Biden’s stimulus is neither socialism nor a New Deal

March 15, 2021

By Michael Gerson,

Both President Biden and his Republican critics have an interest in pronouncing the massive stimulus package to be an ideological revolution. Biden has a history of inviting comparisons between himself and Franklin D. Roosevelt. Senate Majority Leader Charles E. Schumer (D-N.Y.) hailed the American Rescue Plan as “the biggest package of relief since the New Deal.” According to House Minority Leader Kevin McCarthy (R-Calif.): “They called this the most progressive piece of legislation in history. For those who are watching, progressive means socialism.”

And there is no doubt that the $1.9 trillion stimulus package is enormous — roughly 40 percent of the whole federal budget and about 9 percent of gross domestic product. If you stacked up all that money in dollar bills, the pile would reach almost half as high as Donald Trump’s self-regard. As I said, just huge.

But having taken the time to scroll through the legislation, my cumulative impression was different than I expected. There is, of course, funding for vaccine distribution, testing and contact tracing, state and local health departments, genomic surveillance, emergency medical supplies and global pandemic response, rural hospitals, community health centers, mental health services, VA hospitals, the Indian Health Service and Obamacare subsidies. There is funding for farm loans, food stamps, libraries and school lunches. There is funding for child-care block grants, private schools that enroll low-income children, small businesses, nonprofits, rental assistance, mortgage payment assistance, emergency housing vouchers, public transportation, restaurants, aging and disability services, the Fish and Wildlife Service, airlines, the earned-income tax credit and paid sick leave.

In the legislation, you will find a line item for a long list of social needs. What you will not find is a new or transformational role for government. A great deal of money is devoted to shoring up existing programs and institutions, as you’d expect during a national emergency. Some of the largest elements of the stimulus — the $1,400 checks, the $300 weekly unemployment insurance subsidy, the refundable child credit — go directly to individuals to use as they please. The transfer of $350 billion to states and localities is federalism exemplified.

This is not to deny that the stimulus will have dramatic effects. The funding given to state, local and tribal governments is more than quadruple the budget holes they need to fill until next summer. The Urban Institute estimates that child poverty may be (temporarily) cut in half by measures in the package. And at least some elements of the legislation — particularly the expanded child credit — may be popular enough to become permanent.

But comparisons between this emergency measure and the New Deal or Great Society are strained to the point of silliness. Roosevelt and Lyndon B. Johnson established new federal roles in retirement security and health care, which were fulfilled by vast new federal bureaucracies. Biden is mainly adding more money to existing programs and mediating institutions. For the most part, he is dramatically increasing the funding pressure in existing pipes. This does nothing to change the fundamental relationship between the citizen and the state.

For me, this is not a criticism. Providing resources to families, businesses, community institutions and states is certainly the fastest way to encourage economic recovery. This approach increases the positive influence of government while maximizing the authority and choice of individuals. It encourages social justice without massively expanding the size and role of federal bureaucracies. In many aspects, this is what used to be called the empowerment agenda: providing individuals, businesses and community institutions with the resources to improve the quality of life around them.

The American Rescue Plan reduces economic inequality — but not in such a way that it punishes the wealthy. According to the Tax Policy Center, the legislation will boost after-tax income in the lowest quintile by about 20 percent. Those in the top quintile will see their after-tax income rise by 0.7 percent. This is a pretty anemic socialist revolution.

The difficulty with this scale of spending is not that it helps the poor at the expense of the wealthy. The problem is that it helps the present at the expense of the future. The level of liabilities the federal government is incurring will eventually impose a burden of debt servicing that crowds out a lot of discretionary spending. But there seems to be a cheerful, bipartisan agreement to ignore this problem. And it probably should be ignored during an economic crisis anyway.

I don’t deny that Biden could build on this emergency measure — with, say, his $2 trillion climate plan, or the creation of a public option for health care — in ways that could be transformational. But what he has done so far does not indicate the triumph of socialism, or even the return of the New Deal. It shows a distinctly American talent for achieving liberal goals by market-oriented methods.

Read more: Lawrence H. Summers: The Biden stimulus is admirably ambitious. But it brings some big risks, too. James Downie: Democrats have Republicans on the back foot. Now they must keep pushing. Michael Gerson: The child tax credit is a conservative dream fulfilled. Let’s help make it permanent. Jennifer Rubin: Thanks to the GOP, Biden doesn’t need to sign the stimulus checks Lawrence H. Summers: My column on the stimulus sparked a lot of questions. Here are my answers.

Source: WP