Since the 1980s, Democrats have offered a consistent refrain about the Information Age economy: that it makes the rich richer, suppresses wages for the middle class and leaves the poor falling further and further behind. To reduce inequality and expand opportunity, their economic advisers have prescribed government investments in education, health care, training, infrastructure and support for families, all financed by higher taxes on the affluent.
A political era favoring lower taxes and smaller government has allowed them only limited success.
But Republican opposition thwarted their attempts to win larger investments in “human capital” and economic change. Major legislative action on priorities such as expanding early childhood education, modernizing infrastructure and curbing carbon emissions to slow the warming of the planet fell by the wayside.
Federal spending on popular benefit programs for retirees continued to swell. Federal spending on the future — capital investment, research and development, education and training — eroded. From a peak of more than 6% in the 1960s, those budget investments fell by more than half.
“The Biden administration was not strategic about this,” complained Massachusetts Institute of Technology professor David Autor, a leading authority on the economic shifts that have kept many Americans from getting ahead. He fears the window for major action may be closing again.
“We’ve been doing this for four decades: underinvesting in ourselves, cutting taxes and running away from the future,” Autor said. “This just contributes to American decline.”
Republican economists say the extent of wage stagnation and dimming opportunity has been exaggerated. Michael Strain of the conservative American Enterprise Institute, author of the 2020 book “The American Dream Is Not Dead,” insists that Build Back Better would have set the economy back with wasteful, poorly designed programs.
University of Maryland economist Melissa Kearney, a moderate Republican who favors much of Biden’s agenda, called continued stalemate “a terrible outcome.” She still hopes for a compromise.
“Investing in kids is such a win-win. Millions of poor kids would do better in school, contribute more to our economy, rely less on safety net programs.”
Biden keeps making the case, including on his West Coast swing last week. “We have not invested in ourselves,” the President told donors at a Seattle fundraiser.
His remaining best-case scenario is half of last year’s $3.5 trillion blueprint, with much of the new tax revenue devoted to deficit reduction rather than new spending. Potential elements: $500 billion to address climate change, limits on some prescription drug prices, Obamacare subsidies and spending to expand early childhood education.
It wouldn’t be what he or his advisers hoped for. But it would be something.
“I don’t know when another opportunity will come along,” Furman said, “which is why I hope they can pull a rabbit out of a hat.”