First 100: The American Families Plan

Lots of great and critical stuff in it, and huge hurdles to any of it actually happening.

by

It’s April 28, 2021 and welcome to First 100. You can sign up to have First 100 delivered to your email by clicking here.

The Chief

Before I get into the details of the $1.8 trillion American Families Plan, which Joe Biden will announce tonight to a joint session of Congress (if you don’t want to sit through a speech you can read the fact sheet), I want to toot our own horn. Last October, with the assistance of Caring Across Generations, we produced a comprehensive study of family care, both the challenges and the ways to fix it. We identified this as a critical missing piece of the safety net, creating hazardous situations for both families and care workers.

It was not a guarantee at that point that Biden would focus on the care economy; we were making the case that it was urgent policy and good politics, and that it fit into his overall desire to tackle crises like economic inequality and racial equity. We even did a piece laying out why investments in care work were critical infrastructure.

If you’re looking for umbrage and outrage and coverage of tweets, you might have to go somewhere else. But if you want coverage that six months later becomes the basis of the top policy priority of the White House, read the Prospect. And especially read our Family Care series.

Now, let’s talk about this American Families Plan. The short version is that I’ve never in my political lifetime been more optimistic about the stated priorities of the upper echelons of the government, and I’ve never been more pessimistic about the prospects of actually getting them into law.

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So here’s what’s in the American Families Plan, based on the fact sheet and a conversation with senior administration officials from last night:

• Education: the plan touts “four more free years of college,” getting to that by making universal, free pre-kindergarten for ages 3 and 4, and two years of free community college for those who want it (that explicitly includes DREAMers). Both of these are structured as federal/state partnerships; with community colleges, the feds provide a 75 percent share and expects the states to pony up the other 25 percent. These investments total about $309 billion.

There’s also $80 billion more for Pell Grants, which would expand the maximum award by $1,400, an increase of 20 percent. There’s $62 billion for increasing completion and retention rates at community colleges and institutions serving disadvantages students. There’s $46 billion for HBCUs and minority-serving institutions to expand or create programs. And there’s $9 billion to train and equip K-12 teachers, including doubling scholarships for future teachers and helping them earn credentials in things like special and bilingual education.

• Child care: The main piece of this is a $225 billion program routed through the existing Child Care Development Block Grant, to make child care affordable and worth providing. Low- and middle-income families, defined as those making 150 percent of the median state income or less, would pay no more than 7 percent of income on child care. This could be devoted to family providers, child care centers, or Early Head Start programs. Pay would increase for providers to at least $15/hour (the current industry average is $12.24), with paid investments in smaller class sizes, training, and better programs.

• Paid leave: Workers would get up to $4,000 a month (with a max 80 percent wage replacement rate) to leave for a pregnancy, medical emergency, to care for a loved one, deal with military deployment of a spouse, or grieve after a death in the family. It ramps up but it’s up to 12 weeks at full strength. It’s a $225 billion program.

• Nutrition: The summer meals program, which we profiled in 2019, would be extended to all eligible children, an expansion of 9.3 million. Since so many of these children get primary nutrition through schools during the school year, it makes sense to help them in the summer months as well. School-year nutrition programs would also expand by lowering the threshold for eligibility and investing in getting every eligible school on the program. There will be a $1 billion demonstration project supporting schools with healthy options. Formerly incarcerated individuals would (I think) be newly eligible for nutrition assistance. Overall, $45 billion here.

• Tax credits: After some wrangling, the plan permanently extends the ACA exchange subsidies to make insurance coverage affordable ($200 billion). It extends the increased and advanced child tax credit but only for to 2025. There are permanent increases to the Child and Dependent Care Tax Credit (which seems duplicative of the child care investments) and the Earned Income Tax Credit for childless workers.

• Things not in the plan but weirdly in the fact sheet: The fact sheet says Biden wants to “work with Congress” to automatically adjust unemployment insurance to make it more generous and lengthier in hard economic times. It says he “has a plan” to lower prescription drug prices and plow the savings into lowering the Medicare age and improving its benefits. But none of that is actually in the proposal.

The whole thing is offset with revenue from four main sources: increasing the top marginal tax rate back to 39.6 percent, taxing capital gains as ordinary income for earners over $1 million, eliminating “step up in basis,” which we also wrote about in 2019, to force taxation of capital gains after death (this kind of takes the place of rolling back Trump’s changes to the estate tax, which was left out of this package), and an $80 billion investment in tax enforcement expected to yield $700 billion. The most important part of that last one is that it forces banks to report information on account flows, making it much harder to hide income. Also, with all the hand-wringing about the other tax law changes, it’s hard to make an argument against enforcing the laws on the books.

That’s Great. Won’t Happen.

There are two parallel universes in effect right now. The first rightly praises this and the American Jobs Plan’s needed investments in the core priorities of our country: helping people find a place to live, move around, learn, and get assistance with their family needs on a sustainable planet. And it praises the bid to make America a more equal place, by rewarding work as much as wealth and taxing capital income. These priorities are all crucial and necessary and it’s great to see leadership on them.

The parallel universe is the one that recognizes where this is all likely going. There’s a guy named Joe Manchin who isn’t interested in investing $4 trillion in these programs, despite earlier claims to the contrary. As passage depends on his assent, I can’t see there being any passage.

Manchin is in consultation with Republicans, whose first offer on the American Jobs Plan portion of this package only contained less than $200 billion in new spending. More important, the White House is quietly meeting with GOP officials on a compromise plan, with top Biden aide Steve Ricchetti leading the talks.

In theory you could see a two-step process, with a thinned-out infrastructure plan passing with bipartisan support, and then something focused on health care, child care and climate investments via budget reconciliation. But if Manchin and friends insist this has to all be “paid for,” and Republicans reject all tax increases (along with plenty of Democrats), I don’t see where that leaves us. The Democratic demand to benefit high-income residents of high-tax states by repealing the cap on the state and local tax deduction is also a hurdle.

So I know the uber-rich are afraid of losing them their gold, but from my vantage point it’s more likely than not, maybe 60/40, that this all falls down, as nobody can agree on taxes or what investments to salvage. The tax enforcement angle could be a salvation here, but expecting Republicans to fund the IRS is remote. Maybe in the end you get a reconciliation bill at about the tax enforcement number of $700 billion. It’s good to make these agenda items priorities so they’re on the top shelf of the Democratic agenda for the future, but that doesn’t make them law.

This fight will take months, so stay tuned.  

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Today I Learned

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