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build back better
Democrats Should Take Americans’ Negative Views of the Economy Seriously
Bringing back the Covid-19-era safety net would bolster financial security and help defeat Trump and the Republicans next November.
Sep 07, 2023
By many major indicators, the economy under President Joe Biden is doing great.
Real gross domestic product (GDP) has grown 5% since 2019. Unemployment has fallen to a low of 3.7% after a peak of around 15% in the early days of the Covid-19 pandemic. And inflation, although still higher than pre-pandemic levels, appears to be receding. Real wages are up by 3.5% since Biden took office, with low-wage workers seeing the biggest of those gains between July 2022 and July 2023.
Yet many Americans still seem decidedly unhappy with economic conditions today. Several recent polls have found that people in the United States hold negative views of the economy and of how President Biden has been handling it, despite the rosy macroeconomic indicators. For instance, the Michigan Consumer Sentiment Index, which has been measuring consumer confidence levels nationwide since 1978, found that consumers’ feelings about the economy and their personal finances—although up from an all-time low last summer—were still quite negative in August 2023. And a July New York Times poll found that only 20% of Americans would rate economic conditions today as “excellent” or “good.” (By contrast, 49% rated the economy “poor.”)
This disconnect has led many pundits to wonder what’s going on, with some chalking up Americans’ low opinion of “Bidenomics” to partisanship or ignorance. Look beyond top-line metrics like GDP growth or unemployment, though, and you’ll find a more complicated story. Many Americans report struggling financially, in part because of the discontinuation of many early pandemic welfare policies. So even as the U.S. economy has reaped continued benefits from those programs and is seeing a jobs boom driven in part by the federal government’s historic investments in clean energy and domestic manufacturing, many people are understandably resentful at feeling like the ladder’s been kicked out from under them.
Instead of combining necessary investments in green manufacturing and infrastructure with social safety net provisions to protect the vulnerable, the federal government seems to be giving with one hand and taking with the other.
The situation shows that high-level metrics like GDP growth and unemployment are not good proxies for Americans’ quality of life—or for economic justice. It also demonstrates the need for a progressive economic program of combining ambitious “demand-side” welfare policies with “supply-side” investment programs like the Inflation Reduction Act (IRA). That combination is likely to be more conducive to actually helping people—while also being politically popular.
Bidenomics: Success and Failure
We can’t dismiss the high points of today’s economy, or the role Biden and national Democrats have played in rebuilding it. Real GDP and job growth have not just rebounded from the early Covid recession—they have outpaced the recovery of many other advanced capitalist countries. The United States has also been outperforming most of these nations in lowering both inflation and unemployment. The resulting tight labor market has even helped lower income inequality for the first time since the 1980s.
Biden and Democrats in Congress can take some credit for all this. The relatively generous welfare policies they passed at the beginning of the pandemic helped stimulate demand, making the recession shorter and the recovery from it stronger than would have been the case otherwise. More recent policies, like the Bipartisan Infrastructure Bill, the IRA, and the CHIPS Act, have made major investments in domestic manufacturing, further buoying the economy.
So why aren’t Americans celebrating Bidenomics? In a perceptive article at The New Republic, Kate Aronoff points out that many people simply aren’t aware of—and probably don’t viscerally care about—the administrations’ efforts to address climate change and create jobs, including the IRA. The problem is that many of these policies are “pretty boring,” Aronoff says: “Few people get up in the morning excited about the U.S. share of manufacturing employment, or tax credits to install heat pumps.” She goes on to argue that such projects should be married to more visible public investments in things like parks, swimming pools and national forests, and government support for the arts and culture—making sure that “people are having a nice time,” and that they know the government is responsible for it.
Fair enough. Creating communal spaces for leisure has long been an important element of progressive and left-wing political projects. But disapproval of Biden’s economic record isn’t just about ignorance or indifference to his policy achievements. Lots of Americans today really are dealing with economic hardship. Consider a few results from the Federal Reserve Board of Governors’ 2022 Survey of Household Economics and Decisionmaking (SHED):
- 73% of adults said they were doing OK financially—down 5% from the year prior.
