White House proposes $1.8 trillion package that would dramatically expand education, safety net programs
Universal preschool and free community college are among a plethora of initiatives that would be paid for by tax increases and IRS changes.
Biden’s plan proposes a suite of domestic policies that would collectively represent a marked change in how Americans interact with the federal government.
The White House says its proposal would provide every American with two years of tuition-free community college; prekindergarten for all 3- and 4-year-olds; and paid family and medical leave for American workers. Among its sweeping agenda items, the plan also calls for devoting hundreds of billions of dollars to fighting child poverty and ensuring affordable child care nationwide.
To pay for these initiatives, White House officials are also proposing $1.5 trillion in tax hikes aimed primarily at increasing the amount paid by wealthy Americans and investors. The White House aims to raise money through a sizable increase in enforcement by the Internal Revenue Service, as well as approximately doubling the capital gains tax rate for those earning more than $1 million per year — a measure that would apply to a small fraction of Americans but is likely to face resistance on Capitol Hill.
Biden will highlight the plan in his address to a joint session of Congress on Wednesday night, kicking off what is expected to be months of congressional wrangling. The president’s plan reflects many of his 2020 campaign promises but also leaves out other key pledges and demands from top allies.
Biden’s proposal steers clear of his campaign promise to lower the Medicare enrollment age, despite pressure from liberal and some centrist House Democrats. The plan also leaves out an increase in the estate tax and would only temporarily extend a child benefit that the president himself has said should be made permanent. Some experts and congressional aides have begun questioning whether the amount of money in the plan would be enough to achieve the administration’s objectives.
“The American Families Plan is an investment in our children and our families — helping families cover the basic expenses that so many struggle with now, lowering health insurance premiums, and continuing the American Rescue Plan’s historic reductions in child poverty,” the White House’s plan states.
The White House’s latest spending plan, its third since the inauguration, faces steep obstacles to passage — probably to an extent the administration has not seen yet on one of its top legislative priorities.
After passage of its $1.9 trillion stimulus plan with Democratic votes only, the Biden administration has faced bipartisan criticism over much of its approximately $2.3 trillion jobs and infrastructure proposal. Congressional Republicans have balked both at the scope of that plan and the corporate tax increases proposed by the White House to fund it. Democrats could again try to approve the package without Republican votes, but several centrist Democrats have called for the infrastructure bill to be bipartisan, complicating its path to passage.
Biden has signaled he’s open to negotiation on much of his agenda and has called on Republicans to try to reach a compromise.
The bandwidth in Congress for another multitrillion-dollar spending effort remains highly uncertain. Some congressional aides think lawmakers are months away from taking up the families plan.
“They’re all focused right now on the infrastructure plan. Those are already very difficult conversations,” said Bill Galston, a senior fellow at the Brookings Institution, a Washington-based think tank. “Even without knowing what’s in the families plan, there’s going to be less Republican support than the infrastructure plan. So, it just gets harder.”
White House officials say the latest plan is necessary to meet persistent problems in the American economy.
The plan would include hundreds of billions of dollars for education funding, including funding to make two-year community colleges tuition-free.
It would effectively expand the nation’s guarantee of a free education from 13 years — kindergarten through 12th grade — to 17 years. Children, no matter their families’ income, would be entitled to free pre-K at ages 3 and 4, and later to two years of community college after high school.
Making these programs universal raises the cost but will help the White House gain and maintain political support, said Rahm Emanuel, a former White House chief of staff who worked to expand access to pre-K and community colleges when he was mayor of Chicago.
“Once everyone’s in, all the parents want it. Then it’s not a poor person’s program or a poverty program. It’s an educational program,” he said ahead of the announcement. “That to me, that is essential. It changes the public center of gravity once it’s for everybody.”
But some are skeptical of a universal benefit, fearing it will advantage children from wealthy families, who probably will land in the best programs, and therefore expand learning gaps among students that already exist in the K-12 system.
“A universal entitlement will not likely narrow disparities in children’s growth, setting poor kids back even before they begin school,” said Bruce Fuller, a professor of education and public policy at the University of California at Berkeley who has studied New York City’s universal pre-K program.
The White House said the pre-K program would cost $200 billion over 10 years, but officials said the program might not take effect right away, so it was not clear how many years of spending that figure covers. It also was unclear how the White House calculated that this sum would be enough to cover the costs of pre-K, particularly given that Biden is promising high-quality programs that pay all employees at least $15 per hour.
The community college plan, meanwhile, would cost $109 billion.
Both the pre-K and community college programs depend on a federal-state partnership for implementation, and states could decide whether to participate. After the Affordable Care Act was passed, many GOP-controlled states declined to expand Medicaid programs, even with a generous federal contribution.
