How Biden’s economic plan compares to the Great Society and the New Deal


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President Joe Biden’s $ 3.5 trillion economic program – and the social spending it would introduce – has few parallels in modern American history.

The New Deal era of the 1930s and the Great Society of the 1960s are its closest comparisons, according to economists and historians.

These periods of vast social expansion – hosted by Presidents Franklin D. Roosevelt and Lyndon B. Johnson respectively – saw the creation of some of our country’s most popular programs, such as Social Security, Medicare, Medicaid and unemployment insurance.

Biden’s Build Back Better reforms – which would increase spending in areas such as childcare, health care, paid time off, and education – share traits with those eras gone by but diverge significantly, have said the experts.

“They’re all important,” said Stephen Marglin, an economist at Harvard University, of aspects of Biden’s program. “They are all part of what we should consider necessary infrastructure, social infrastructure, this is important for a 21st economy of the century. “

The birth of social spending

The national government was small when the Great Depression hit in 1929. At the time, most welfare programs were funded and administered by local government, according to John Joseph Wallis, economic historian and professor at the University of Maryland.

But FDR’s series of New Deal programs in the 1930s fundamentally changed public expectations of Washington and the role of government in their lives.

Social security retirement benefits and unemployment insurance were the biggest and longest lasting reforms of this period, according to economists. Some modern programs – like the Supplemental Nutritional Assistance Program (Food Stamps) and Temporary Assistance to Needy Families (also known as Social Assistance) – have their roots in New Deal reforms.

Later, in 1965, President Johnson’s war on poverty led to the creation of Medicare and Medicaid, public health plans for the elderly and the poor.

The federal government also roughly doubled the value of social security benefits between 1965 and 1972, and began to tie them to the rising cost of living, according to Irwin Garfinkel, professor and co-founding director of the Center on Poverty and Social Policy at Columbia University. (Some of these reforms took place during President Richard Nixon’s tenure.)

“What we did in the 1960s, what was most remarkable, was that we almost eliminated poverty among the elderly,” Garfinkel said.

Biden’s proposals come at a time of similar economic and social upheaval in the United States.

The pandemic downturn was the worst recession since the Great Depression, throwing millions of people out of work overnight. The country’s simultaneous reckoning with racial inequalities after the murder of George Floyd was reminiscent of the civil rights movement of the 1960s and highlighted the uneven impact of the recession on minorities and the poor.

While U.S. social programs were largely geared toward the elderly, Biden’s program would shift that focus somewhat to children and families, experts say.

According to one estimate, his proposal to expand the child tax credit would cut child poverty in half. (Child poverty is the share of children living in poor households.)

“It’s not quite like we did for the elderly, but it’s not bad,” Garfinkel said.

Biden’s proposal would also expand programs for the elderly, adding visual, dental and hearing benefits to Medicare, for example.

Cost of the program

It’s hard to compare the overall cost and expense of Build Back Better compared to the New Deal and Great Society eras.

On the one hand, the budgeting tools that the federal government uses today to assess costs did not exist at the time. But looking at cost as a share of the U.S. economy is one of the best ways to judge the relative reach of programs, economists said.

Biden’s $ 3.5 trillion plan would be spent over 10 years. That’s about $ 350 billion a year, or about 1.5 percent of the country’s current gross domestic product, or $ 22.7 trillion, a measure of economic output.

This 1.5 point increase is a big jump from the past decades, but is lower than in the Roosevelt and Johnson eras.

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In 1939, the share of federal welfare spending reached a New Deal-era peak of 3.6 percent of GDP, according to an analysis by Price Fishback, a University of Arizona professor who studies political economy of the New Deal. This is an increase of 2.7 percentage points from 1933.

In 1963, social spending represented 4.1% of GDP; by 1973 it had jumped to 7.4%, an increase of 3.3 points, Fishback said.

“It’s a big amount of money,” Fishback said of Build Back Better. “[But] it doesn’t sound like a big budget, ”he added.

The picture is somewhat different when considering per capita spending, to account for the growth of the US population over the past century.

Social spending would increase by about $ 1,060 per person per year under Biden’s plan, Fishback said. By comparison, New Deal policies had inflated spending by about $ 400 per person by the late 1930s; expenses increased by $ 2,571 per person between 1963 and 1973.

We are redefining the safety net to the next level. It will shift public resources to more people.

William hoagland

senior vice president at the Bipartisan Policy Center

One caveat: The spending proposed by Biden would be in addition to the existing welfare system, Fishback said. And it is not clear how or if the programs can develop over time or become permanent devices.

Social Security, for example, paid few benefits in its early years, but accounted for about $ 1 trillion, or 23%, of the federal budget in 2019.

And the overall price may change during negotiations in Congress. Key Senate Democrat Joe Manchin, DW.Va., said Thursday he would not support legislation exceeding $ 1.5 trillion – less than half the amount of Biden’s proposal.

Investment vs expenses

Of course, some economists view these federal spending as “investments” in the future of the country rather than outright spending.

“I almost think the [$3.5 trillion] plan is a little more comparable to LBJ’s war on poverty [than to the New Deal]because it tries to solve long-term strategic problems, ”said Krishna Kumar, director of international research and senior economist at RAND Corporation.

Investing in children (the beginning of the life cycle) as opposed to the elderly (towards the end of their life) distinguishes Biden’s plan, he explained.

In addition to an expanded child tax credit, the plan includes lower child care costs, two years of universal preschool, 12 weeks of paid family and medical leave, and two years of free community college.

The United States lags behind other rich developed countries in the Organization for Economic Co-operation and Development in many of these categories, Kumar said.

Such “investments” can produce economic benefits in the future. For example, healthier and more educated children tend to live longer, earn more as adults, pay more taxes and rely less on the safety net, Garfinkel said.

Investing in early childhood programs earns $ 2-4 for every dollar invested, according to RAND analysis.

Beyond the New Deal and the Big Society

Biden’s plan diverges from his predecessors in some ways, economists say.

Perhaps more importantly, its benefits are spread over a large portion of the American population – not just the most needy.

This brings the United States closer to a social model adopted by Scandinavian countries like Norway and Sweden, perhaps reflecting that childcare issues also affect middle-class families, economists said.

For example, poor families get the biggest gains from the Expanded Child Tax Credit, but additional funds also reach higher-income households (people with up to $ 200,000 in income and married couples with up to $ 200,000 in income). at $ 400,000.)

Overall, the expansion doubles average family benefits to nearly $ 5,100, according to the Congressional Research Service.

“We are redefining the safety net to the next level,” said William Hoagland, senior vice president of the Bipartisan Policy Center. “It will shift public resources to more people.”

This strategy can help garner political support for Biden’s initiatives. A narrower focus – only on the poorest individuals, for example – is a “recipe for political disaster” because it erodes the supporter base, according to Marglin, an economist at Harvard.

“This is how our political system works,” he said. “The great innovators have understood this.

“It was something Franklin Roosevelt knew in 1935, and I’m sure Lyndon Johnson knew it in 1965, and I’m sure Joe Biden knows it too,” he added.


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