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An American Rescue...from Reaganism?
The $1.9 Trillion American Rescue Plan packs a lot more than COVID relief—it’s a rethink of the role of government for good. But there’s A LOT more to do.
On Thursday, before his primetime address to the nation, President Joe Biden signed the most consequential package of legislation in a generation: the American Rescue Plan.
Though there are some obvious misses in the law—which I’ll get to—this has the potential to be, as Biden himself might put it: “A Big F’ing Deal.” Here, I want to offer a few pieces of context that help us understand what this means for America’s future.
People are notoriously bad at processing big numbers. And the fact that $1.9 Trillion starts with a number that is slightly less than 2 makes the plan’s full size hard to grasp. So, let’s put this in perspective: $1.9 trillion is $1900 Billion. It’s nearly 2 million million.
It’s a lot of money.
That matters because this isn’t the first COVID-19 relief package that’s passed. It’s the sixth. And passing this big of a bill, this late in the game, says something about how this administration will leverage government to take on big challenges in the future.
Prior to this one, previous COVID-19 relief packages have allocated a collective $3.5 Trillion in COVID-19 relief. With this additional $1.9 Trillion, the Center for Economic Policy Research estimates we’ll have spent about 27% of GDP on COVID-19 relief—putting the United States in the top three globally in pandemic relief spending.
And that’s a good thing. After all, we are among the most unequal high-income countries in the world. So, despite our national wealth, we bear a large burden of poverty—far more as a result of the pandemic. Public spending (aside from tax breaks for the wealthy and corporations) tends to disproportionately benefit the poor who rely more on government support than those who have the means to insulate themselves in times of stress and challenge.
This means that we are finally spending to support low-income Americans in ways we have failed to for nearly a generation.
This package is a clear departure from an era when government was expected to spend just enough to allay catastrophe—and not a dime more. After all, during the Obama era when the Great Recession stimulus bill had its sails trimmed, the thinking went: “how dare we even consider bills in the trillions.” Stimulus of that size would have offended decades of economic thinking (read: voodoo hocus pocus devoid of strong empirical evidence) that tells us that big spending would definitely raise inflation. That same thinking ignored the suffering of millions of people who were losing jobs, homes, and healthcare.
Reversing a 40 year governing consensus.
When President Bill Clinton infamously declared that the “era of big government is over,” he waved the white flag to President Ronald Reagan’s vision for a minimalist American government dedicated to the wealthy and corporations.
“The nine most terrifying words in the English language are,” Reagan said only 10 years earlier, “I’m from the government and I’m here to help.”
With those words Ronald Reagan kicked off a 40 year governing consensus that Republicans and Democrats alike have accepted as Truth—that government is part of the problem rather than the solution. Instead of building and improving effective government programs to solve big, public problems, government spent four decades tinkering around the edges of “market-based” solutions that centered major corporations and invited them to profiteer off the public.
What happened? We privatized public goods—schools, hospitals, prisons—to enrich major corporations. Because the poorest could not pay, they were excluded—everyone else just had their wealth extracted. Meanwhile, those same corporations, credited with “creating” those jobs, were handed tax cuts and subsidies while busting unions and offshoring jobs.
It wasn’t just Republicans. Democrats bought into this approach too—that’s what made it a consensus. Consider the Affordable Care Act, one of the most important (and meaningful) Democratic-led reforms of the past four decades. It bends over backward to accommodate a private insurance system. Meanwhile, corporate insurers have accelerated the price of healthcare and continue to exclude 10% of Americans from access.
But Reaganism wasn’t always the consensus. When Clinton embraced Reagan’s frontal assault on government, he toppled the bipartisan tradition that had preceded it. President Franklin Delano Roosevelt’s New Deal had long since invested government with the responsibility for major infrastructure, work opportunities, and regulations to protect and empower the American people during the Great Depression. This approach to governing was also a consensus, embraced by Eisenhower who used it to expand America’s federal highway system, and even Nixon, who embraced universal healthcare.
The American Rescue plan would be a big deal because it has the potential to reverse the Reagan consensus—mainly through one major program...
A guaranteed minimum income for kids.
By far, the most consequential component of the American Rescue Plan law is the new childhood tax credit. It establishes, in effect, a guaranteed minimum income for kids.