States participating in the pre-K program would be expected to cover 10 percent of the costs at first, increasing their share to 50 percent. For community college education, the federal share ultimately would be 75 percent of the cost.
The president also proposes subsidizing tuition for students from families earning less than $125,000 enrolled at historically Black institutions, tribal colleges and other minority-serving institutions for two years. The scope of the tuition-free proposal represents a potential windfall for under-resourced institutions that educate a disproportionately large share of students from lower-income households.
Still, the administration’s exclusion of many four-year institutions could create a fault line within higher education, especially as universities are reeling from the financial fallout of the public health and economic crisis. Many four-year schools would become comparatively more expensive, and some students may decide to study at community college free for two years and then transfer.
But a final element of Biden’s plan could mitigate these concerns. He is calling for increasing the maximum Pell grant award by about $1,400, a 20 percent increase — short of his campaign pledge to double the grant but a proposal that would help students at all schools.
The White House proposal has many other elements. It also would include $225 billion in child-care funding; $225 billion for paid family and medical leave; and $200 billion to extend enhanced Affordable Care Act subsidies. The plan also would extend a more robust child tax credit until 2025, rejecting calls from some Democratic lawmakers and the president himself to make the measure permanent, as well as permanently extend a more robust tax credit for workers. (White House officials were thought to be trying to minimize the overall cost of the bill, and fully extending the credit would dramatically increase the cost.)
Those plans reflect policies that have largely entered the Democratic mainstream. The United States has among the lowest levels of child benefits and paid leave benefits in the developed world, which is why the child poverty rate in the United States is also among the highest in the developed world. A child-care crisis also gained high-profile attention over the past year as the pandemic forced millions of single mothers in particular out of the labor market to care for their children.
The tax component of the bill also reflects mounting concerns about widening inequality. The “families” package is funded by increasing the top tax rate from 37 percent to 39.6 percent while also increasing the capital gains rate paid on assets such as stocks, bonds and dividends to 39.6 percent, effectively doubling it. The increase in the capital gains rate would be paired with a major change in how capital gains taxes are calculated, by taxing the increase in the original value of the asset even after it has been passed down to an heir.
White House officials also think they can raise as much as $700 billion by increasing IRS enforcement and compliance.
“We have very good data showing the benefits to kids, and their subsequent careers, from having good child care and preschool. We lag enormously in providing child care, and if we want people to be able to work, they need something to do with their kids,” said Dean Baker, senior economist at the Center for Economic and Policy Research, a left-leaning think tank. “The people making out like bandits over the last four decades are the top 1 or 2 percent — that makes sense for who you’d look to to get the money from first.”
Parts of the plan already have come under fire from conservatives, liberals and even some members of Democratic leadership.
Conservatives have argued that Biden’s proposed tax increases are harmful to economic growth and are punitive. Biden’s plan would reverse some of Republicans’ 2017 tax cut, a nonstarter for the GOP. Leading business lobbyists have pressed the White House and congressional Democrats not to push additional spending, noting that the White House’s two plans combined amount to about $4 trillion over 10 years.
“These are being sold as economic packages, but they’re not. They’re fundamentally attempts restructure the scale and scope of the role of government in American society,” said Doug Holtz-Eakin, a former economic adviser to George W. Bush and John McCain. “It’s all-or-nothing on big taxes and big government support, and Republicans are not going to support that.”
The White House also has taken criticism from some members of the president’s own party about what it left out of the plan.
Biden’s plan only partially extends the enhanced child tax credit that was approved in March through the $1.9 trillion relief plan. White House officials celebrated that measure, repeatedly claiming it would cut child poverty in half, but are proposing extending it in full only through 2025.
The White House also scuttled a plan aimed at requiring cuts to prescription drug costs, a measure pushed by House Speaker Nancy Pelosi (D-Calif.) and leading Democrats but fiercely resisted by pharmaceutical industry groups.
Other parts of the proposal also drew criticism from some interest groups that wanted it to go further. The $225 billion budgeted for paid family and medical leave over 10 years is “inadequate,” said C. Nicole Mason, the president and chief executive at the Institute for Women’s Policy Research, a gender-focused think tank. To ensure 12 weeks of paid leave for all new parents, she said, the Biden administration would have to set aside more than double that amount. The full cost of the plan from 2024 to 2033 is $460 billion, according to IWPR’s simulation model.
For decades, women and family advocates have been pushing for paid family leave in the United States, the only industrialized country that does not guarantee paid leave for new parents. The American Family Plan is a “once-in-a-generation opportunity” to finally implement the policy, but there has to be enough money behind it, Mason said.
“You can’t underinvest and get the same kind of returns,” she said.
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