The $3.5 Trillion Democratic Spending Plan Isn’t So Unprecedented. Here’s Why.

Democratic leaders in Congress are still a few votes short of what they need to pass legislation to advance President Joe Biden’s Build Back Better agenda, with a handful of members objecting to the proposal’s scope and, especially, its price tag.

The legislation contains a variety of major initiatives, including subsidies for electric vehicles, a quasi-universal child care program and dental coverage for Medicare recipients. House leaders are still filling in the details of their proposal, while Senate leaders haven’t even introduced legislative language for theirs. But the basic policy vision is clear and, according to available estimates, it would take about $3.5 trillion in new federal outlays over the next decade to realize that vision. 

That’s too much spending and too much big government for Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.), as well as some conservative House Democrats. Without their votes, the legislation won’t pass.

The posture of these conservative Democrats is not surprising, given their relative ambivalence toward government programs and federal spending. Putting aside one-time or emergency spending measures, like the pandemic relief measures of the past year and a half, that $3.5 trillion increase in federal spending would represent the largest single increase in ongoing government spending in decades. 

Still, there are other ways to measure the scope of what Democrats are proposing. One is to look back a little farther in history to the reforms of the Great Society and New Deal. Another is to look abroad, to peer countries across Western or Northern Europe. 

By those standards, “Build Back Better” is big, but maybe not as big as it seems.

How Much Democrats Actually Intend To Spend 

The arithmetic of those comparisons is more complex than it might seem, so HuffPost enlisted the services of an expert: Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities who previously held a variety of budget-related positions on Capitol Hill and in the Obama administration. 

One of the first points Kogan made was that Build Back Better’s new net outlays probably wouldn’t be $3.5 trillion.

Although the bulk of the legislation’s proposals envision spending new money on human services like home care aides for the elderly and people with disabilities, the agenda also includes some proposed initiatives that are supposed to reduce government spending ― in other words, proposals that would make government smaller, not bigger. 

To call [the Biden-Democratic] package ‘historically large’ is fundamentally wrong unless one ignores the New Deal, wars and tax cuts.
Richard Kogan, senior fellow at the Center on Budget and Policy Priorities

Probably the most significant is a proposal to control the price of prescription drugs. That would mean less government spending through Medicare, which pays for older Americans’ drugs. It would also reduce what the federal government spends to subsidize private insurance through the Affordable Care Act. 

The total net savings for the drug plan could approach or even exceed half a trillion dollars, depending on what policy particulars Democrats eventually endorse.

Taking those savings and some other factors into account, Kogan said, a fair figure for new spending under the Democrats’ proposal is closer to (and quite possibly less than) $2.5 trillion over 10 years. Probably the best way to measure how that would affect the relative size of government would be to calculate it as a percentage of the nation’s gross domestic product over the same 10-year window. 

It works out to about 0.9% of GDP, Kagan said.  

For context, today, total federal expenditures are 31.2% of GDP. And that doesn’t include local or state spending.

Sens. Kyrsten Sinema (D-Ariz.) and Joe Manchin (D-W.Va.), on their way to a July Capitol Hill meeting, have said they will no

Sens. Kyrsten Sinema (D-Ariz.) and Joe Manchin (D-W.Va.), on their way to a July Capitol Hill meeting, have said they will not vote for the Build Back Better legislation if it envisions $3.5 trillion in new federal spending over 10 years.

How Biden’s Plans Stack Up To LBJ’s ― And FDR’s

Even that lower estimate would represent a significant amount of money. But how does it compare to historical analogues ― in particular, the Great Society? 

There’s no simple way to make the comparison, Kogan said, because President Lyndon Johnson and his allies enacted those reforms in a series of smaller legislative acts rather than one big one with a straightforward, easy-to-compare cost estimate. 

But Kogan was able to make an approximation based on figures for some of the major initiatives (Medicare, enacted in 1965, was by far the biggest) as well as some broader categories of spending (like “food stamps and child nutrition”).

