President releases spending plan
$1.8 trillion proposal focuses on education, safety-net efforts
WASHINGTON — The White House on Wednesday unveiled a $1.8 trillion spending and tax plan aimed at significantly expanding access to education and safety-net programs for families, in the latest effort by President Joe Biden to try to turn some of his campaign promises into policy.
The package cannot be implemented without congressional approval, and many Republicans have offered a cool reception to the scope of tax increases and spending that Biden has tried to advance. But the White House’s “American Families Plan” provides Congress with details of the president’s domestic agenda, setting down markers for negotiations later this year.
Biden’s plan proposes domestic policies that would collectively represent a marked change in how Americans interact with the federal government.
The White House says enactment of its proposal would provide every American with two years of tuition-free community college; prekindergarten for all 3- and 4-year-olds; and paid family and medical leave for American workers. The plan also calls for devoting hundreds of billions of dollars to fighting child poverty and ensuring affordable child care nationwide.
Biden highlighted the plan in his address Wednesday night to a joint session of Congress, kicking off what is
expected to be months of congressional wrangling. The president’s plan reflects many of his 2020 campaign promises but leaves out other key pledges and demands from top allies.
“The American Families Plan is an investment in our children and our families — helping families cover the basic expenses that so many struggle with now, lowering health insurance premiums, and continuing the American Rescue Plan’s historic reductions in child poverty,” the plan states.
The White House’s latest spending plan, its third since the inauguration, faces steep obstacles to passage.
The package could face even more challenges than the American Jobs Plan, Biden’s $2.3 trillion physical infrastructure proposal, has met in Congress. The president has said repeatedly that he hopes to move his agenda with bipartisan support. But his administration remains far from reaching a consensus with Republican negotiators in the Senate.
Republicans have expressed much less interest in additional spending for education, child care and paid leave than they have for building roads and bridges. They have also chafed at the tax increases that Biden has proposed, including the ones that would help pay for his latest proposal.
The president is proposing an increase in the marginal
income tax rate for the top 1% of American earners, to 39.6% from 37%. He would also increase capital gains and dividend tax rates for those who earn more than $1 million a year. And he would eliminate a provision in the tax code that reduces capital gains on some inherited assets, such as vacation homes, that largely benefits the wealthy.
Biden would also invest $80 billion in personnel and technology enhancements for the IRS, in hopes of netting $700 billion in additional revenue from high-earners, wealthy individuals and corporations that evade taxes.
The bandwidth in Congress for another multitrillion-dollar spending effort remains highly uncertain. Some congressional aides think lawmakers are months away from taking up the families plan.
“They’re all focused right now on the infrastructure plan. Those are already very difficult conversations,” said Bill Galston, a senior fellow at the Brookings Institution, a Washington-based think tank. “Even without knowing what’s in the families plan, there’s going to be less Republican support than the infrastructure plan. So it just gets harder.”
White House officials say the latest plan is necessary to meet persistent problems in the American economy.
EDUCATION FUNDS
The plan would include hundreds of billions of dollars for education, including funding to make two-year community colleges tuition-free.
It would effectively expand the nation’s guarantee of a free education from 13 years — kindergarten through 12th grade — to 17 years. Children, no matter their families’ income, would be entitled to free prekindergarten at ages 3 and 4, and later to two years of community college after high school.
The White House said the prekindergarten program would cost $200 billion over 10 years, but officials said the program might not take effect right away, so it was not clear how many years of spending that figure covers. It also was unclear how the White House calculated that this sum would be enough to cover the costs of prekindergarten, particularly given that Biden is promising high-quality programs that pay all employees at least $15 per hour.
The community college plan, meanwhile, would cost $109 billion.
States participating in the prekindergarten program would be expected to cover 10% of the costs at first, increasing their share to 50%. For community college education, the federal share ultimately would be 75% of the cost.
The president also proposes subsidizing tuition for two years for students who are from families earning less than $125,000 and who are
enrolled at historically Black institutions, tribal colleges and other minority-serving institutions. The scope of the tuition-free proposal represents a potential windfall for under-resourced institutions that educate a disproportionately large share of students from lower-income households.
Still, the administration’s exclusion of many four-year institutions could create a fault line within higher education, especially as universities are reeling from the financial fallout of the public health and economic crisis. Many four-year schools would become comparatively more expensive, and some students may decide to study at community college for free for two years and then transfer.
But another element of Biden’s plan could mitigate these concerns. He is calling for increasing the maximum Pell grant award by about $1,400, a 20% increase — short of his campaign pledge to double the grant but a proposal that would help students at all schools.
The White House proposal has many other elements. It would include $225 billion in child care funding; $225 billion for paid family and medical leave; and $200 billion to extend enhanced Patient Protection and Affordable Care Act subsidies. The plan also would extend a more robust child tax credit until 2025, rejecting calls from some Democratic lawmakers and the president himself to make the measure permanent, as well as extend permanently
a more robust tax credit for workers.
FACING CRITICISM
Parts of the plan already have come under fire from conservatives, liberals and even some members of the Democratic leadership.
Conservatives have argued that Biden’s proposed tax increases are harmful to economic growth and are punitive. Biden’s plan would reverse some of the Republicans’ 2017 tax cut, a nonstarter for the GOP. Leading business lobbyists have pressed the White House and congressional Democrats not to push additional spending, noting that the latest two plans combined amount to about $4 trillion over 10 years.
“These are being sold as economic packages, but they’re not. They’re fundamentally attempts to restructure the scale and scope of the role of government in American society,” said Doug Holtz-Eakin, a former economic adviser to George W. Bush and John McCain. “It’s all-or-nothing on big taxes and big government support, and Republicans are not going to support that.”
The White House also has taken criticism from some members of the president’s party about what it left out of the plan.
Biden’s plan would only partially extend the enhanced child tax credit that was approved in March through the $1.9 trillion virus-relief legislation. White House officials celebrated that measure, repeatedly saying it would cut child poverty in half, but are proposing to extend it in full
only through 2025.
The White House also scuttled a plan aimed at requiring cuts to prescription drug costs, a measure pushed by House Speaker Nancy Pelosi, D-Calif., and leading Democrats but fiercely resisted by pharmaceutical industry groups.
Other parts of the proposal drew criticism from some interest groups that wanted it to go further. The $225 billion budgeted for paid family and medical leave over 10 years is “inadequate,” said C. Nicole Mason, the president and chief executive at the Institute for Women’s Policy Research, a gender-focused think tank. To ensure 12 weeks of paid leave for all new parents, she said, the Biden administration would have to set aside more than double that amount. The full cost of the plan from 2024 to 2033 is $460 billion, according to the group’s simulation model.
For decades, women and family advocates have been pushing for paid family leave in the United States, the only industrialized country that does not guarantee paid leave for new parents. The American Family Plan is a “once-in-a-generation opportunity” to finally implement the policy, but there has to be enough money behind it, Mason said.
“You can’t underinvest and get the same kind of returns,” she said.