We need Biden’s economic plan to rebuild the middle class
For more than 40 years, the central narrative of American politics, successfully pushed by the Republican Party, has been that government is ineffectual at best, and counterproductive more often than not. Or, as President Ronald Reagan, a former New Deal Democrat, famously said in his 1981 inaugural address, “government is the problem.”
Yet today, most Americans are beginning to realize that the lack of effective government has become the much bigger problem. In just the last dozen years, Americans have faced the two worst economic crises since the Great Depression and a chronic, dispiriting lack of economic opportunity for all but the top 10 percent. We have endured in Donald Trump the most divisive president in U.S. history, who politicized a devastating pandemic that has infected over 40 million Americans and killed more than 655,000.
It is against this backdrop that President Joe Biden and Democrats are proposing the most ambitious economic and social legislation in 90 years to rebuild our economy and create the workforce of the future. The goal of Biden’s Build Back Better plan is nothing less than to restore the American Dream and revive its central promise: that our children can be better off than we are, and that our nation can still provide most Americans the economic mobility to climb up the income ladder if they work hard.
We have to face it: The once-vaunted social and economic mobility of America, the ability to rise into the middle class that was the pride of our political economy, has drastically declined in recent decades. More than 90 percent of children born in the 1940s went on to earn more than their parents. For children born in 1984, the year President Reagan was reelected, that number has dropped to 50 percent, and is likely even lower for those born since.
Biden’s efforts are aimed at both improving the daily lives and earning power of average Americans and also expanding the productive capacity of our economy. “We can’t go back to the old, failed thinking,” Biden said about the effort recently. “We need to grow the economy from the bottom up and the middle out. This is the best strategy to create millions of jobs and lift up the middle-class families and grow wages and keep prices affordable for the long term.”
The list of proposed measures includes the basic building blocks of a modern workforce and creation of family economic stability. Expanding child tax credits and income tax credits for working families. Providing universal Pre-K for 3 and 4-year-olds as well as childcare for workers with children. Tuition-free community college, workforce development and job training. Pandemic preparedness. Obamacare expansion and filling the Medicaid coverage gap. Paid family and medical leave. Building school infrastructure — and many of others.
The legislation also tries to address the climate crisis by jumpstarting the U.S. clean energy transition, creating millions of new jobs rebuilding our electricity infrastructure and energy technologies, manufacturing electric vehicles and other advanced energy products, and creating a Civilian Climate Corps, in addition to $600 billion in new funding on roads, bridges, water, internet, clean energy and other infrastructure that has passed by the Senate in August.
Biden and the White House have also argued in a new report that these efforts, expensive though they are, can help reduce long-term inflation and price pressures in the future by increasing the economy’s productivity. Democrats plan to take up the Build Back Better legislation with an overall price tag of $3.5 trillion in September. The budget “blueprint” of this bill calls for “long-term investments to be fully offset by a combination of new tax revenues, health care savings, and long-term economic growth” and would “prohibit new taxes on families making less than $400,000 per year, and on small businesses and family farms,” a pre-condition insisted on by Biden.
To pay for this funding, the president has proposed increasing the corporate tax rate to 28 percent from 21 percent, although concerns from some Democrats suggest the new tax rate may end up closer to 25 percent. Biden has also suggested raising the top capital gains tax rate paid on investment profits to 43 percent from its current 24 percent, and increasing the amount U.S. companies pay on foreign earnings. Democrats also expect to save hundreds of billions more by lowering the price of prescription drugs covered under federal health programs.
Some Senate Democrats, including Krysten Synema of Arizona and Joe Manchin of West Virginia, have indicated they are unlikely to support funding as high as $3.5 trillion. Since Republicans are uniformly against the plan, every single Senate Democratic vote is needed to gain passage. The margins are almost as tight in the House of Representatives. For these reasons, and given growing concerns about inflation and the federal debt, analysts including my colleague Ben Ritz at the Progressive Policy Institute (PPI) suggest a final spending figure of closer to $2 trillion than $3.5 trillion. PPI research also finds that paying for the full $3.5 trillion figure will be difficult, even if some of these investments provide high economic value in the long-term and can benefit from “dynamic budget scoring.”
While much of Biden’s infrastructure, economic and social package is popular with the American public, gaining majority support in polls, the president’s overall approval has dipped in the wake of the withdrawal from Afghanistan. As Democrats look toward a competitive mid-term election in 2022, support for the major elements of Biden’s economic plan still seem the best path toward increased economic and job growth, likely the determining issue in defying historical trends and retaining Democratic majorities. But, at the same time, having moderate Democrats impose an element of fiscal restraint on the president’s economic plans could be the critical difference in the moderate swing States and districts that will also help decide the congressional majority.
As Biden said recently, “if we increase the availability of quality, affordable childcare, eldercare, paid leave, more people will enter the workforce…..independent forecasters project that it will have an incredibly significant impact on GDP and jobs — good-paying jobs with prevailing wages. And the majority of these jobs will go to people without a college degree…a blue-collar blueprint for building an American economy back.” Now, congressional Democrats must enact the heart of Biden’s ambitious blueprint to create a newly resurgent American middle class.
Paul Bledsoe is strategic adviser at the Progressive Policy Institute and a professorial lecturer at American University’s Center for Environmental Policy. He served on the White House Climate Change Task Force under President Bill Clinton, and as a staff member at the Senate Finance Committee and for several members of the U.S. House of Representatives.