A calculation focusing on the period between 1964 and 1968 suggests the Great Society expanded government by 1.3% of GDP, Kogan said. And that figure actually understates the impact of those LBJ initiatives because some of them expanded on their own after 1968. (An example is Medicaid, whose cost increased as more states joined the program.)

The Biden agenda looks even smaller when you compare it to the New Deal. Kogan estimated that overall federal spending increased from 3.1% of GDP in 1933 to 9.2% in 1940. 

Not all of that represented permanent expenditures, and the prevailing economic conditions (the Great Depression) made the GDP smaller by comparison. On the other hand, this was mostly before Social Security started paying out checks.

“One can reasonably say t hat the New Deal tripled the size of government,” Kogan said, adding that it was “vastly greater in every way than what’s going on with the Democratic plan.” 

How Biden’s Plans Look Next To Reagan’s 

Kogan added that some other historical comparisons make the current proposal seem smaller still. He mentioned in particular temporary, one-time funding for wars and emergencies ― including the pandemic ― that have sent government spending soaring.

He also pointed to some Republican tax cuts, like the Reagan-era reductions from the early 1980s that were projected to reduce revenue by 3% to 4% of GDP, depending on the estimate. Those proposed reductions in revenues weren’t matched by reductions in government; the deficits they threatened were one reason even Republicans agreed to scale them back after their enactment.

But the sheer magnitude of what supporters of the Reagan tax cuts had in mind ― a swing in government revenue by 3% to 4% of GDP ― helps to put the Biden-Democratic proposals into a very different context.

“To call [the Biden-Democratic] package ‘historically large’ is fundamentally wrong unless one ignores the New Deal, wars and tax cuts,” Kogan said. “It’s sort of like saying that if you ignore Babe Ruth, Willie Mays, Ted Williams, Henry Aaron, Mickey Mantle, and Ken Griffey Jr., then fill-in-the-blank-player is the greatest major league hitter of all time.”

The prescription drug reforms that Senate Minority Leader Chuck Schumer (D-N.Y.) and House Speaker Nancy Pelosi (D-Calif

The prescription drug reforms that Senate Minority Leader Chuck Schumer (D-N.Y.) and House Speaker Nancy Pelosi (D-Calif.) have supported would reduce drug prices, which in turn would lower government spending through Medicare.

How Biden’s America Would Compare To Europe

Comparisons between the U.S. and other countries are always difficult, in part because a proper tally of U.S. government spending has to include state and local outlays. Taking that into account, Kogan explained, the U.S. currently spends about 3% less of its GDP on government programs than the U.K. does, 10% less than big Western European countries like Germany, France, Italy and Spain, and 12% less than the Scandinavians.

The Organization for Economic Cooperation and Development doesn’t make projections, Kogan said, so it’s not possible to do an apples-to-apples comparison of projections of what spending in those countries would be a decade from now. But, he said, the projected increase in U.S. spending under Build Back Better ― again, about 0.9% of U.S. GDP ― clearly isn’t big enough to close the gap even with the closest country, the U.K., let alone all the other European countries.

This shouldn’t be surprising. As ambitious and potentially historic as the proposals of Build Back Better would be, they would fall far short of providing the level of support and services that even the stingier European Countries provide to their citizens. 

Seniors here would still be paying significant out-of-pocket costs for their drugs and dental care. Working parents would still owe hefty fees for child care. Green energy would get a boost, but not enough to hit climate goals. Home care workers would get raises, but not enough to attract all of the workers that the aging U.S. population needs.

That is why progressives like Rep. Pramila Jayapal (D-Wash.) and Sen. Bernie Sanders (I-Vt.) wanted to spend a lot more than $3.5 trillion. They wanted to get closer to the European model of public programs. 

That’s not going to happen. The question now is whether the small number of holdouts can scale down the bill even more ― and, with it, its ambitions.

Leave a Reply

Your email address will not be published.