This year, the administration of President Joe Biden introduced two of the largest domestic spending bills the United States has seen in generations. Combined, Biden’s American Jobs Plan and his American Families Plan aim to spend $3.3 trillion and provide $800 billion in tax credits over the next 10 years. (For those who follow such things, technically the jobs programs extend over eight years, while most measures in the Families Plan extend for 10 years.)
At the same time, the big price tag is deceptive. If you throw the word “trillions” around often enough, most people will understand that means “big.” But how big? The answer, as it happens, is not as large as it might seem.
First, it’s worth appreciating just how large the federal government is. Note that in fiscal year 2019—before the pandemic—the feds spent $4.448 trillion in a single year. (In 2020, the federal response to COVID-19 pushed up that number to $6.55 trillion). Bottom line, even if you assume that federal spending reverts to something close to that 2019 number by 2022, you’re still talking about $50 trillion in likely baseline federal spending over the next decade, even if neither Biden bill passes.
A simple way to understand the scale of Biden’s two proposals is to recognize that they involve roughly a seven-percent increase in overall spending. If compared with gross domestic product (GDP), the expense works out to roughly 1.5 percent of GDP.
What does that mean? It helps to have some historical perspective. The Office of Management and Budget maintains data that indicate that the federal government in 1980 spent 5.1 percent of GDP on domestic discretionary spending; in 2019, that number was 3.1 percent. Biden’s plans, if they both passed without amendment, would fall far short of restoring spending to 1980 levels.
Then there’s the question of infrastructure specifically. A 2018 report by Jeffrey Stupak of the Congressional Research Service finds that “nondefense gross government investment (federal, state, and local) in the United States has largely been in decline since the 1960s, falling from above four percent of GDP to about 2.5 percent in 2016.” A return to 1960s levels would require $3.5 trillion over the next decade for infrastructure alone.
It should be noted too, importantly, that there is a cost to not spending money. Stupak observes, “Infrastructure is understood to be a critical factor in the health and wealth of a country, enabling private businesses and individuals to produce goods and services more efficiently. With respect to overall economic output, increased infrastructure spending by the government is generally expected to result in higher economic output in the short term by stimulating demand and in the long term by increasing overall productivity.”
The converse can also be true. That is, a lack of infrastructure spending may impede economic development. Over time, productivity growth goes up and down for many reasons. In the US, that rate fell in the 1970s, probably due to rising energy costs, and rose in the 1990s and early 2000s due to new computer technology. But it is hard not to notice that between 2007 and 2020, US productivity growth, according to the federal Bureau of Labor Statistics, was 1.5 percent a year compared to 2.7 percent a year between 1947 and 1973. This poses an interesting question: might declining infrastructure investment already have become a drag on the US economy?
How Did We Get Here?
A 2019 paper by Yale economist Ray Fair sets forth the following conundrum: “Infrastructure as a percent of GDP began a steady decline around 1970, and the government budget deficit became positive and large at roughly the same time. The infrastructure pattern in other countries does not mirror that in the United States, so the United States appears to be a special case. The overall results suggest that the United States became less future oriented beginning around 1970. This change has persisted. This is the interesting fact. Whether it can be explained is doubtful.”
But what might have led the United States to become less “future oriented” around 1970? Is the answer really all that mysterious? A recent book published by Heather McGhee, who chairs the board of Color of Change and used to direct Demos, suggests that the explanation might not be so hard to figure out after all.
McGhee’s book is titled The Sum of Us. In that book, she notes that, time and again, when public services became integrated during the civil rights movement, white support for public spending plummeted. In other words, after integration, white voter willingness to support public investment in the country’s future fell.
This behavioral shift could first be seen at the local level. For example, when a court ordered the city of Montgomery, Alabama, to integrate its public swimming pools, city officials instead moved to close all the pools down. Later, St. Louis, Missouri and Jackson, Mississippi followed suit. The US Supreme Court upheld Jackson’s public pool shutdown decision in the 1971 case of Palmer v. Thompson.
Of course, public pools were hardly the only institutions affected. Support for public education fell too. As McGhee points out, “When the public meant ‘white,’ public colleges thrived” (p. 42). More broadly, McGhee notes, “While racial barriers were coming down across the society, class barriers went up” (p. 31). In general, the US experienced the “pricing up and privatization of public goods” (p. 180)—and that, in turn, led to a defunding of both public infrastructure and social spending.
Whether or not Biden succeeds in 2021, it is surely no accident that Biden’s legislation is arriving in the context of a historic uprising against anti-Black racism. Any serious public effort to dismantle structural racism, must include, as McGhee puts it, measures “to refill the pool of public goods” (p. 271).
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What Measures Do the Biden Bills Contain?
So how, to use McGhee’s phrase, does Biden propose to “refill the pool of public goods”?
