The American Recovery Plan Act: $1.9 trillion. The American Jobs Plan: $2 trillion. The American Family Plan $1.5 trillion. It’s fair to say that the Biden administration’s attempts to transform the country are adding up. We keep being told, by the very enthusiastic pro-Democrat press corps, not to underestimate the radicalism of the new president, and Joe Biden is eager to prove the point. He really is proposing to remold the American economy and his government is wasting little time. He and his advisers clearly take the FDR comparisons seriously.
But the trouble with gargantuan government spending is that, even in the topsy-turvy world of pandemic economics, the people of the country eventually have to foot the bill. The messaging from the Biden administration at the moment is that it will be the very rich who will shoulder the fiscal burden. In order the fund the American Family Plan, Biden will double the capital gains tax for people earning more than $1 million a year, apparently. He will also raise the top marginal income tax rate to 39.6 percent from 37 percent. Reports of these proposals have sent global stock markets (and cryptocurrencies) tumbling.
The American Family Plan is not lacking in ambition, and its goals are noble. It aims to make kindergarten and community college free for all. It aims to support childcare and establish a national paid leave program for parents. It will not include healthcare reforms, as many had expected, which has apparently disappointed some senior Democrats, including House Speaker Nancy Pelosi. Team Biden will, however, launch another separate health scheme soon. Whatever the issue, the Biden administration probably has a trillion-dollar plan for it.
Conservatives and free-market types can call it ‘un-American’ until they are blue in the face. The problem for the Republican party is that squeezing the rich is popular, even in America and especially in 2021. The rich have prospered during the pandemic as the poor suffered. Middle-or-low income families have struggled for decades; today, many are desperate. Public opinion on fiscal matters has moved leftwards ever since the 2008 crash. COVID-19 has only accelerated that.
But ‘rebalancing the American economy’, as the New York Times likes to call it, will not be as simple dialing up a few taxes on the rich and corporations and spraying the less fortunate with handouts and credits. The post-pandemic recovery could easily be derailed if the stock market slides and growth stalls. Voters may be less enthusiastic about dramatic moves to reduce inequality if everyone becomes poorer.
The Biden administration knows this, which is why the tax increases still sound non-committal. None of Biden’s tax hikes has been signed into law yet, and Team Biden insists that, as he promised on the campaign, anybody earning under $400, 000 will not have to pay more. For now, then, Biden sounds and feels radical. But will he really squeeze the rich? Or will he just resort to removing Donald Trump’s tax cut, take America back to the Obama era, then blame Republicans for blocking economic justice? The proof is yet to come.