Will Democrats break the GOP’s deficit doom loop?
Republicans understand it. The rest of the country should, too. The real game-changer in President Joe Biden’s raft of policy proposals is the revenue he would raise from the wealthy.
Biden’s plans are routinely described as big, bold and progressive. This is true but incomplete. Yes, Biden is making ambitious efforts to grapple with long-standing shortfalls in public investment.
But Biden has not cooked up some radical, untested concoction. He’s advancing programs that have been successful in U.S. states and in other well-off democratic nations. Many of his plans were proposed and vetted in Congress over the past decade. Team Biden knows that familiarity breeds comfort and long-term coalition-building.
His child-care plan, for example, draws heavily on proposals from Rep. Robert C. “Bobby” Scott, D-Va., and Sen. Patty Murray, DWash. Two years of free community college were first proposed in 2015 by President Barack Obama, and Scott, now the chair of the House Education and Labor Committee, introduced it.
Child care, Scott noted in an interview, “is not just vetted as an idea legislatively in the United States, these are things that . . . most countries have just been doing routinely; they’re not unusual on an international basis.” And 17 states already offer tuition-free community college.
Nonetheless, what’s really bold is Biden’s effort to create a stream of revenue through higher taxes on the wealthy and corporations that would support his efforts on education, child care, infrastructure and more help for low-income families.
Biden’s tax program, including an enforcement effort to make it harder for corporations and the well-to-do to evade what they owe, is designed to break a vicious cycle. Since the early 1990s, Democrats coming into office after a GOP era have had to raise taxes just to ease deficits Republican tax cuts created in previous administrations. Then, when Republicans came back into power, they enacted more tax cuts (often accompanied by higher levels of military spending).
This process has contributed to a revenue shortfall over time. Federal revenue as a share of gross domestic product has dropped from 20% in 2000 to 16.3% in 2019. A calculation the Center on Budget and Policy Priorities (CBPP) made at my request found that if federal revenue returned to 20% of GDP — a long way from socialism, you might notice — the government would collect some $680 billion more in 2022 than it would under current law. Biden’s tax increases amount to just 1.2% of GDP over the next decade, and they are confined to the very rich for good reason: The income gains at the top of the economy over the past four decades dwarf those of everyone else (and this was likely aggravated during the pandemic).
Many of the wealthy pay lower rates on their income than taxpayers earning much less because some two-fifthsof the incomes of the top 1% come from capital — and capital income is currently taxed far more lightly than labor income.
The upshot is that as long as we refuse to ask wealthy Americans to chip in a little more, our nation will continue to underinvest in public goods, accept wide opportunity gaps between rich and poor children, and do little or nothing to ease the family and work struggles of two-income households.
“We’ve been so caught up in this worship of tax cuts that it not only shrank our revenues but it also shrank our ambitions,” said Sharon Parrott, president of the CBPP. “The price of not raising revenues is ignoring festering problems.”
Biden made a similar point to reporters Wednesday, asking whether slightly lower tax rates on the wealthy or universal access to community college would do more for the country.
As you watch the coming debate, notice that Republicans will devote more time to fighting Biden’s tax increases than to criticizing particular programs he champions. This is partly because Biden’s ideas are broadly popular but mostly because they have long counted on the deficit doom loop to block social progress. Democrats should have the courage and clarity to recognize what Republicans already know: It’s the revenue, stupid.