April 8, 2021
by François-Michel Le Tourneau, Deputy Director of iGLOBES and Senior Researcher at the French National Center for Scientific Research (CNRS)
For those who follow US news, the last few weeks have a surrealistic feel. Since Joe Biden's election, a whole slew of notions and ideas that seemed banished from public debate - or carefully confined to left-leaning circles, are all of sudden at the center of public action: family allowances, corporate taxes, assault on hiding profits in tax havens... This in a country that still gave Donald Trump a historical record of 74.2 million votes, the highest number ever obtained by an American presidential candidate...after Joe Biden, of course. How is this possible?
A COUNTRY SHAKEN BY THE PANDEMIC
Even if local situations are hugely diverse, the United States is still paying, at a high cost, the Donald Trump administration's messy response to the pandemic. The most bereaved country in the world according to official counts, it obliterated the 500 000 death marker in February 2021 and is quickly approaching 600 000.
But, in the middle of the chaos, we must recognize the previous administration's crucial measure. In May 2020, the federal government flooded the pharmaceutical industry with funds (14 billion dollars!) so that it could find a vaccine as soon as possible. All serious companies were largely subsidized - contrary to the view we often have in France, the American taxpayer finances research to a great extent, including the most "useless" fundamental research... Several months later, the results are here, with not just one, but three approved vaccines, and the ability to produce in large quantities that is the envy of the European Union who didn't have the same audacity.
Faced with the third wave's increase in deaths at the beginning of January, president Joe Biden set a goal that seemed ambitious: 100 million doses given in 100 days. In fact, the initial goal will probably be more than doubled (so, over 200 million doses in 100 days), brushing aside the industrial incidents and the errors which, in the US as in Europe, have been part of the vaccination campaign. The Biden government probably had the knowledge that it would be possible for them to go beyond their initial goal, but he put in place a policy of "under promise and over deliver". And it's working. It is far more exciting to surpass initial ambitions, including when these are modest, than to announce delays in assembly-line deliveries...
THE PANDEMIC AS AN EXCUSE TO CHANGE THE SOCIAL WELFARE MODEL
But the public health situation is not the only issue that worries the Biden administration. Despite numbers showing the economy is quickly recovering despite the pandemic crisis, the damage is done, with historic unemployment and a huge section of the population abandoned after companies and restaurants where they worked closed. As a result, a housing eviction crisis is looming - this all the while the stock market is doing quite well, contributing to the increase in disparities.
Intervention was also necessary even if, here again and despite the Republicans' liberal creed, president Trump had already "tossed money from helicopters" (in total close to 1.8 billion dollars spent by December 2020 to stimulate the economy).
The stimulus plan created in January by Biden, called the American Rescue Plan, also had the goal of reestablishing confidence in the economy, but also of appeasing the country. Despite their deep ideological differences on the government's role, few working-class Americans do not appreciate receiving a check in their name that can immediately be cashed in. Since January, they have found in their mailbox stimulus checks of $1400 per person (D. Trump had given $1200), usable without restriction: a measure guaranteed to be popular.
But using the hugely popular approval of these stimulus measures, president Biden used his plan to add important innovations which touch at the heart of the American welfare model. Following in Barack Obama's footsteps, he thus extended the enrollment period for the government regulated health insurance plans put in place with the Affordable Care Act (the famous Obamacare). In other words, since many Americans lost their insurance when they lost their job, Biden's plan gives them the option to get an insurance plan guaranteed by the government, whose price has been made more attractive for now thanks to funds given by the American Rescue Plan.
The stimulus plan also includes family allowances, now almost universal (you have to earn more than $10 000 per month to not benefit from it), up to $300 per child. Contrary to the doxa in place for a long time, mentioned in this blog article, these allowances are no longer conditioned and their use is left to the appreciation of the parents (contrary to food stamps that can only be used to purchase food). In short, a social welfare model that is closer to Europe's.
Of course, these measures are temporary for now. Instead of proposing a major legislative change which would have caused an ideological war again, Joe Biden chose to present the whole thing as a "stimulus plan" adapted to the circumstances. But no one is dupe. The idea is really to start a mass movement. Americans could get use to benefitting from these guarantees and demand that they continue, creating the basis for a universal social protection unknown in the United States.
