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What Biden Should Prioritize in His First Term
Beyond COVID, the Democrat's priority must be revitalizing the American Dream.
Joe Biden’s priority as president will be alleviating the COVID-19 pandemic, which the outgoing president, Donald Trump, has mismanaged. 350,000 Americans are dead. Nearly 11 million are unemployed. Republicans were slow to approve the latest stimulus, which Trump, seemingly without consulting lawmakers of his own party, threatened to veto and then signed anyway.
But the Democrat’s first-term goal must be to revitalize the American Dream, which is out of reach for most.
In the 47 years Biden has been in Washington, first as a senator, then as vice president, social mobility has declined to the point where Europeans are now more likely to grow out of poverty than Americans. Real incomes have been stagnant for everyone but the wealthy. Traditional middle-income jobs have been outsourced or made redundant by automation. Most job growth comes from established businesses, not startups, suggesting a decline in entrepreneurship. Housing is unaffordable in the very metro areas where those jobs are. There are fewer opportunities for workers without a college degree, and the cost of higher education has outpaced income growth. So have the costs of child care and health care, making it harder for families to combine childrearing and work.
America could learn from Nordic countries and the Netherlands, which combine competitive, free-market economies with generous social protections for the middle and working class.
Many of Biden’s policies would move America in that direction.
Here’s where I would start.
Tuition and fees at American colleges and universities have risen twice as fast as wages. Half of students take on loans to try for a higher-education degree. Total student debt is $1.4 trillion, up 116 percent in a decade. One in three graduates aged 25 to 39 struggle financially. The same percentage believes their degree wasn’t worth the cost.
Making education at public as well as historically black colleges and universities free for families with incomes under $125,000, and limiting federal student loan repayments to 5 percent of discretionary incomes over $25,000, would go a long way to allowing every young American to study.
Americans shouldn’t need a college degree to find a good job. Nor should anyone need to work two jobs to make ends meet.
Biden plans to raise the federal minimum wage to $15 per hour; define “gig economy” workers as employees instead of contractors, so they qualify for benefits; ban noncompete clauses, no-poaching agreements and mandatory arbitration clauses, which only protect employers; and liberalize occupational licensing requirements, which could create some two million jobs.
Republicans should support this. Excessive licensing requirements limit entry into more than 1,000 professions, including hair braiding, plumbing and interior design. (Which hasn’t prevented horrors like these.) They make it more difficult to start a business. And, because rules differ per state, sometimes wildly, they stifle labor mobility.
Biden proposes to invest $700 billion in manufacturing and technology under a $2 trillion Green — err, don’t call it “New Deal”.
The idea is to subsidize everything from electrical vehicles to new lightweight materials, with investments deliberately spread across the United States to revitalize left-behind communities, including communities of color. 10 percent of R&D spending would go to black- and brown-owned businesses.
I’m wary of the government picking winners and losers in the private economy, and the federal government doesn’t have a spotless record of ensuring its money is spent wisely. Barack Obama’s $800 billion stimulus went mostly into existing infrastructure projects and local governments, who used it plug shortfalls caused by the recession.
But there is also an obvious benefit to the climate in Biden’s plan and to the country keeping up with China in R&D.
Child and health care
Child care is unaffordable in America. Health-care costs have risen twice as fast as wages in a decade. Americans pay twice as much for insurance and medical services as Europeans, but they are just as healthy (or unhealthy).
Biden’s plans include tax credits for child care and private health insurance, twelve weeks of paid family leave, introducing a Medicare-like public health insurance option, allowing Medicare to negotiate drug prices, allowing consumers to buy prescription drugs abroad and banning insurers from overcharging patients for out-of-network care.
Ideally, I would like to see health insurance decoupled from work altogether. The original sin of the American health care system is that it ties insurance to jobs, which means it ties people to jobs. It gives employers too much power and distorts the incentives in the insurance market. Insurance companies aren’t bidding for the business of 300+ million consumers. They are bidding for the business of a few dozen mega-corporations.
The better alternative is not single-payer, or Medicare-for-all, which would be expensive and deprive Americans of choice. It’s Obamacare-for-all, or the Dutch system: regulated and mandatory private insurance, paid from a mix of insurance premiums and payroll taxes, with subsidies for low incomes and maximum prices for co-payments, deductibles and pharmaceuticals. Biden’s plans could move America in that direction.
If you want a European-style welfare state, you’re going to need European levels of taxation.
Americans for decades accepted weaker social protections and second-rate public services in return for higher incomes and the opportunity to get rich. They no longer accept the first, but they still want the second. (Who wouldn’t?)
The great conceit of American politics is that you can’t raise taxes on the “middle class”, which is everyone except “millionaires and billionaires”.
Biden has proposed to tax capital gains as ordinary income and apply the 12.4 percent Social Security payroll tax to incomes over $400,000, which are good ideas, but raising taxes on high incomes alone is not going to be enough.
Raising corporate tax from 21 to 28 percent could give him another $1 trillion to spend over a decade, but that would come at a cost. Small businesses may be discouraged from expanding, especially when, under Obamacare, they also have to pay health insurance to all their workers as soon as they employ fifty people or more. Big companies could move their headquarters overseas.
The Nordic countries and the Netherlands keep income and sales taxes high and business rates low. Their people put up with high taxes, because they get a lot for it: affordable child and health care, almost free education, high-quality infrastructure.
Middle- and upperclass Americans, by contrast, tend to think welfare is something for other people.
Perhaps the only way to change that mentality is to give Americans better government services first and make them pay for it later?