and the American Enterprise Institute.

Methodology and models

The core analytical engine is a large-scale, dynamic microsimulation model that integrates detailed data from sources such as the Internal Revenue Service, the Current Population Survey, and the Survey of Consumer Finances. This model projects individual and household behavior over time in response to policy changes, using techniques from computational economics and agent-based modeling. A separate macroeconomic model, based on neoclassical growth theory, is used to estimate effects on gross domestic product, capital stock, and wages. The methodology emphasizes transparency, with all key assumptions and model code made publicly available for peer review, a practice endorsed by groups like the National Bureau of Economic Research.

Policy impact and reception

Analyses have been formally presented in testimony before committees of the United States Senate and the United States House of Representatives, influencing debates on taxation and entitlement reform. While nonpartisan, its findings sometimes challenge projections from official government scorekeepers or advocacy groups, generating discussion among policymakers in Washington, D.C.. The model has been praised by figures from across the political spectrum, including former U.S. Secretary of the Treasury officials, for its technical sophistication. It is considered a key contributor to the ecosystem of policy analysis alongside established institutions like the Urban Institute and the Tax Policy Center.

Category:Public policy organizations based in the United States Category:University of Pennsylvania Category:Economic research institutes