President Biden formally announced his American Families Plan on Wednesday, a $1.8 trillion proposal to give all Americans access to community college, preschool, affordable child care and paid leave, among other initiatives. He wants to fund it by increasing taxes on the rich.
Here are five top takeaways from this latest Biden plan.
1. This is a big expansion of U.S. government support for families
Biden’s plan calls for a much larger government role in people’s daily lives. It’s basically a rejection of the Reagan-era mantra of smaller government and an embrace of a more European-style safety net. The most dramatic changes in the proposal would expand the time frame for publicly funded schooling in the United States from 13 years to 17 years. Two of those years are through universal preschool, which would be available for all 3- and 4-year-olds. Also, Americans would be able to enroll in two years of community college free. The plan also calls for 12 weeks of guaranteed paid family and medical leave, so Americans can take off time when a child is born or to care for themselves or a sick relative.
Other initiatives include a government payment of $3,600 per year for each child under six years and $3,000 per year for each child aged six to 17 for parents earning less than $125,000 annually, increased Pell grants to help low-income students pay for college and more-generous child-care subsidies. It also includes additional aid to make it cheaper for moderate-income families to buy health insurance and get food assistance in the summer when kids are out of school.
Biden’s team call this a major investment in Americans’ education and well-being. Republicans see it as a big expansion of the “welfare state.” Polling indicates Americans are growing more comfortable with a larger role for government. In a recent Washington Post-ABC News poll, support for a smaller government with fewer services was at the lowest level since 1984.
2. It will be hard to pass
Republicans are already making it clear this Biden proposal is a non-starter for them. They don’t like the big price tag of the bill, they don’t like how much it expands government, and they don’t support raising taxes, especially not ones that were just cut in their 2017 tax law.
Passing all — or even part — of the American Families Plan will require all 50 Democratic senators to sign on. It’s a tall order. Liberals are frustrated the plan does not go far enough. They were hoping to see the Medicare enrollment age lowered below 65 and aggressive action to slash drug prices, among other initiatives. Meanwhile, centrist Democrats are uneasy at the $1.8 trillion price tag.
Senior administration officials are already signaling that Biden is “open to hearing” other approaches, a Washington code phrase for Biden being “open for negotiation.” Sen. Joe Manchin III (D-W.Va.) will once again hold a lot of sway on what happens, as he did during Biden’s earlier covid-19 relief package passed in March.
3. Biden wants to pay for the $1.8 trillion by taxing the rich
This latest Biden plan calls for two key tax hikes on the rich. The first is to raise the top income tax bracket from 37 percent (where the GOP set it in 2017) back to 39.6 percent. That would still be less than the 50 percent rate in the early 1980s and the 70 percent top rate in the 1970s. Biden’s second tax hike would be to increase taxes on capital gains — the tax paid on the gain when a stock or other investment is sold — for Americans earning more than $1 million.
Republicans are wary of increasing these taxes, but raising taxes on the rich has a lot of broad public support, and the White House is keen to tap into that sentiment. Biden also wants to ramp up enforcement to ensure the rich are actually paying taxes.
But from an economic perspective, the capital gains tax is already generating some controversy. Wall Street was jittery last week when news broke about the potential hike, which would nearly double the top capital gains tax rate from 20 percent to 39.6 percent. The White House argues this hike would affect only the top 0.3 percent of Americans, but some economists and tax analysts believe it could dissuade private investment, which could harm growth. Another problem could be a wave of stock and asset selling just before the higher rate kicks in. Expect a lot of debate — and lobbying — in Congress if this proposal moves forward.
4. The plan’s timeline is weird
One of the odd parts of this plan is when programs start — and when they end. This is supposed to be a 10-year plan, but not everything begins on Day 1 and ends a decade later.
For example, the White House is not guaranteeing access to 12 paid weeks of family and medical leave until 10 years into the program, according to an administration fact sheet. It’s also not clear how quickly universal pre-K for 3- and 4-year-olds could roll out across the country. In a background call with reporters, senior administration officials acknowledged it will take time to ramp up these programs.
On the flip side, the child payments of up to $3,600 per child for lower- and middle-class families would last only through 2025. This is supposed to be Biden’s signature anti-poverty program, and he has expressed a desire to make it permanent, but his plan has it running for just five years.
It makes it easier to “pay for” the plan when some programs end early and some start later. Making programs permanent costs more. Some outside groups are already saying Biden’s estimates for how much these initiatives will cost are too low, even for the short time frames they are proposing.
5. Implementing this will be mind-boggling
As the United States learned with the Affordable Care Act, this is going to be tough to implement in a nation of 331.5 million people. Programs such as free preschool and community college for all will require help from all 50 states and U.S. territories. In fact, the plan explicitly calls for states to kick in money to help fund these initiatives. Are all the states going to sign on?
It’s been more than a decade since the Affordable Care Act passed, yet 12 (largely Republican) states still have not expanded Medicaid, a key initiative of the health-care law, according to the Kaiser Family Foundation. It’s a reminder of the roadblocks that could occur, especially since Biden’s plan calls for states to contribute 10 percent of the pre-K costs initially and 50 percent after the program ramps up.
Implementing just the education portion of the plan will also require schools to be ready to accept the influx of students. Biden’s plan calls for increasing pre-K teacher pay to $15 an hour, up from a typical pay of around $12.24 an hour now, in an effort to attract more teachers.
The nation can probably make these adjustments over time, but it’s unclear how quickly. And initial impressions matter, as the Obama administration learned with the disastrous rollout of HealthCare.gov.