TOWARD A CHANGE IN ECONOMIC PHILOSOPHY
Though the announcement of family allowances was already a scoop in and of itself, the discussions on the plan to rebuild infrastructures, called the American Jobs Plan, that started right after those on the stimulus bill, also brought out ideas that were taboo in Washington up to this point, such as a significant increase in corporate taxes and, at the same time, the start of discussions at the global level on the fight against tax evasion of which the largest American companies, notably those in the digital fields, are uncontested champions. A 180° turn compared to the Trump era, but also, in large measure, compared to the economic policies Bill Clinton and Barack Obama had accepted.
Here also, rather smooth. The topic of crumbling infrastructures is a common one in American political life (Donald Trump had also announced such a plan, finally doing nothing). It helps arouse patriotic feelings: "we have to become N°1 in the world again!". It also means following in the footsteps of the Roosevelt (that had conceived the idea) and Eisenhower (who had hugely financed construction projects) administrations that created the foundation of the federal road network the county is so proud of.
But the primary issue is finding out what lies behind the portmanteau word "infrastructure". Republicans, who clearly see they will not be able to oppose this new plan presented as another way to stimulate the economic machine (which explains the plan's name), want to give it a narrow definition: roads, bridges, maybe telecommunications.
But the Biden administration and the Democratic party are setting their sights much higher. The plan includes the decarbonization of transportation (a nod to A. Ocasio-Cortez and B. Sanders' Green New Deal), but also debt relief for students and measures for those not in the job market, presented as strengthening the country's "human infrastructures". And again, measures to bolster welfare protection, especially the Medicare and Medicaid programs.
This will all need to be paid for, and it will be more difficult to finance this plan on just the deficit, as the previous one. Surprise, an increase in corporate taxes and shutting down tax havens are what is being looked at - with of course the idea that the long-term economic growth will largely compensate for the investment.
Despite their accusations, it is likely that opposition from the Republicans on the topic will not be very audible. Who could oppose new jobs and the popular infrastructure improvements?
AN ASTUTE USE OF THE PANDEMIC?
Having inherited a catastrophic public health situation from his predecessor, Joe Biden has been very shrewd. Not only was he able to mobilize the country around the massive vaccination campaign (up to 3.8 million doses given per day!), but he also managed to make it what Americans love: a national success story, a tale in which records are accumulating one after the other, showing America's indominable spirit.
Also, the president elected in November, though confronted with violent opposition demonstrated by the events at the Capitol, succeeded in using the crisis to put forward his agenda, despite having a narrow Senate majority. By adding social measures dear to the Democrats in the context of stimulating the economy and the fight against the pandemic, he has cornered the Republicans since the population is massively in favor of anything that can improve the economic situation and can herald a "return to normal".
But what exactly will happen when things become "normal"? Clearly, the administration is betting on people who are benefitting from these welfare measures mobilizing in order to keep them, and on an economic recovery that will be sufficient to satisfy the others, ensuring in the end a wide victory in the mid-term elections. We will have to wait until next year to see if the change in the coming social welfare model can survive beyond the emergency measures and have a lasting impact, especially by finally incorporating legislation more solid than emergency plans.
We can also ponder the cost of these measures. Having announced close to 5 billion dollars in expenses (it might be a little lower since the final cost of the plan relative to the infrastructures has not been established yet), did the Biden administration shoot all of its bullets in the first months of its term? How will it deal with an increase in the interest rate and the investors' decreased desire for American treasury bonds?
Finally, pandemic or no pandemic, what unites Democrats and Republicans is that the budget deficit seems to be a bigger preoccupation for others than for them...
François-Michel Le Tourneau is a senior research fellow at the French National Center for Scientific Research (CNRS), Deputy Director of the UMI iGLOBES and a member of the Institut des Amériques Scientific Committee. His work focuses on settlement and use of sparsely populated areas, especially the Brazilian Amazon. He is particularly interested in indigenous people and traditional populations and their relationships with their territory. He has authored a number of papers in national and international scientific journals (list here on HAL-SHS, here on Researchgate or here on Academia.edu).