In a speech before Congress Wednesday night, President Biden laid out the case for his American Families Plan, a proposal to dramatically beef up the U.S. welfare state by spending $1.8 trillion over a decade. By American standards, the plan is not bad — the biggest package of welfare legislation since the Great Society programs of the 1960s. They are not groundbreaking innovations; it would basically bring America about halfway up to the mid-20th century rich country standard.
On the merits, the plan should be a total gimme for anyone claiming the Democratic label. But the proposal's odd rollout and janky design call into question how serious Biden and the Democrats are about passing it at all.
Let's look at the details. Biden would set up a federal program for 12 weeks of paid medical and family leave, a sick leave program, add new subsidies for child care, extend his expansion of the Child Tax Credit (so that even people with no wage income qualify) until 2025, and fund universal pre-K and two years of free community college. He would add some more subsidies to the ObamaCare exchanges (which would also get a public option), allow Medicare to negotiate drug prices to cut the cost of pharmaceuticals, and allow people to enroll in Medicare at age 60, along with numerous smaller provisions.
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He would pay for some of this spending with tax hikes on the rich, primarily by hiking the top marginal tax rate, the capital gains tax paid by people earning over $1 million, and by beefing up the IRS budget to go after rich tax cheats (the agency estimates this currently costs the government about $1 trillion per year, and Biden estimates his more focused audit agenda will bring in $700 billion).
All that is basically to the good. Relative to the status quo, it would be a huge upgrade to American society. The U.S. is virtually the only country on the planet that has no paid family leave (including poor ones). Americans are increasingly realizing how violently hostile our economic system is to families, and recognizing the need for reforms.
But there are still some problems. The expansion of the Child Tax Credit is not made permanent, nor are the huge problems with its design addressed. It simply makes no sense to base qualifications for a monthly payment on annual family characteristics that can't be known until the year is over, and the IRS will no doubt struggle to get money to poor people who aren't required to file their taxes. While the "phase-in" of the Child Tax Credit has been abolished so that people with no wage income qualify (that is, the poorest people in the country), Biden's expansion of the Earned Income Tax credit still excludes them, for no reason. It's not clear that the IRS can even handle these payments, given its longstanding budget problems and crushing burdens from the pandemic. As Sen. Mitt Romney (R-Utah) suggests, it would be much wiser to structure the program through the Social Security Administration as a monthly payment to all parents, and then soak up excess payments to the rich with a special tax.
A lot of the more minor programs in Biden's proposal rely on very complicated formulas or Byzantine state-federal partnerships, which Republican-led states are nearly certain to refuse to do no matter how great the benefit is.
Biden's plan is also likely short on revenue — only bringing in $1.5 trillion by White House calculations. Unless conservative Senate Democrats like Joe Manchin get behind a reform of the filibuster (an issue on which he has been all over the place of late, contradicting himself about once a week), the only realistic way to pass this thing will be through the reconciliation process, which requires programs lasting more than one year to be paid for with new taxes or other cuts. It's also unclear whether Democrats would be allowed to count the estimated new revenue from beefed-up IRS enforcement.
Legislative procedure aside, swing-vote Senate Democrats have so far shown little appetite for either part of the bill on the merits, particularly the tax hikes. On the contrary, the most fervent tax priority for many Democrats (including some supposedly progressive ones) seems to be repealing the state and local tax deduction cap passed in 2017, almost all of the benefits of which would flow to the rich — and would therefore require still more revenue to compensate.
Moreover, Biden has already proposed a big "infrastructure" package that also contains a huge pot of money for elder care. The two bills thus make an odd pairing. If Democrats are going to do a big welfare state bill, one would think it makes sense to fold the elder care portion in with that one, and make the infrastructure package about just that — or better still, just do one giant bill and get the whole thing over with. It doesn't matter if both eventually get passed, of course, but as a rule it is easier to pass one bill through Congress than two. The split is reflective of an internal negotiation process where huge details were being changed at the last second.
The Biden administration and most Democrats seem to genuinely believe that America needs a big build-out of the welfare state. But their approach is so far unfocused and haphazard. Given the lockstep opposition that Republicans are guaranteed to mount, and the unreliability of Senate moderates, someone who was really serious about this project would start by penciling out revenue sufficient to "pay for" whatever programs are deemed most vital, plus a big margin of error to account for moderates compulsively cutting things away for no reason, and then start trying to ram it through as quickly as possible. That's what happened with the American Rescue Plan.
Instead we're getting a somewhat aimless bill that is going to need serious work to have even a modest chance of passage. I would be happy to be proved wrong, but at this rate it looks disturbingly plausible that Democrats will get bogged down in process and details and end up passing something much less ambitious, if they get anything at all.
