The Washington PostDemocracy Dies in Darkness

Is it fair to call Biden’s $3.5 trillion plan another New Deal?

President Franklin D. Roosevelt speaking with farmer Will Duerr and his family in Julesburg, Colo., on Sept. 3, 1936. (AP)
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As the showdown in Congress escalates, the Biden reconciliation bill’s $3.5 trillion size has become a lightning rod.

Liberals are committed to the headline number, moderates like Sen. Joe Manchin III (D-W.Va.) are balking at the price tag, and conservatives are decrying what has been described as the biggest spending bill in American history. But has it all been greatly overstated?

President Biden’s $3.5 trillion reconciliation package would expand Medicare, combat climate change and offer free public prekindergarten and community college while boosting federal safety-net programs. At first glance, its price dwarfs era-defining social programs like Franklin D. Roosevelt’s New Deal, which cost around $324 billion in today’s dollars, and Lyndon B. Johnson’s Great Society, which cost around $520 billion in today’s dollars. Barack Obama’s American Recovery and Reinvestment Act cost around $943 billion while the Affordable Care Act was pegged at around $1.1 trillion through 2019, adjusted for inflation.

The Biden legacy is even bigger if you include the $1.9 trillion American Rescue Plan plus another roughly $572 billion in new spending through an infrastructure package, which the House was wrestling with on Friday.

But while the reconciliation package looks colossal by those standards, its passage wouldn’t guarantee Biden a legacy on par with those transformative social programs. His predecessors led a smaller country with a smaller economy. Even after adjusting for inflation, the U.S. economy is more than 20 times bigger than it was in 1934 and five times bigger than in 1964, thanks to a population that has more than doubled as well as factories and offices that produce far more than their Depression-era predecessors.

Every dollar in spending FDR and LBJ proposed was much larger relative to each taxpayer’s income, making costly legislation harder to pass. So rather than adjusting for inflation, many economists compare historical spending with the size of the economy (GDP). In an average year from 1934 to 1940, New Deal spending was equal to 2.8 percent of all goods and services sold in the United States. The Great Society averaged about 0.9 percent a year, while Obama’s plans combined averaged around 1 percent of GDP. Biden’s plan comes in around 1.1 percent of the economy for an average year from 2021 to 2031 — 2.1 percent if you include the American Rescue Plan and infrastructure bill.

“We’ve outdone the New Deal by a long way in terms of spending,” said Price Fishback, an economics professor and New Deal scholar at the University of Arizona. “But it’s almost impossible for him to have an impact that will go beyond what Roosevelt did.”

Biden’s plan also looks bigger, because thanks to limits on how many filibuster-proof bills can be passed via reconciliation each year, many key initiatives have been compressed into a single ambitious package — or three packages if you count the other two pillars of the Biden agenda above. The New Deal and the Great Society were both passed piecemeal over several years.

And $3.5 trillion is just the cost side of the bill. It would be offset by $2.9 trillion in revenue, according to recent estimates, putting its budgetary impact at $0.6 trillion. For comparison, Donald Trump’s Tax Cuts and Jobs Act cost between $3.3 trillion and $5.6 trillion, according to Marc Goldwein of the nonpartisan Committee for a Responsible Federal Budget, depending on how you count the money shifted around by a restructuring of the tax code. But offsetting those tax cuts with revenue means it added between $1.5 trillion and $1.9 trillion to the budget.

The true size of Biden plan is further limited, because many of its provisions are set to expire within a few years, economist and Urban Institute fellow Eugene Steuerle said. That’s a budgetary trick that reduces the top-line cost but sets the stage for future political battles. The popular $300 child tax credit, for example, would expire in 2025. The New Deal and Great Society, of course, spawned myriad programs still in effect today, from the Federal Deposit Insurance Corporation and the Securities and Exchange Commission to Medicare and the Department of Housing and Urban Development. If the Biden plan’s expiring provisions are extended, as Democrats hope, the plan’s long-term cost will be larger.

But long-term cost as scored by budget wonks is not a perfect measure.

“Many of the costs should be regarded as investments with fairly sizable returns,” said University of California at Los Angeles professor Martha Bailey, co-editor of the book “Legacies of the War on Poverty.” “The political discussion often revolves around how much things cost today but neglects that these costs are substantially reduced or even generate revenue when viewed over the longer term.”

For example, Bailey and her collaborators recently showed Head Start, a preschool program that remains a signature achievement of the Great Society’s War on Poverty, actually turned a 14 percent profit by increasing college graduation rates by almost 40 percent and reducing reliance on public assistance.

Many such programs, particularly those focused on low-income children, generate generational returns that ultimately pay for themselves, according to a recent analysis of 133 U.S. policy changes over the past 60 years by economist Nathaniel Hendren and PhD candidate Ben Sprung-Keyser of Harvard University, published in the Quarterly Journal of Economics. Adult-focused programs such as unemployment benefits or housing vouchers, however, are designed to provide short-term benefits to recipients and tend not to recoup their costs in the long run.

Step back and consider a chart of U.S. social spending as a share of GDP over the past 60 years. It’s hard to even pick out major programs like the New Deal and Great Society, according to University of California at Davis economist Peter H. Lindert, author of the book “Making Social Spending Work.”

“The $3.5 trillion proposal not only fails to stand out in the long sweep of history, but even represents a deceleration of the average upward trend in that taxpayer cost over the last six decades,” Lindert said.

In fact, the Biden administration’s reconciliation proposal amounts to a step down from the truly massive rush of social spending experienced in 2020, under the Cares Act passed by large congressional majorities and signed by Trump, Lindert said.

Overall social spending has increased steadily over the decades as the population ages and incomes rise, regardless of who is in power. The president’s opening bid for reconciliation spending is in line with that long-term trend. The contents of the bill may well be revolutionary, but the price tag, which so far has attracted the lion’s share of the attention, isn’t.


Formal, comparable federal spending estimates are difficult to find for the decades before Congressional Budget Office began operations in 1975.

For the most comparable possible numbers for the New Deal, The Washington Post used 1934 through 1940 spending totals from a 2015 Research in Economic History analysis by economist Price Fishback of the University of Arizona as well as 2015 Journal of Economic History analysis by Fishback and Valentina Kachanovskaya.

There have been few attempts to put a comparable price on the Great Society and its signature program, the War on Poverty. To create one, The Post started with “Federal Outlays Benefiting Persons Below the Poverty Level” in the 1976 Statistical Abstract of the United States. We imputed missing values based on neighboring years and counted all spending from 1965 to 1974 on programs created by the Great Society, as well as all increases in spending above 1964 levels on programs expanded by the Great Society.

For Biden’s reconciliation plan, The Post used Senate budget resolution committee allowances for all committees but finance, where The Post assumed $1.8 trillion of gross costs listed in budget committee documents. For offsets, we used CRFB’s $2.9 trillion estimate of the House bill, based on estimates from the Joint Committee on Taxation and other sources.