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Comparison of Biden’s economic plan with the Great Society and the New Deal

By on October 2, 2021 0

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President Joe Biden’s $ 3.5 trillion economic program and the social spending it will entail are very similar to modern U.S. 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 organized 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, took off. been created. it was done.

Experts say Biden’s best reforms will increase spending in areas such as child care, medical care, paid time off and education, sharing characteristics with those past, but important times. It differs in this.

“They’re all important,” said Stephen Marglin, an economist at Harvard University, of the part of Biden’s agenda. “This is all part of the important and necessary social infrastructure for 21.NOT. 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 hit in 1929. At that time, most welfare programs were funded and administered by governments. local.

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

Social security retirement benefits and unemployment insurance have been the most important and long-lasting reforms of the period, according to economists. Supplement Some modern programs, such as nutritional support programs (food stamps) and temporary assistance to poor families (also known as social assistance), have their roots in the reform of the New Deal.

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 doubling the value of Social Security benefits between 1965 and 1972 and tackling them upward in the cost of living, said Erwin, professor and co-founding director of the Center for Poverty and Social Policy. Garfinkel said. Columbia University. (Some of these reforms took place during President Richard Nixon’s tenure.)

“What we did in the 1960s, in particular, was to almost eliminate poverty among the elderly,” Garfinkel said.

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

The pandemic downturn was the worst recession since the Great Depression, leaving millions unemployed overnight. The simultaneous calculations with racial inequalities after the murder of George Floyd reminded us of the civil rights movement of the 1960s and shed light on the impact of the recession on inequality and the poor.

According to experts, America’s social programs were primarily focused on the elderly, but Biden’s program will focus more on 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 for the elderly,” Garfinkel said.

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

Cost of the program

It’s difficult to compare the overall costs and expenses of the Build Back Better, New Deal, and Great Society eras.

On the one hand, the budgetary tools that the federal government uses today to measure costs did not exist at the time. However, viewing costs as a share of the U.S. 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. This is about $ 350 billion a year, or 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 decades past, but smaller than in Roosevelt and Johnson’s time.

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

In 1963, social spending represented 4.1% of GDP. By 1973, it had jumped 3.3 points to 7.4%, according to Fishback.

“That’s a lot of money,” Fishback said of Buildback Better. “”[But] It doesn’t sound like a big budget. “

The situation is a little different when you consider the per capita spending to explain the growth of the American population 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, New Deal policy had inflated spending by about $ 400 per capita by the late 1930s. From 1963 to 1973, spending increased by $ 2,571 per capita.

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

William hoagland

Senior Vice President of the Biparty Policy Center

One caveat: The spending proposed by Biden would be in addition to the existing welfare system, Fishback said. And it’s unclear how the program will develop over time or become a permanent fixture.

Social Security, for example, paid little in profit at first, but accounted for around $ 1 trillion, or 23%, of the federal budget for 2019.

And the overall price may change during parliamentary negotiations. Great Senate Democrat Joe Manchin, DW.Va. Said Thursday he would not support a law that exceeds $ 1.5 trillion, less than half of Biden’s proposal.

Investment vs expenses

Of course, some economists view these federal expenditures as “investments” in the future of the country, and not as full expenditures.

“I almost [$3.5 trillion] The plan is a little more like LBJ’s fight against poverty [than to the New Deal]We are trying to solve long-term strategic problems, ”said Krishna Kumar, director of international research and senior economist at RAND Corporation.

Investing in children (early in the life cycle) rather than in the elderly (near the end of life) sets Biden’s plans apart, he explained.

In addition to expanding child tax deductions, the plan includes reduced child care costs, a two-year universal kindergarten, 12 weeks of paid family and medical leave, and two years of free community college.

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, well-educated children tend to live longer, earn more as adults, pay more taxes and are less likely to depend on safety nets, Garfinkel said.

Investing in early childhood programs pays $ 2 to $ 4 for every $ 1 invested, according to RAND analysis.

Beyond the New Deal and the Big Society

According to economists, Biden’s plans differ from their predecessors in several ways.

Perhaps more importantly, its benefits are spread across a wide range of American populations, not just the poorest.

This brings the United States closer to social models adopted in Scandinavian countries such as Norway and Sweden, perhaps reflecting that childcare issues also affect middle-class families, economists said. ..

For example, poor families benefit the 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 interests of the average family to about $ 5,100, according to the Congressional Research Service.

William Hoagland, senior vice president of the Bipartisan Policy Center, said, “This will transfer public resources to more people.”

This strategy can help garner political support for Biden’s initiative. According to Harvard economist Marglin, the focus is, for example, on the poorest individuals, but because this erodes the base of their supporters, it is a “recipe for political disaster”.

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

“This 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.

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