Democrats see slipping economic opportunity to expand

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Government action dreams of radically expanding opportunity for the millions of Americans left behind by changes in the modern economy. The political tide is set to turn away unified Democratic control of the White House and Congress this fall, and with it Biden’s chance to serve for the rest of his term, if not longer.
“It could be five, 10, 20 years,” said Jason Furman, once a top economic adviser to President Barack Obama and now a Harvard professor. “It could be a generation.”

Since the 1980s, Democrats have offered a consistent refrain about the information age economy: that it makes the rich richer, suppresses wages for the middle class and leaves the poor further behind. To reduce inequality and expand opportunities, his economic advisors earmarked government investment in education, health care, training, infrastructure and support for families, all financed by higher taxes on the affluent.

A political era favoring low taxes and small government has allowed him only limited success.

In the 1990s, President Bill Clinton oversaw an economic boom that, while it lasted, uplifted the fortunes of poor and working-class Americans. Later, Obama steered clear of the Great Recession and mobilized a Democratic-led Congress to implement America’s first national health care program.

But Republican opposition thwarted his efforts to win big investments in “human capital” and economic change. Major legislative action on priorities such as expanding early childhood education, modernizing infrastructure and curbing carbon emissions to slow the planet’s warming fell by the wayside.

Federal spending on popular benefit programs for retirees continued to grow. Federal spending on the future – capital investment, research and development, education and training – decreased. From a peak of more than 6% in the 1960s, those budget investments declined by more than half.

Last year, President Donald Trump’s defeat of Biden and the return of a Democratic-controlled Congress sparked an outburst of optimism about reversing that trend. Biden proposed trillions in spending on the coronavirus pandemic, infrastructure, climate change and helping struggling families.
Some of that optimism was confirmed. Democrats swiftly passed the rescue plan, which includes increased subsidies for Obamacare health insurance and increased tax credits that alleviate childhood poverty. Biden struck a deal with Republicans to implement upgrades to national infrastructure.
But the extra help for families and climate change policy came crashing down in resistance from holdout Democratic senators. The Expanded Child Tax Credit, which is temporarily included in the rescue plan, has expired, as the expanded Obamacare subsidy will expire later this year. While private talks between the White House and congressional Democrats on some form of reviving the Build Back Better package continue, there is no sign of success.
The blame game has targeted many criminals. Republican resistance means that Democrats – with a majority of the Senate, including a member of a deeply conservative state – can only act with unanimity. That senator, Joe Manchin of West Virginia, either made a deal by changing his mind or was misread by Biden and Senate Majority Leader Chuck Schumer.
Before the rescue plan was passed, veteran Democratic economist Larry Summers had issued two caveats about its $1.9 trillion price tag: that it could fuel inflation, and that it supported support for more significant long-term investments in Build Back Better. can terminate. Summers appears to have been right in both cases.

“The Biden administration was not strategic about this,” complained David Autor, a professor at the Massachusetts Institute of Technology, a leading authority on economic changes that has kept many Americans from moving forward. They fear that the window for bigger action may close again.

“We’ve been doing this for four decades: investing less in ourselves, cutting taxes, and running away from the future,” Autor said. “It just contributed to the US decline.”

Republican economists say the opportunity for wage stagnation and reduction has been exaggerated. Michael Strain of the Conservative American Enterprise Institute, author of the 2020 book “The American Dream Is Not Dead,” insists that Build Back Better may have set the economy back with wasteful, poorly designed programs.

Yet Strain supports some of the moves that overlap with Biden’s plans, such as a more limited increase in the child tax credit and the expansion of preschool programs. He sees opportunities in the long run for a bipartisan settlement along those lines, even if Build Back Better can’t be revived.

University of Maryland economist Melissa Kearney, a moderate Republican who supports much of Biden’s agenda, called the continued impasse “a dire outcome.” She still hopes for a settlement.

“The coronavirus pandemic just revealed how vulnerable so many homes are,” Kearney explained. “It cannot be overlooked.

“Investing in kids is a win-win. Millions of poor kids will do better in school, contribute more to our economy, rely less on safety net programs.”

Biden continues to make the case, including with his West Coast swing last week. “We haven’t invested in ourselves,” the president told donors at a Seattle fundraiser.

His remaining best-case scenario is half of last year’s $3.5 trillion blueprint, with the majority of new tax revenue devoted to deficit reduction rather than new spending. Possible elements: $500 billion to address climate change, limits on the prices of certain drugs, Obamacare subsidies and spending to expand early childhood education.

It would not be what he or his advisors expected. But it will be something.

“I don’t know when another opportunity will come,” Furman said, “that’s why I hope they can pull a rabbit out of a hat.”

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