To summarize briefly, Biden divides his initiatives in two packages: the “Jobs Plan” is the infrastructure bill, while the “Families Plan” is the social supports bill. That said, the split is imprecise. Notably, the Jobs Plan contains $400 billion to boost the Medicaid budget for long-term care. There is little doubt this expenditure is hugely important given an aging US population; however, it is also highly dubious to label an increase in an annual operating budget line item as an investment in infrastructure. A breakdown of proposed Biden plan expenditures is listed below:
|Basics (housing, water, broadband, power grid, schools)||$689 billion|
|Transportation (airports, rail, roads, transit, ports, electric cars)||$621 billion|
|Research and development, manufacturing, workforce supports||$580 billion|
|Total infrastructure||$1,890 billion|
|Paid family leave (12 weeks)||$225 billion|
|Education (pre-K, Pell Grants, community college, etc.)||$508 billion|
|Anti-poverty (nutrition, child and earned income tax credits)||$645 billion|
|Long-term care||$400 billion|
|Health care subsidies||$200 billion|
|Total social spending (including $800 billion in tax credits)||$2,203 billion|
While the numbers look impressive, the expansion of social and economic rights implied remains limited. As NPQ has noted before, the child tax credit could significantly reduce childhood poverty—by at least 40 percent—but the bill only funds that benefit until 2025. Universal paid family leave was in the relief bill passed earlier this year, but it was stripped out before passage. If it remains in the legislation this time around, the United States might, at long last, become the 180th nation in the world to offer paid family leave. Universal pre-K and zero tuition community college would also be important gains.
Many of the other expenditures, however, are really down payments on social benefits—more money for childcare, but no universal coverage. The same is true with long-term care subsidy dollars. Another notable example: more money to subsidize health care, but no Medicare for all, no public option, nor even the reduction in Medicare eligibility age to 60 that Biden endorsed in his campaign.
As for assessing infrastructure itself, that’s even more complicated. It is clear, however, that at best the Biden expenditures will make up only part of the shortfall. The American Society of Civil Engineers estimates the nation’s core infrastructure gap to total $2.59 trillion over 10 years and calls for increasing infrastructure spending from 2.5 percent of GDP to 3.5 percent of GDP by 2025. The National Association of Clean Water Agencies puts the cost of building clean drinking water and wastewater infrastructure at $750 billion over 20 years.
Then there is the question of addressing the global climate emergency. Biden himself during the campaign pledged $1.7 trillion over 10 years. Quite clearly, his infrastructure bill, no matter how you count the numbers, falls short of this mark. During the 2020 presidential campaign, Senator Bernie Sanders (I-VT) pledged a much higher $16.3 trillion over 10 years (along with offsetting tax measures, including taxes on fossil fuel companies). A bill introduced this session by Senator Ed Markey (D-MA) and Representative Debbie Dingell (D-MI) that’s based on the research of University of Massachusetts economist Robert Pollin proposes $10 trillion over 10 years.
Yes, the obstacles to a larger package in the current political environment are enormous. But these analyses do have the benefit of basing expenditures on need, rather than political salability. Some of the data from individual line items give a good sense of what drives the gap. For instance, Sanders estimated that a “smart” electrical power grid would cost the nation $526 billion; the Biden plan offers $100 billion.
A New Social Contract?
As the numbers make clear, the Biden proposals are significant, even if they fall far short of making up for longstanding infrastructure and social support gaps. Among the most important measures, in addition to the investment in infrastructure and a greener economy, are the child tax credit (to reduce child poverty), universal pre-kindergarten, paid family leave, and tuition-free community college.
If these measures become law, this would easily be the most significant extension of social benefits since the passage of the Affordable Care Act in 2010. At the same time, the many holes in the Biden bills are not hard to identify. The underinvestment in addressing the climate emergency is obvious, as are the gaps in the buildout of social support—no increase in the minimum wage, no forgiveness of student loans, and no expansion of public health insurance, for instance. And there is nary a mention of more far-reaching measures, such as universal basic income or reparations.
What is clear at this point is that the US regime of neoliberalism that has dominated public policy for the past 40 years has been dislodged. What remains less clear is what will replace it.
Of course, establishing a new social contract could never be expected to be easy. Even in the original New Deal, it’s worth recalling that many of its most fundamental measures, such as Social Security, the Wagner Act for unions, and the Works Progress Administration public works suite of programs, did not come into being until 1935, more than two years after Franklin Delano Roosevelt became president. The Fair Labor and Standards Act, establishing the nation’s first minimum wage, did not pass until 1938.
When covering the relief bill, NPQ noted that “most proposals for structural changes are postponed for another day.” With Biden’s two follow-on bills this spring, more steps in the direction of structural change are visible. Nevertheless, despite trillion-dollar-plus price tags, these are modest steps. What comes afterward remains unknown; Biden might stall out, we might see a period of more thoroughgoing reform, or we might even experience truly transformative, systemic change.
Whether the nation can achieve a new policy equilibrium that sustains a more equitable and democratic economy depends on many things, including social movement organizing and the outcome of the 2022 midterm elections. History has not been kind to the party in power during midterms, but there are exceptions, including, critical for those who follow New Deal history, the midterm elections of 1934.
But this shift is about more than elections. As McGhee reminds us, white supremacy and racism ultimately stopped Great Society liberalism in its tracks. These forces largely explain the why of the past half-century’s sustained decline in US investment that Fair, the economist, found so puzzling.
Achieving a different outcome this time will depend critically on whether, as McGhee puts it, a “nation founded in racial hierarchy truly rejects that belief” and at long last casts aside the great lie of white supremacy. The political and cultural task of establishing the “who” of US society as explicitly multiracial, in short, is central to the long-term project of building a truly democratic economy that sustains social solidarity.