- The share of adults in 2022 who said they were financially worse off than a year ago stood at 35%, the highest level recorded since the SHED started asking the question in 2014.
- 23% of adults said that their spending had increased in the past year but that their income had not.
The Census Bureau’s Household Pulse Survey contains similar revelations: Food insecurity, for instance, is at its highest level since Biden was inaugurated.
Giving With One Hand, Taking With the Other
It is not too hard to find an explanation for all this, as writers Stephen Semler and Branko Marcetic have argued. The Biden administration allowed the temporarily expansive welfare policies and economic protections enacted during the pandemic to expire. Those included emergency Medicaid and food stamp expansions, eviction moratoria, increased child tax credits, and many other anti-poverty measures.
With these policies’ expiration, it’s no wonder that many people are struggling. Homelessness is up by nearly 40% in big cities including New York and Chicago, eviction filings are on the rise; more adults have been skipping medical treatment due to cost; and only 63% of adults said they could cover a hypothetical $400 emergency expense with cash, down from 68% in 2021. The imminent end of the pause on federal student loan repayments threatens to make things much worse.
Biden and the Democratic Party did succeed in breaking with prior policy orthodoxy in two ways. The first was by passing the American Rescue Plan in early 2021, a relatively generous enlargement of the welfare state in response to the Covid-19 crisis, which focused largely on providing direct support to households. The second break came with the Bipartisan Infrastructure Bill, the IRA, and the CHIPS Act—investments focused on boosting supply-side production, including green industry. These policies aim to boost domestic manufacturing and job growth and to help speed the country’s decarbonization.
Biden still has opportunities to help working people, and there are plenty of actions that he and national Democrats could take now to make people’s lives better and to shore up political support.
But by letting the Covid welfare state collapse, the economic and political benefits of this new industrial policy are being muted. Instead of combining necessary investments in green manufacturing and infrastructure with social safety net provisions to protect the vulnerable, the federal government seems to be giving with one hand and taking with the other.
From a policy perspective, this doesn’t make much sense. The “demand-side” and “supply-side” policies serve different goals, and both sorts of programs are necessary for creating an economy that serves everyone’s needs. We need the government to invest aggressively in clean energy and green jobs. We also need programs that guarantee people healthcare, food, and housing.
No Time for Complacency
Politically, it’s clear enough why welfare has gone by the wayside—the attempt to pass a more permanent expansion of the welfare state in the form of Build Back Better (BBB) failed in Congress. It was the obstinance of conservative Democrats such as Sen. Joe Manchin (D-W.Va.) that ultimately sank BBB. Yet there’s a strong case to be made that Biden and other Democratic leaders gave away the store by failing to use their leverage. Progressives wanted to attach a vote on BBB to the Bipartisan Infrastructure Bill, which Manchin strongly supported. By allowing the vote on the infrastructure bill to proceed first, party leadership gave away much of its negotiating power to get Manchin to agree to BBB. The saga called into question the authenticity of the Biden administration’s commitment to the social spending bill in the first place.
But Biden still has opportunities to help working people, and there are plenty of actions that he and national Democrats could take now to make people’s lives better and to shore up political support. That will mean making aggressive use of executive power. First and most obvious, the Biden administration should extend the student loan repayment pause, and it should also use all powers at its disposal to actually make good on its promise to cancel student loan debt. This spring, the Congressional Progressive Caucus put forward a list of other items that Biden could enact through executive orders. These include providing generous sick leave and vacation by strengthening Service Contract Act regulations, and expanding access to healthcare premium subsidies.
Biden could also make the overwhelmingly popular move of legalizing marijuana on the federal level. The administration just announced a plan to negotiate lower prices on a number of drugs for seniors under Medicare, but Biden could take even more aggressive action to lower pharmaceutical prices across the board. Though they are currently stymied by a Republican House majority and a razor-thin Senate majority, congressional Democrats can campaign on no-brainer welfare-state measures like Rep. Rashida Tlaib’s (D-Mich.) End Child Poverty Act which would provide direct child allowances.
