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President Joe Biden’s $ 3.5 trillion economic agenda, and the social spending it will lead to, is very similar to modern US history.
According to economists and historians, the New Deal era of the 1930s and the great society of the 1960s are the closest comparison.
During the period of vast social expansion marshalled by Presidents Franklin D. Roosevelt and Lindon B. Johnson, some of the most popular programs in the United States, including social security, Medicare, Medicaid, and unemployment insurance, were created. it was done.
According to experts, Biden’s buildback better reforms will increase spending in areas such as childcare, medical care, paid leave and education, sharing characteristics with these past times, but important. It differs in that.
“They’re all important,” said Stephen Marglin, an economist at Harvard University, about Biden’s agenda prong. “All of these are some of the important and necessary and social infrastructures for 21.NS The economy of the century. “
Birth of social spending
According to John Joseph Wallis, an economic historian and professor at the University of Maryland, the country was small when the Great Depression struck in 1929. At that time, most social welfare programs were funded and operated by local governments.
However, the FDR’s series of New Deal programs in the 1930s fundamentally changed public expectations of Washington and the role of government in their lives.
According to economists, social security retirement benefits and unemployment insurance were the most important and lasting reforms of the period. Supplement Some modern programs, such as nutrition support programs (food stamps) and temporary assistance for poor families (also known as welfare), have roots in the New Deal reform.
Then, in 1965, President Johnson’s War on Poverty created Medicare and Medicaid, a public health program for the elderly and the poor.
The federal government also began to double the value of social security benefits between 1965 and 1972 and nail them to rising living costs, said Erwin, professor and co-founding director of the Center for Poverty and Social Policy. Garfinkel says. Columbia University. (Some of these reforms happened during President Richard Nixon’s tenure.)
“What we did in the 1960s, most notably, was to almost wipe out poverty in the elderly,” Garfinkel said.
Biden’s proposal is coming at a time of similar economic and social upheavals in the United States.
The pandemic downturn was the worst recession since the Great Depression, leaving millions unemployed overnight. Simultaneous calculations with racial inequality after George Floyd’s murder reminded us of the civil rights movement of the 1960s and spotlighted the inequality impact of the recession on minorities and the poor.
According to experts, US social programs were primarily focused on older people, but Biden’s agenda will shift its focus to children and families.
According to one estimate, the expansion of the child tax credit he proposed would cut child poverty in half. (Child poverty is the percentage of children living in poor families.)
“It’s not as bad as it is for older people,” Garfinkel said.
Biden’s proposal will also expand programs for the elderly, for example by adding the visual, dental and auditory benefits of Medicare.
It is difficult to compare the overall costs and expenses of the Build Back Better and New Deal and Great Society eras.
For one thing, the budgeting tools that the federal government is using today to measure costs weren’t there at the time. However, considering costs as a share of the US economy is one of the best ways to determine the relative scope of the program, economists say.
Biden’s proposed $ 3.5 trillion plan will spend more than a decade. That’s about $ 350 billion a year, which is about 1.5% of the country’s current $ 22.7 trillion in gross domestic product and is an indicator of economic output.
This 1.5 point increase is a huge leap from the last few decades, but smaller than that of Roosevelt and Johnson’s time.
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By 1939, the share of federal social welfare spending had reached 3.6% of GDP, the peak of the New Deal era, according to an analysis by Professor Price Fishback of the University of Arizona, who studies New Deal’s political economy. .. This is an increase of 2.7 percentage points compared to 1933.
In 1963, social spending was 4.1% of GDP. By 1973, it had jumped 3.3 points to 7.4%, according to Fishback.
“This is a lot of money,” Fishback said of Buildback Better. “”[But] It doesn’t look like a big budget buster. “
The situation is a little different when considering per capita spending to explain the US population growth of the last century.
According to Fishback, Biden’s plans are to increase social spending by about $ 1,060 per person per year. By comparison, the New Deal policy had inflated spending around $ 400 per person by the end of the 1930s. From 1963 to 1973, spending increased by $ 2,571 per capita.
One caveat: Biden’s proposed spending would be on top of the existing social welfare system, Fishback said. And it’s unclear how the program will grow over time or become a permanent fixture.
Social security, for example, paid little profit in the early days, but accounted for about $ 1 trillion, or 23%, of the federal budget for 2019.
And the overall price tag may change during parliamentary negotiations. One major Senate Democrat, Joe Manchin, DW.Va. Said Thursday that it would not support a law that exceeds $ 1.5 trillion, less than half of Biden’s proposal.
Investment vs. spending
Of course, some economists consider these federal spending to be “investments” in the country’s future, not full spending.
“I almost [$3.5 trillion] The plan is a little more comparable to LBJ’s fight against poverty [than to the New Deal]We are trying to address long-term strategic issues, “said Krishna Kumar, director of international research and senior economist at RAND Corporation.
Investing in children (beginning of life cycle) rather than older people (towards the end of life) distinguishes Biden’s plans, he explained.
In addition to expanding child tax deductions, the plan calls for reduced childcare costs, a two-year universal kindergarten, 12 weeks of paid family and medical leave, and two years of free community colleges.
According to Kumar, the United States lags behind other developed countries in the Organization for Economic Co-operation and Development in many of these categories.
Such “investments” have the potential to bring economic benefits in the future. For example, healthy and well-educated children tend to live longer, earn more as adults, pay more taxes, and are less likely to rely on safety nets, Garfinkel said.
Investing in early childhood programs returns $ 2 to $ 4 per $ 1 invested, according to RAND analysis.
Beyond the New Deal and the Great Society
According to economists, Biden’s plans differ from their predecessors in several ways.
Perhaps most importantly, its benefits are spread over a wide range of American populations, not just the poorest.
This brings the United States closer to the social models adopted in Scandinavian countries such as Norway and Sweden, perhaps reflecting that childcare issues are also affecting middle-class families, economists said. ..
For example, poor families benefit most from the expanded child tax credit, but additional funding also reaches high-income households (individuals with incomes up to $ 200,000 and couples up to $ 400,000).
Overall, this expansion doubles the average family’s interests to about $ 5,100, according to the Congressional Research Service.
William Hoagland, Senior Vice President of the Bipartisan Policy Center, said: “It will transfer public resources to more people.”
This strategy can help to gain political support for Biden’s initiative. According to Harvard economist Marglin, the focus is, for example, on the poorest individuals, but because it erodes the base of their supporters, it is a “political disaster recipe.”
“This is how our political system works,” he said. “The great innovators understood that.”
“It was what Franklin Roosevelt knew in 1935, and I’m sure Lindon Johnson knew it in 1965, and Joe Biden was sure he knew it.” He added.
Comparison of Biden’s economic plan with the Great Society and the New Deal
Source link Comparison of Biden’s economic plan with the Great Society and the New Deal