This credit offers a $3600 annual tax credit for every child under 6 and a $3000 tax credit for every child aged 7-18 for families earning less than $150,000 a year. Though support phases downward for families earning more than $150,000 and goes away completely for families earning more than $195,000 a year, a full 94% of families with children will still receive these benefits.
Nearly one in six American kids live in poverty. Estimates suggest that these tax credits would cut that in half. It does so by resurrecting welfare, but in a different way than we knew it.
When Clinton turned his back on the New Deal and declared the era of big government over, he was talking about his pledge to “end welfare as we know it.” He signed the Personal Responsibility and Work Opportunity Act of 1996, putting a cap on welfare benefits and opening the door to welfare work requirements that essentially squeezed poor Americans into poverty-wage jobs. All of this occurred in the backdrop of corporate welfare policies—trade agreements and subsidies—that incentivized corporations to offshore and automate away what limited opportunity for social mobility did exist.
In offering unconditional cash assistance for all but the highest-income families, the Biden administration reverses Clinton’s attacks on welfare—creating a precedent for a new kind of relationship between government and its people.
Beyond programs for the poor, this childhood tax credit opens the door to the kinds of big, bold, unconditional, and universal programs that Americans—particularly low-income Americans and Americans of color—have suffered without for a long time. Whether it's a jobs guarantee, a universal basic income, or Medicare for All—the precedent set by this child tax credit makes achieving them that much easier.
Unconditional and Universal.
But here’s where the American rescue plan still falls short. It has a few critical design flaws that may yet leave the new consensus it could usher forth open to Republican destruction.
To understand why, it’s worth revisiting how Reagan Republicans destroyed the New Deal. When Republicans attacked the New Deal, they didn’t repeal whole programs all at once. Instead, they burrowed small holes into them, setting traps that fomented race and class conflicts that ultimately brought the programs down. They made these programs conditional and limited their access to smaller and smaller groups of people.
The first conflict was between rich and poor. Making these programs conditional made it seem as though the rich were being asked to support and subsidize programs for the poor. The opposite was, in fact, true: the rich were offered far more lucrative support in the forms of tax cuts, homeownership subsidies, and corporate welfare. And yet the conditional programs created an incentive to cut and clip and curtail in the name of “fairness.”
The second conflict they fomented was between poor (white) and poor (Black). To justify his destruction of government programs, Reagan deployed the “welfare queen” trope, weaponizing racism and exploiting segregation to paint a picture of poor Black Americans that would drive the narrative of the undeserving minority—and coax poor white people to vote against the very programs that they relied upon (once again, I recommend Heather McGhee’s excellent book about this).
The simple, seductive—and broken—logic that allowed Reagan Republicans to set these conflict traps remains a design flaw in the American Rescue Plan. “Of course the rich don’t need the government’s help with childcare, or school, or healthcare,” the logic goes. These talking points were deployed by rightwing Democrats (can we please stop calling them “moderates”?) to condition $1400 checks (which should be $2000) and childhood tax credits in the American Rescue Plan.
There’s one more flaw in the American Rescue Plan. Though it embraces big, bold government solutions for problems like childhood poverty, it also succumbs to small, cowardly, private duct tape for other serious problems, like healthcare. Nearly 15 million people lost their health insurance because of the asinine way we link health insurance to employment. And yet, rather than offer those who’ve been jerked around by the private system a strong public option instead, we’re subsidizing them to get back on the private insurance roller coaster through COBRA. As I’ve written prior, COBRA subsidies are simply a giveaway to corporate insurers to do what they should have done in the first place. And rather than uproot the corporate system, the plan doubles down on it.
If the American Rescue Plan is really going turn the page on the past 40 years of Reaganism, then Democrats have to do everything we can to make the tax credits—and so many other programs (*cough* Medicare for All *cough*)—public, unconditional, and universal.
The American Rescue Plan is bigger than the $1400 checks that seem to have stolen the headlines. The real story is that it has created the precedent for more than double that for every child, every year.
But to be truly transformational, we have to fully embrace the new governing consensus to which it opens the door. These kinds of programs need to be universal and unconditional to truly have their lasting impact—and then we need to expand them to healthcare, higher education, and beyond.
That would be a Big F’ing Deal.