With 2024 presidential polls showing Biden in a dead heat with presumptive Republican nominee Donald Trump, Democratic complacency is extremely dangerous. A second Trump presidency is likely to be far worse than the first, given that the former president and his team would come in with experience and a real plan. They are planning on, among other things, cleaning house in the federal bureaucracy and filling it with loyalists, invoking the unitary executive theory to give Trump complete control over the executive branch while shielding him from prosecution, and rolling back already-insufficient progress on climate change. A Trump administration would also almost certainly replace Biden’s pro-worker National Labor Relations Board with a virulently anti-labor board.
To avoid this bleak scenario, Democrats should take Americans’ negative views of the economy seriously. This means taking action to provide material benefits to working people while improving their economic security. It also requires offering an exciting, positive alternative political vision to counter the GOP’s grievance-mongering. It will be up to progressives and the Left in and outside of Congress to articulate such a vision—and demand that Biden and the Democratic Party act on it.
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As Medicare Turns 58, It Still Must Be Protected and Expanded
Despite the demise of Build Back Better, we should not give up on expanding traditional Medicare. Real change takes time and persistence.
Jul 31, 2023
President Lyndon Johnson signed Medicare into law 58 years ago Sunday—on July 30, 1965. Before Medicare, most American seniors could not obtain health insurance; they had to rely on charity or help from relatives with medical bills.
"Millions of our citizens do not now have a full measure of opportunity to achieve and to enjoy good health. Millions do not now have protection or security against the economic effects of sickness,” said President Johnson at the signing ceremony. “And the time has now arrived to help them attain that opportunity and to help them get that protection."
Medicare was modeled on a typical Blue Cross/Blue Shield plan in 1965. The average health insurance plan 58 years ago did not include hearing, vision, or dental coverage. As Kaiser Health News points out, “Back in 1965, life expectancy was lower and health care (including dental) was more affordable.”
“When Medicare was created, its architects assumed expansion… in terms of benefits. (But) they didn’t anticipate the shift in American politics to the right.”
Today, life expectancy is longer and healthcare costs have skyrocketed. But traditional Medicare still does not cover hearing, vision, and dental care—leaving beneficiaries to bear the full cost of care for their ears, eyes, and teeth. Hearing aids, dental crowns, and eyeglasses can amount to thousands of dollars in out-of-pocket expenses, which many seniors simply can’t afford.
President Joe Biden’s original Build Back Better plan finally would have added hearing, vision, and dental coverage to traditional Medicare. The White House ultimately dropped dental and vision care from its plan after objections from Democratic centrists, leaving hearing coverage as the only potential benefit expansion. Then, the entire Build Back Better plan was killed at the end of 2021 when Senator Joe Manchin (D-W.Va.) withdrew his support, effectively ending any real chance to expand traditional Medicare benefits while Democrats controlled the White House and both houses of Congress.
As Jonathan Oberlander, professor of health policy at UNC-Chapel Hill, observed, “Medicare is the kind of program where you’d expect the benefits to be expanded over and over again.” But other than the addition of Part D prescription drug coverage (administered by private plans) in 2003, Medicare benefits have not been expanded in the 58 years since the program was enacted.
“When Medicare was created, its architects assumed expansion… in terms of benefits,” Oberlander told Kaiser Health News. “(But) they didn’t anticipate the shift in American politics to the right.” This shift, which took root with the election of Ronald Reagan in 1981, emphasized tax cuts for the wealthy and corporations, increased military spending, and spouted a lot of bluster about reducing deficits (hard to accomplish given the first two items on the list).
What President Biden called “human infrastructure”—services for everyday Americans struggling to thrive in a global economy amid growing wealth inequality—became a tougher political sell after 1981. The ill-fated Build Back Better plan was an earnest attempt to begin investing more resources in “human infrastructure.” Despite the demise of Build Back Better, we should not give up on expanding traditional Medicare. Real change takes time and persistence.
