Build Back Better, Part 2: A two-step plan for policy that helps most American families

In the political world the last half of 2021 was dominated by President Joe Biden’s Build Back Better proposal. That effort failed, for both good and bad reasons, which I discussed here. Lately there’s been discussion of trying again, perhaps in a more limited way, in hopes of better positioning the Democratic party for the upcoming midterm elections and perhaps even improving the country. The White House, House Speaker Nancy Pelosi (D-Yep, still here!), and swing vote Sen. Joe Manchin (D-Who’s the Majority Leader now, Chuck?) said earlier this year they were open to trying a more limited version, though Manchin backed away from that last week.

In this post, I’ll look at what was in Build Back Better and suggest two pieces that could be adopted, one before the midterms and one after, provided the Democrats learn some key lessons.

Why Build Back Better?

President Biden and his Democratic allies were trying to achieve three important and legitimate goals with Build Back Better (BBB). First, they wanted to give some policy rewards to liberal Democratic voters and interest groups who reluctantly but effectively helped elect the president. Second, they wanted to give voters a reason to choose Democrats in the 2022 midterm elections. Finally, they wanted to make Americans better off. They just didn’t find a way to do all three sufficiently to get the votes for it.

What was in Build Back Better?

A LOT! The White House’s summary is a good way to understand it, breaking it down into three big chunks: 1) children and caregiving, 2) climate change, 3) health care, and 4) supporting the middle class. The latter is an unruly mix of direct assistance to households, spending on housing and rural development, and immigration reform.

Many of the ideas in BBB were smart and long overdue investments in our future, like increasing Pell Grants, expanding eligibility for school meals, expanding the earned income tax credit (EITC) for childless workers, and taking direct action to both fight and adapt to climate change.

Geeks may recognize there are some things I’m leaving out; that’s because I don’t think they make political or economic sense right now. In some cases, they’re just poorly designed policies, but in most it’s a realistic look at what could pass Congress and win the lasting support of the American people. Here are just a few examples:

• While we know that high-quality early learning programs can make a difference in academic achievement and adult outcomes, we don’t know that about prekindergarten as it’s normally delivered. We also know that refundable tax credits and food assistance are surer bets to improve children's health, academic achievement, and success as adults, so we should expand our investment in direct assistance before we bet on prekindergarten.

• Eliminating the SALT cap, which limits the amount of state and local taxes that can be deducted from the federal income tax is the kind of wasteful pandering to rich people that one is more likely to associate with Republicans than Democrats. Ninety-eight percent of the benefit would go to those making over $100,000.

• We need radical action to reduce greenhouse gasses, but BBB largely relied on tax incentives, which aren’t radical and may not have significant impacts.

• Biden had to propose immigration reform to satisfy the Democratic base, and he proposed good ideas, but nothing on immigration is going to pass the Senate this year.

What could we do before midterm elections?

It’s too late to rescue this bill. It may not be the right time to rescue any of the ideas in it. But there may be an opportunity for the President and Congress to show they can accomplish something and that they care more about Americans than party or reelection (if indeed they do). They’ll have to thread multiple needles, such as getting some Republican votes, accepting some conservative changes, and getting progressives to be for, well, progress.

I’d begin by packaging health and caregiving expansion into something with the word “family” in the name, and bring in some Republicans to negotiate the specifics. Every American is affected by health care costs and most will face issues with cost, quality, and supply of child and adult care at some time or another. That gives lawmakers from both parties an opportunity to get some credit for widely-supported policy leading up to the elections.

Build Back Better makes a good starting point for discussion in all three parts of this potential package. The Democratic bill would have made healthcare more affordable (by reducing costs for Affordable Care Act Marketplace coverage and reducing drug prices) and comprehensive (by expanding Medicaid services for new mothers and children and by covering hearing aids in Medicare), would reduce health disparities, and could increase life expectancy, allow more people to work, and reduce crime. Democrats might have to give some ground on Marketplace subsidies and drug price controls, but they’d still be extending access to medical services and relieve a concern of nearly all Americans, the cost of prescription drugs.

In both senior care and child care, owners can’t make a profit, workers can’t make a living, and customers can’t afford the cost. It’s a classic case of market failure, in which the industry benefits the entire nation and its economy, but the cost is borne first by families and second by limited government subsidies for low- and moderate-income households.

Build Back Better’s child care provisions would have helped pay for child care well up the income ladder and required the states to pay the actual cost of care, including living wages. The CBO estimates this would increase employment and wages for parents, especially women.

The Build Back Better provisions on home- and community-based services (HCBS) for seniors and the disabled would have provided more federal money to states and required them to pay living wages for professional caregivers, who are disproportionately Black and Hispanic. Moody’s estimated this would add 300,000 jobs and 0.2 percent annual growth to the economy, since it allows many unpaid caregivers to go back to work or work more hours. Ultimately, we may need to extend help for senior and disabled care to middle-income families the way BBB tried to with child care, but it’s probably too soon for that.

What about the cost of all this and paying for it? The Congressional Budget Office (CBO) put the cost of the health care changes at $40 billion per year, which ultimately would have been paid for by lower government spending on prescription drugs. The estimate for child care was about $60 billion and the annual cost of the HCBS increase appears to be roughly $40 billion. That means at least $100 million in new revenues is needed to fully fund these important investments. That’s roughly the amount of all business tax increases in the House-passed version of Build Back Better, so there’s a starting point. The corporate income tax now accounts for just 1 one percent of the nations' gross domestic product, down from four percent in the 1950s and '60s. Businesses would benefit from this package through lower costs for health insurance and a larger, more dependable workforce, so it's fair to let them pay for some or all of it.

What can happen after the midterm elections?

After the election looks like the best shot for improving the Child Tax Credit (CTC). Congress will be close either way and both parties will want some things to boast about for the way-too-soon presidential election. Sen. Mitt Romney (R-Utahnistan) proposed a CTC expansion that appears to have some backing from Republicans. Romney’s plan included a credit of up to $4,200 per child, as compared to the current $2,000 per child credit and up to $3,600 that was in effect for 2021. It has work requirements, which Democrats don’t like and should not agree to.

Romney would pay for the new CTC by eliminating the SALT deduction and the aforementioned child care tax credit, ending Temporary Assistance for Needy Families (TANF), and cutting back the Supplemental Nutrition Assistance Program (SNAP). My liberal friends, particularly those like me with high state tax bills, will hate this, but I’d be for everything but the work requirements and SNAP cuts. If Democrats want to solidify the decline in child poverty that resulted from the temporary credit fully refundable credit, they’ll have to find ways to pay for them and pick up a few Republican votes. That’s within their reach and they should grab it.

Changing the landscape for 2024

If President Biden and Congress are able to accomplish either of these significant social policy gains (or something similar), it may end up helping both parties. But it will also help nearly every American family. Surely there’s room to agree on that as a worthy objective.