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President Joe Biden’s $3.5 trillion economic agenda and social spending from it is very similar to modern American history.
According to economists and historians, the New Deal era of the 1930s and the Great Society of the 1960s are the closest comparison.
Presidents Franklin D. Roosevelt and Lyndon B. During the period of enormous social expansion driven by Johnson, some of the most popular programs were created in the United States, including Social Security, Medicare, Medicaid, and unemployment insurance. He was done.
According to experts, Biden’s buildback of better reforms will lead to increased spending in areas such as childcare, medical care, paid leave and education, sharing characteristics with these past times, but significant. In this it differs.
“They are all important,” Stephen Marglin, an economist at Harvard University, said of Biden’s agenda. “These are some important and essential and social infrastructure for all 21.ns century economy. “
the birth of social spending
According to John Joseph Wallis, an economic historian and professor at the University of Maryland, when the Great Depression hit in 1929, the country was small. At that time, most social welfare programs were funded and operated by local governments.
However, FDR’s series of New Deal programs in the 1930s radically changed Washington’s public expectations 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. Supplemental Some modern programs, such as the Nutrition Assistance Program (Food Stamp) and Temporary Assistance for Poor Families (also known as welfare), have their roots in the New Deal Reformation.
Then, in 1965, President Johnson’s war on poverty created Medicare and Medicaid, a public health program for the elderly and poor.
Irwin, a professor and co-founding director of the Center for Poverty and Social Policy, said the federal government began doubling the value of Social Security benefits between 1965 and 1972 and withholding them over rising cost of living. Garfinkel says. Columbia University. (Some of these reforms took place during President Richard Nixon’s tenure.)
“What we did in the 1960s, most notably, was to virtually eradicate poverty among the elderly,” Garfinkel said.
Biden’s proposal comes at a time of similar economic and social upheaval in the US.
The pandemic recession was the worst recession since the Great Depression, leaving millions unemployed overnight. Racial inequality as well as calculations following the assassination of George Floyd reminded us of the civil rights movement of the 1960s and highlighted the effects of recessionary inequality on minorities and the poor.
According to experts, US social events were primarily focused on older people, but Biden’s agenda will shift its focus to children and families.
According to one estimate, the extension of the child tax credit proposed by him will 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 would also expand programs to the elderly, for example by adding Medicare’s visual, dental and hearing benefits.
It’s 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 tool the federal government is using today to measure costs was not there at the time. However, considering costs as part 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 would take more than a decade. That is, about $ 350 billion annually, which is about 1.5 percent of the country’s current GDP of $ 22.7 trillion and is an indicator of economic output.
This 1.5 point increase is a huge jump from the past few decades, but small compared to the times of Roosevelt and Johnson.
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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 analysis by Price Fischbach, a University of Arizona professor who studied the political economy of the New Deal. .. 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.
“That’s a lot of money,” Fischbach said of Buildback Better. “”[But] It doesn’t look like a big budget buster. “
The situation differs slightly when per capita spending is considered to explain the US population growth of the last century.
According to Fischbach, Biden plans to increase social spending by about $1,060 per person per year. By comparison, the New Deal policy raised spending per capita by about $400 by the late 1930s. From 1963 to 1973, spending increased by $2,571 per person.
One caveat: Biden’s proposed spending would be on top of the existing social welfare system, Fischbach said. And it’s not clear how the program will grow over time or become a permanent fixture.
Social Security, for example, offered little benefits in the early days, but accounted for about $1 trillion, or 23%, of the 2019 federal budget.
And the overall price tag may change during parliamentary talks. A prominent Senate Democrat, Joe Manchin, DW.Va. said on Thursday he would not support legislation worth more than $1.5 trillion, less than half of Biden’s proposal.
investment vs spend
Of course, some economists consider these federal spending to be “investments” in the nation’s future, not the entire spending.
“I’m almost [$3.5 trillion] The Plan Is Little More Than LBJ’s Fight Against Poverty [than to the New Deal]We are trying to address long-term strategic issues,” said Krishan Kumar, director of international research and senior economist at RAND Corporation.
Investing in children (the beginning of the life cycle) rather than the older ones (towards the end of life) sets Biden’s plans apart, he explained.
In addition to expanding the child tax deduction, the plan includes a reduction in childcare costs, two years of universal kindergarten, 12 weeks of paid family and medical leave, and two years of free community college.
According to Kumar, in many of these categories the United States lags behind other developed countries in the Organization for Economic Co-operation and Development.
Such “investments” have the potential to bring economic benefits in the future. For example, healthy and well-educated children live longer, earn more as adults, pay more taxes, and are less likely to rely on a safety net, Garfinkel said.
According to the RAND analysis, investing in early childhood programs yields a return of $2 to $4 per $1 invested.
Beyond the New Deal and the Great Society
According to economists, Biden’s plans differ from those of his predecessors in several ways.
Perhaps most importantly, its benefits extend to a wide range of the American population, not just the poorest.
Economists said this brings the United States closer to the social model adopted in Scandinavian countries such as Norway and Sweden, perhaps showing that child care issues are also affecting middle-class families. ..
For example, poor families benefit the most from the Extended Child Tax Credit, but additional funding also reaches high-income families (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 could help garner political support for Biden’s initiative. According to Harvard economist Marglin, for example, the focus is on the poorest individuals, but because it destroys their base of supporters, it is a “political disaster recipe”.
“This is how our political system works,” he said. “Great innovators understood this.”
“It was what Franklin Roosevelt knew in 1935, and I’m sure Lyndon Johnson knew it in 1965, and Joe Biden was sure he knew it.” she added.
Source Links Comparison of Biden’s Economic Plan with the Great Society and the New Deal