In fact, there has been real progress on Medicare in other ways. The Inflation Reduction Act (the reconstituted version of Build Back Better) finally allows Medicare to negotiate prescription drug prices with Big Pharma—an historic reform that took some 20 years to enact. The Inflation Reduction Act will cap beneficiaries’ out of pocket drug costs at $2,000 per year (starting in 2025), limits seniors’ insulin costs to $35 a month, and penalizes drug-makers for raising prices above the rate of inflation.
While Congress was unable to enact a hearing benefit for traditional Medicare enrollees, legislation introduced by Senators Elizabeth Warren (D-Mass.) and Chuck Grassley (R-Iowa) required the Food & Drug Administration (FDA) to create a rule greatly expanding access to over-the-counter (OTC) hearing aids, which the FDA did in 2022. These OTC products (suitable for mild-to-moderate hearing loss) can be significantly less expensive than prescription hearing aids. And while the president’s proposed dental benefit for traditional Medicare did not survive the legislative process, the Biden administration has expanded the definition of “medically necessary” dental care under Medicare Part B.
A 2021 study by Kaiser Family Foundation indicated that MA customers “still generally end up with significant out-of-pocket costs” for hearing, dental, and vision care.
Some Medicare Advantage (MA) plans do offer hearing, dental, and vision coverage—but those benefits are extremely modest and don’t always make up for the disadvantages of Medicare Advantage. Many MA insurers are under investigation for overbilling the government, denying authorizations for reasonable medical procedures, and misleading customers through celebrity ad campaigns. Meanwhile, Medicare Advantage plans restrict beneficiaries to limited networks of providers and sometimes don’t cover medical care outside of a patient’s home region.
A 2021 study by Kaiser Family Foundation indicated that MA customers “still generally end up with significant out-of-pocket costs” for hearing, dental, and vision care. “It stands to reason there would be lower out-of-pocket spending in Medicare Advantage than in traditional Medicare, but the differences are not as large as one might expect,” Tricia Neuman, a senior vice president at Kaiser Family Foundation, told Kaiser Health News.
These privatized Medicare plans, which unfortunately are growing in market share under the power of their advertising (boosted by a pro-MA bias during the Trump administration), were not part of the original vision for Medicare when President Johnson signed it into law. Traditional Medicare is the bedrock program which has provided seniors with health security since 1965. It must be preserved—and expanded—in accordance with the real needs of 21st century seniors.
On this 58th anniversary of Medicare, let’s recommit to President Johnson’s promise of the “opportunity to achieve and enjoy good health” and provide “security against the economic effects of sickness.”
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Far From Perfect, But the Inflation Reduction Act Is a Major Step in the Right Direction
This legislation is not as good as the original Build Back Better bill, but it is certainly progress.
Aug 10, 2022
U.S. Senate Democrats' compromise bill, the Inflation Reduction Act (IRA) of 2022, addresses not just inflation but also several key longstanding problems facing our economy and society.
There is a simmering debate about the causes of today's inflation; but regardless of what side one takes, this bill represents a step forward. For those worried about excessive demand, there is more than $300 billion in deficit reduction. And on the supply side, the bill would mobilize $369 billion of investments in energy security and decarbonization. That will help bring down the cost of energy--one of the main drivers of current price growth--and put America back on track to reduce its carbon dioxide emissions by some 40% (from 2005 levels) by 2030.
This bill represents a step forward.
These investments will yield far-reaching returns. The costs of climate-driven events (wildfires, hurricanes, tornados, and floods) will reduce our standard of living even more than today's inflation will, and they are disproportionately borne by lower-income households, people of color, and future generations. These costs are far larger and more difficult to rectify than the costs of deficits.
Moreover, enhancing energy security has become essential. For far too long, authoritarian leaders of petrostates have been able to hold the rest of the world hostage. Russian President Vladimir Putin has reminded us once again that energy interdependencies come with serious risks (something I warned about more than 15 years ago). Weather may be variable, but fossil-fuel dictators are unreliable and downright dangerous.
