Democrats’ $3.5 Trillion Spending Plan Flunks Its Own Test
(Bloomberg Opinion) -- With his $3.5 trillion spending proposal, President Joe Biden would move toward extending the government’s reach from cradle to grave. This is the wrong goal, but that’s not the only reason to oppose it. Even measured by the Democrats’ expectations for its achievements, it fails.
Instead of designing an innovative American version of the European-style social democracy that many Democrats admire, the plan pours money into flawed existing programs rather than fixing them. It creates unnecessary redundancies and fails to target assistance to those who need it most.
The Democrats would establish a paid family-leave program for parents with newborns, increase funding for child care, establish universal pre-kindergarten, provide a per-child check every year to households with younger children, boost funding for post-secondary education, provide for more generous job training programs, and expand Medicare to include dental, hearing and vision benefits.
The details are still unclear, but the hope is to combat widening economic and social inequality by offering Americans increased government support throughout their lives. That much government would make the U.S. less dynamic and more sclerotic. It would sap energy and boost dependency, weakening the value of personal responsibility.
But dismiss those objections if they don’t persuade you. Consider, instead, the likelihood that the approach won’t accomplish the Democrats’ goals because it doubles down on the current defective system, mindlessly boosting spending on government programs in need of an overhaul.
Take the proposed Medicare expansion. Key parts of the Medicare program are in precarious financial shape. The trust fund used to finance hospitals is expected to run out of reserves in five years. Once that happens, Medicare won’t be able to pay its hospital bills unless Congress acts. Other parts of Medicare — like those covering physician and ambulatory services — are seeing their costs balloon, as well.
If the Democrats want to offer retirees more generous health care, putting the program on solid fiscal footing is the right first step. Adding on additional services will only quicken the day of financial reckoning, which will put health-care security at greater, not lesser, risk.
The same is true of child-care services. The details are murky, but the plan is likely to simply increase the size of existing block grants provided by the federal government to cities, states and localities for community development activities. This would do little to address the underlying issues pushing up the price of child care, like regulations that restrict the supply of providers. Until those are addressed, the Democrats’ plan amounts to throwing good money after bad.
Job training is another example. Simply adding additional resources to existing programs won’t provide the desired improvements in economic opportunity and social mobility because those programs have proven ineffective. Instead, Democrats should take advantage of innovations in job-training programs that have shown success.
Work-based learning programs, for example, allow employers to help determine what’s taught in training programs, helping to ensure that participants learn skills that the market values. Sector-focused programs that include training in soft skills like teamwork and effective communication, and that include job placement and retention services, hold promise.
To achieve their stated goals, Democrats should figure out why some of these programs work better than others, and how to expand the successful ones to meet the need.
If Democrats want cradle-to-grave government support, they need to eliminate redundancies and do a better job focusing their programs on the groups they are trying to help. As they are discovering, there is only so much appetite, even among members of their own party, to spend trillions more.
According to estimates by Moody’s Analytics, the plan would put $435 billion into an expansion of the tax credit for children over the next five years. With this much additional money going to households with kids, why is a paid family-leave program also needed to finance time away from work? Over the next five years, the Democrats would expand the tax credit for child and dependent care by $42 billion. Given that, why are additional child-care subsidies included?
Moreover, the program isn’t well aimed at those who need assistance. The expanded child tax credit is being widely hailed as a way to fight poverty among children. But the vast majority of its benefits would go to households above the poverty line, including those making comfortable six-figure incomes.
Senator Joe Manchin, the West Virginia Democrat, has called for a “strategic pause” in his party’s attempts to ram through this spending bill, in the hopes that stopping to take a breath could lead to a better law. He’s right. Democrats are advancing the wrong vision of government.
But they should at least take the time to figure out how to advance the wrong vision in the right way.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”
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