US progressives need more than Biden’s relief plan

US Politics: Test is whether Americans will accept higher taxes to make policies sustainable in the long term

US President Joe Biden  comments  on the American Rescue Plan at the Rose Garden of the White House in Washington DC, earlier this month.  Photograph: Jim Lo Scalzo/Pool/EPA

US President Joe Biden comments on the American Rescue Plan at the Rose Garden of the White House in Washington DC, earlier this month. Photograph: Jim Lo Scalzo/Pool/EPA

 

Those who failed to see a social change coming are the most liable to overrate it. And so a press that dismissed Donald Trump’s presidential chances in 2016 (as I did) later invested him with a near-mystical sway over “real” Americans, whoever they are. Embarrassment at being caught unawares led to the equal and opposite folly of overcompensation. It took the voters of Michigan and elsewhere to scotch the legend of Trump as the heartland-whisperer last November.

It is possible that something similar is going on with President Joe Biden and his $1.9 trillion fiscal relief Bill. For anyone willing to see, America’s social democratic turn has been in the works for decades now. The one Republican to win the popular vote in a White House race since 1988, George W Bush in 2004, had widened Medicare the year before. Quietly, voters have grown to like Barack Obama’s Affordable Care Act. Public surveys disclose a culture that is no longer one of masochistic self-reliance, if it ever was.

But then nor is today’s progressive moment quite as resounding as currently billed. The test is not whether voters like cash that is time-limited, crisis-enforced and financed by the awesome borrowing power of the US government. Of course they do. The test is whether they will accept higher taxes to make it sustainable in the long term. The Biden administration has not even begun to confront them with the choice.

Welfare state

This is where the comparisons with Lyndon Johnson and – for heaven’s sake – Franklin Roosevelt start to break down. In enlarging the welfare state, those presidents were playing for keeps. Roosevelt’s universal pension scheme is the one that exists today. Johnson legislated for Medicaid, Medicare and even National Public Radio: all fixtures of US life in 2021.

Perhaps Biden will get around to reforms of similar permanence and persuade voters to pay for them. Until then, it is frivolous to pass off his American Rescue Plan as anything of the kind. The principal components of its vast outlay – direct cheques, plus increases in tax credits and unemployment benefit – are all meant to expire.

Perhaps the centre-left has been on the defensive for too long to recall the nature of its original creed. The progressive ideal is that citizens pay for a lasting, generous state, in which all can dip their beaks. Borrowing for emergency measures is not quite the same thing. Nor, really, is that other Biden plan: a tax increase on the rich alone.

The point is universal sacrifice for universal insurance, in part to ensure viable, broad-based funding, but also as a badge of citizenship in itself. The government is, as Biden said last week, “all of us”.

On this score, the Democrats still have all their work ahead of them. As a share of national output, US tax revenue ranks 32nd out of the OECD’s 37 countries, just ahead of Turkey. It is slightly more than half that of Denmark. Unless the plan is to become an extravagant and eternal debtor, the US has to raise its tax “burden” (how tellingly sour a phrase) or trim its dreams of progressive change.

Astronomical

Even those who deplore the content must grant the president’s feat of lawmaking. The sums are so astronomical as to give committed Keynesians pause. And whereas Roosevelt and Johnson enjoyed strapping majorities in Congress, Biden had to finesse his Bill into law.

It is just that, of late, the praise has elided permanence with transience, and social reform with ephemeral measures. There is much burbling about a grand new compact between capital and labour, as though the relief Bill contains much in the way of structural change.

Yet weirder is the idea that Biden has closed an age of craven Democratic submission to something called “neo-liberalism”. This travesty of the recent past is worth correcting now. The healthcare model for which Biden has increased subsidies had to be created. Obama did it. The child tax credit that Biden has enhanced temporarily had to be introduced in the first place.

That was the work of Bill Clinton, who also passed the last sweeping round of federal tax increases in 1993. These alleged sell-outs did a lot for Americans caught up in what Johnson’s father called, with a flourish not given to his son, the “tentacles of circumstance”.

No doubt, they have the scars on their backs to show for it. But then so will Biden if he tries to entrench what is for now a fleeting munificence. A proper welfare state must be paid for. Such is the political Everest that should daunt the Democrats, and the opening that awaits the Republicans. – Copyright The Financial Times Limited 2021

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