Already, President Joe Biden has enacted two unprecedented pieces of legislation: The fiscal stimulus of 2020 and the Infrastructure Bill, a combined total of $2.9 Trillion in investment in the Covid impact on Americans and in our universally agreed aged and dangerous infrastructure. Administrations before Biden have been talking infrastructure needs for decades, but no one before has actually done anything. He’ll have a great legacy, even if only this is accomplished before the Congress makes its regular mid term shift to the opposition party.
Now pending is Build Back Better, which I predict will get enacted in 2022, in some form not radically different than already approved by the House of Representatives. This prediction stands, notwithstanding the position held by Senator Manchin.
This bill has the following major elements:
$555B fighting climate change—mostly tax credits for solar installations, plus 330,000 jobs to restore forests and wetlands
$400B for universal pre-k—for all 3 and 4 year olds
$200B for child tax credits—this is not a new benefit, but extends the expiration one more year
$200B for 4 weeks of paid leave—we are one of the few industrialized nations without one
$165B for health care
$150B for in-home health care
$150B for affordable housing–provides assistance to those unable afford our costly rental housing
Liberal views: Critical assistance to our underprivileged, in a country with the weakest social support system among developed countries, and with the highest inequality.
Conservative views: Adds too much to the national debt and will increase inflation.
Manchin view: The priority elements of the program need to be funded for the full 10 years, and not dependent on future Congresses extending them. He may require a smaller bill if Democrats cannot agree on additional funding. That funding would be available by increasing taxes on the wealthy, so the Democrats have work to do among their own Senators and Representatives.
Notably, none of the Conservative pundits criticize the need or value of these programs–just “we can’t afford it.” They criticize adding taxes, and constantly inaccurately complain that the proposed tax increases will be applied to working class folks and small businesses. That’s not true–just attempts to garner American sentiment against–thus making the polls suggest the bill is unpopular. In fact, all of the social service elements of the bill are extremely popular and in great need.
First, the Republican history: No Republican President has reduced the national debt during his term. Most recently Donald Trump dramatically increased it by enacting his tax cut which went 80% to the wealthy and was not financed by any savings elsewhere. The debt rose by $7.8 Trillion during Trump’s term. So the Conservative hype about debt concerns is highly hypocritical.
By comparison, the Congressional Budget Office, non-partisan, estimated BBB’s $1.75 Trillion ten year spend will be short only $250 Billion in accompanying sources of funding–primarily from increased taxes on the ultra wealthy and establishing a minimum 15% tax on corporations, many of which have used a variety of legal loopholes to pay nothing, for years.
Is it a perfect bill? No. Is there ever a perfect bill in our highly divided Congress, where each representative is beholden to frequent returns to the ballot box and to the demands of their constituents? No. Trump’s tax cut bill was abysmally imperfect. Larry Summers said, “I think it’s a serious policy error that will make middle class Americans poorer.” And, Manchin is right that it would be ideal to fund all elements for the full 10 years.
A fan of the Biden’s BBB, Summers thinks it should tax the wealthy more and close tax loopholes. Original plans did so, but so called “moderate” Democrats opposed some of these provisions, regrettably. I belong to Patriotic Millionaires which fights for higher taxes on the wealthy of us.
Will this bill lead to inflation? No. Our inflation is largely Covid driven, and when the supply chain and Covid issues are resolved, we will return to reasonable inflation.
Time Magazine on BBB and inflation: “The major ratings agencies Moody’s and Fitch both agree that BBB and the recently enacted infrastructure legislation would not add to inflationary pressures. Also, many leading economists have concluded that BBB would not make the Fed’s task of controlling inflation more difficult and should not stand in the way of enacting the needed investments in BBB, which would expand the economy’s capacity to produce goods and services in the longer term, strengthen economic growth, and ease future inflationary pressures.”
Larry Summers on BBB inflation: “Because that [BBB} spending is offset by revenue increases and because it includes measures such as child care that will increase the economy’s capacity, Build Back Better will have only a negligible impact on inflation.”
There you have it. Needs adjustments to satisfy Democrats, including Manchin. A critical piece of legislation that needs to get approved. President Biden’s approval ratings notwithstanding, his legacy is written and it looks equivalent to that of Lyndon Johnson (a one term President) and even to FDR. By comparison, Donald Trump was a legislative failure of great proportions.