The IRA also would help address the rising health-care costs that have long plagued America, both by lowering Affordable Care Act (Obamacare) premiums for millions of Americans and by capping out-of-pocket drug costs for those on Medicare. The pharmaceutical industry has received tens of billions of dollars more from Medicare payouts than it otherwise would, simply because the government is prohibited from negotiating for lower prices. This gift to the industry will finally be rescinded, yielding savings of almost $300 billion over ten years.
The United States is one of the world's leading sources of pharmaceutical innovation, and much of the basic research behind these advances was paid for by American taxpayers. Yet, Americans pay much more for prescription drugs than people in other countries, partly because drug companies have been given an unbridled power to set prices. Many of us have been fighting for years to curb these firms' undue market power. If the IRA becomes law, this provision alone would be a signal achievement.
Furthermore, the bill would deliver sorely needed improvements to U.S. tax policy. Corporations and the wealthiest households are not paying their fair share of taxes. That not only erodes confidence in our democracy, but also is economically inefficient. Tax revenues are necessary to finance essential public expenditures without generating inflationary deficits.
Russia's invasion of Ukraine has reminded us why defense expenditures are necessary. But to preserve America's competitiveness, we also must invest heavily in education, research, technology, and infrastructure. Here, the bill includes provisions that would raise more than $450 billion (over a decade) through a 15% minimum corporate tax, increased tax enforcement, and the introduction of a 1% excise tax on stock buybacks.
The 15% minimum corporate tax is especially important. The U.S. has led a global negotiation to curtail the practice of a few governments cutting special deals for corporations so that they can siphon tax revenues and jobs from other countries and compete in a race to the bottom in tax rates--a race in which the only winners are the multinational corporations. A 15% US minimum corporate tax will not only raise badly needed revenue; it will also help stop this self-defeating global race. This is especially important for the U.S., because it spares American jobs from unfair competition.
But the landmark global agreement that America forged is unlikely to move forward if America itself does not abide by its conditions. From climate change and food insecurity to the fight for democracy in Ukraine, there are so many issues for which we need global cooperation. Like the climate measures, the U.S. minimum corporate tax is an important step in showing that we can be good global citizens.
Like the climate measures, the U.S. minimum corporate tax is an important step in showing that we can be good global citizens.
Of course, some critics on the right (many of them allied with drug companies, other major corporations, and the wealthy) will argue that the IRA will be inflationary, and they will even produce models "proving" that that is the case. But we know by now that bad models give bad predictions. Just look at the models that were marshaled in support of Ronald Reagan's tax cuts for the rich (which they falsely claimed would increase revenues) or Donald Trump's tax cuts for corporations (which they falsely claimed would spur additional investment).
These predictable arguments against the IRA's tax provisions are based on a flawed assumption: namely, that corporations will "shift" the burden of the minimum tax by raising prices and lowering wages. But economists have long recognized that the current U.S. corporation-tax regime--which allows firms to deduct virtually all costs, including labor and capital--is close to a pure profits tax. And a longstanding presumption in economics is that a pure profits tax does not lead to either higher prices or lower wages.
This also implies that these taxes can be raised without fear of adverse effects, either on inflation or investment. The big distortions--and gross inequities--in the tax system come from inadequate enforcement and large loopholes, and the IRA at least makes progress on the first of these fronts.
While the full benefits of the IRA will be realized only gradually over the coming years--especially as we invest in the green transition--some of its anti-inflation effects could be felt almost immediately, particularly in the case of the drug-pricing provision. Since markets are forward-looking (even if imperfectly so), the anticipation of increased renewable-energy supply should lead to decreased fossil-fuel prices today. Moreover, according to some of the more prevalent theories, anticipations of future inflation are a key determinant of current inflation, so even the bill's slower-moving inflation-dampening provisions could have anti-inflationary benefits today.
No bill is perfect. In America's money-driven politics, there will always be compromises with special interests. The IRA is not as good as the original Build Back Better bill, which would have done more both to promote equitable growth and to fight inflation. But we can't let the perfect be the enemy of the good. Ultimately, the IRA is a very important step in the right direction.
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