Democrats Must Pass Biden’s $4 Trillion Economic Plan

Sep 30

This time, the progressive Democrats such as Rep. Pramila Jayapal (D-WA) and Sen. Bernie Sanders (D-VT) are right.

Moderate Democrats should join them in passing President Biden’s $4 trillion package, or at least the lion’s share of it. Biden’s proposals would re-invigorate the U.S. economy, reduce inequality and combat climate change. If they are not passed, the U.S. economy will stagnate and our social and environmental problems will grow even more dire. Meanwhile, China will forge ahead.

The Wall Street Journal and other conservative commentators like Bret Stephens of the New York Times are yelling about huge tax and spending increases, inflation and “socialism”. Senator Joe Manchin (D-WV), who increasingly looks like a DINO (Democrat in Name Only), thundered on Wednesday that the proposals are “fiscal insanity”.

This is all nonsense. Yes, the price tag is high. However, Biden’s critics don’t put the numbers in context, and they don’t mention a key feature: the spending and tax raises would be spread out over 10 years. That works out to about $440 billion annually.

The U.S. budget for fiscal year 2019 (so pre-Covid) was about $4.5 trillion. Biden’s proposals would increase run-rate government spending (pre-Covid) about 10%. That’s a large percentage increase, but hardly revolutionary in the context of the overall U.S. budget. The Bolsheviks are not at the gates.

The Biden Plan Would Reboot the U.S. Economy

Here are three crucial points:

· The Biden plan would reverse decades of under-investment in our physical infrastructure and human infrastructure, under both Republican and Democratic administrations. We have to play catch-up to reboot our economy and compete with China.

· This may be the U.S.’s last chance to avoid the worst-case scenarios for climate change; we are running out of time.

· Joe Biden ran for President on this platform, and voters strongly support most of his proposals. This is the Democratic Party’s platform, which Joe Biden has been pushing for a year. Is Joe Biden a Socialist? If Democrats don’t deliver on these promises, it will be bad for the country and terrible for the party.

Biden’s proposals are not at all socialist; they are designed to help the capitalist system work better for most Americans. The Biden plan would provide a better safety net, filling some unusual gaps in U.S. government programs compared to those other advanced nations. Critics charge that the plan would provide cradle-to-grave security, so the U.S. would become more like France and Americans would work less. But Biden’s plans are designed to make it easier for Americans to work, by removing some structural barriers.

Universal pre-K education and two years of free community college would help more Americans get a decent education and improve their job prospects. That is especially true for those from low-income families. Paid parental leave would help families balance their work and child-rearing obligations more easily. Expanding access to medical care, through larger subsidies for the Affordable Care Act, would lead to healthier employees.

The expanded tax credit has already cut child poverty drastically, which should lead to better-fed, less stressed kids who will perform better in school. Biden’s plan would make that feature permanent.

The Biden plans would foster a transition away from fossil fuels to green energy, electric cars, etc. It’s crucial to move quickly on these measures, particularly after Trump took the U.S. backward on energy policy. Instead of fighting climate change, Trump wasted four critical years.

Howling About Taxes

Predictably, various industry groups are attacking the Democrats’ proposed tax increases as “job killers”.

The President has also encountered resistance on a more surprising front: Senator Manchin and his fellow DINO, Sen. Kyrsten Sinema (D-AZ), seem to oppose many of the tax hikes. Some of Manchin’s comments read as though the Republican National Committee wrote them. Sen. Sinema, the Sphinx of Phoenix, apparently has refused to say (even in private) what tax rises, if any, she would support.

This is strange and troubling. One would expect these Senators to support their party on such a fundamental issue as tax policy.

After all, these proposals would essentially reverse Donald Trump’s massive, $1.7 trillion tax cuts. Those reductions were fiscally irresponsible, and they doubled the federal deficit to $1 trillion a year. The cuts mostly benefited corporations and the top 0.1% of individual taxpayers. They had almost no impact on middle-class and lower-class Americans.

The cuts did not stimulate the economy, despite Trump’s hype. The ultra-rich mostly saved the money, rather than spend it. Companies bought back stock with their windfall, rather than investing in plant and equipment. So why don’t Sens. Machin and Sinema support ending those tax cuts?

The Tax Increases Are Reasonable

Furthermore, the tax rises would be eminently reasonable, especially after Congressional Democrats scaled back some of President Biden’s proposals. Tax rates would rise modestly, and they would not be a drag on the economy. The higher taxes would offset most of the cost of Biden’s program, but not all; deficits would increase. Still, the Democrats would provide a lot of funding, via taxes, for programs that would improve many citizens’ lives and our long-term economic prospects.

Corporate tax rates would increase to 26.5% from 21%. That is a reasonable compromise figure and competitive with tax rates in other major industrialized countries. President Biden sought a 28% rate, but Congressional Democrats trimmed that request.

The Trump Administration overshot the mark in cutting rates from 35%, which was too high, to 21%. U.S. companies would do just fine with a 26.5% tax rate, despite their bellyaching.

Ultra-Rich Americans Would Again Pay Their Fair Share

As Biden promised, Americans earning less than $400,000 would not pay more in taxes.

For higher-income Americans, their basic tax rate would increase by 2.6 percentage points, to 39.6% from 37%, starting at $400,000. So they would pay an incremental $2,600 in taxes if they earned $500,000, for example. Their tax rate would return to the level they paid before the Trump tax cuts. Like the corporations, they would do just fine.

For families with incomes above $5 million, there would be an additional three percentage point surtax on their earnings above that amount. That is a significant rise, 5.6 percentage points, but only a tiny group of taxpayers would be affected.

Democrats Rejected Soak-the-Rich Proposals

The capital gains rate would rise by five percentage points, to 25% from 20%. Biden had originally proposed doubling the rate, to about 40%. However, that would have been a huge change, and guaranteed to provoke a backlash, so Congressional Democrats balked at that idea.

Democrats rejected the wealth tax proposed by Sen. Elizabeth Warren (D-MA), which was a very bad idea. (Only four countries in the world have a wealth tax.) The Democrats also apparently turned down a proposal to tax unrealized capital gains. That approach could have created problems for many investors, by forcing them to sell some stocks so they could pay taxes, even though they had not yet taken a profit yet.

Will the U.S. Move Forward…or Stagnate?

For the last several decades, American conservatives have been obsessed with tax cuts for their donor base: corporations and wealthy Americans. They are proud of “starving the beast”, cutting the government’s revenues and limiting public investments in infrastructure and social programs. But their policies have been a recipe for economic and social decline.

We are at an inflection point. If Congress passes the Biden agenda, America can revitalize its economy and move forward. If not, we will stagnate, and the divisions in our society will grow even sharper.

Guess which side the guys in Beijing are rooting for?

The Wall Street Democrat

Ryan O’Connell