Despite diverging economic views, we all support the Biden plan
We are not generally regarded as occupying the same position within economic policy debates. We have had divergent views on issues relating to spending, taxes and deficits. But we’ve come to the same conclusion: President Biden’s economic agenda would make long-overdue investments in our nation’s future, and the revenue measures that would fund those investments are sound, progressive and efficient. Over the long-term, we believe it would be highly detrimental to our economy not to pass the Biden plan.
The White House has released two proposals — the American Jobs Plan and the American Families Plan — that, together, provide roughly four trillion dollars in public investment over 10 years, fully paid for with increased revenues from corporations, high-income individuals, and enhanced enforcement of existing tax law.
Some economic analysts have raised concerns about the size of the packages, arguing that the economy does not need additional stimulus. But it is wrong to cast these bills as stimulus. Unlike recent, pandemic-related stimulus bills, these are not deficit-funded. The Jobs and Families Plans are focused on boosting our long-term productive capacity, not on increasing short-term demand. Making the expanded and refundable Child Tax Credit permanent, for example, would lift millions of children out of poverty, better equipping them to contribute to our economy and our democracy later in life. And the proposed investments in resilient infrastructure would greatly reduce the long-term costs of climate change, which poses an existential threat to our economy.
Other critics argue that measures like universal pre-K and family and medical leave are social programs and don’t belong in an economic package. Regardless of what you call it, these are public investments that are likely to have a high rate of return. Quality childcare and pre-K programs, for example, allow parents to stay in the labor force during a child’s early years, contributing to our national economic output and competitiveness. Smart investments in early childhood care and education have been shown to deliver up to seven-fold returns, as children grow up healthier, better educated, and higher-earning as adults.
Other critics have found fault with the revenue measures that would fund the Biden programs. They say this is the wrong time to raise taxes, warning that higher taxes could stymie growth and punish the wealthy. Having been around economic policymaking for decades, we’ve heard these arguments before. The truth is that there is plenty of room to raise taxes on a progressive basis without economically harmful effects. Taxes are historically low; prior to the pandemic, federal tax revenues as a share of GDP were well below the average for a full employment economy, and much below the share in the late 1990s. Lowering the corporate tax rate from 28 percent to 21 percent in 2017 added to the deficit without having any meaningful positive impact on investment. There’s no reason to believe that increasing the rate in 2021, as the president has proposed, will have an adverse effect. The Penn Wharton Budget Model, for example, has said as much.
Beyond corporate taxes, the president has offered a number of other sensible revenue-generating measures, from narrowing the gap between capital gains and income tax rates, to taxing carried interest as ordinary income, to ending the “stepped-up basis” that allows the wealthy to transfer major assets to their heirs without paying capital gains taxes. All of these measures are economically sound.
Beyond traditional revenue measures, the president has also proposed investing $80 billion in enhanced IRS enforcement to collect more of the hundreds of billions of dollars in legally-owed taxes that go unpaid every year. And we believe other revenue measures deserve to be on the table, such as a carefully designed financial transactions tax and some form of carbon tax, both of which have economic benefits beyond raising revenue.
There’s legitimate debate to be had about the comparative merits of different revenue measures, and, in particular, the deficit funding of some types of infrastructure expenditures. Even among the three of us, our views differ. What’s critical, however, is that we have sufficient revenue from taxation alone to fund the Biden bills, so that we don’t exacerbate what many see as our already unsound fiscal trajectory.
The U.S. has enormous long-term economic strengths and should succeed over time. But to realize our potential, we need to meet highly consequential policy challenges, including the need for major public investment, after decades of not doing what is needed. Each of us might have designed a slightly different bill if we were drafting legislation on our own, but what Biden has proposed is a bold, necessary — and fully paid for — package of investments that would promote inclusive growth, reduce poverty and inequality and fight climate change.
Democrats of all policy stripes, whether moderate, progressive, and anywhere in between, should embrace the plan — as should all Americans who seek a stronger, more inclusive society and economy.
Robert Rubin is former secretary of the Treasury under President Clinton. Joseph Stiglitz is a Nobel Laureate economist who was also chief economist of the World Bank. Felicia Wong is president of the Roosevelt Institute.
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