Alex Brandon/AP Photo
President Joe Biden speaks about the American Rescue Plan in the Rose Garden of the White House, March 12, 2021, in Washington.
Passed only by a single vote in the Senate, President Joe Biden’s $1.9 trillion American Rescue Plan Act may lay the basis for overcoming two deep-seated problems that have bedeviled the Democratic Party for decades.
The first is a half-century curse on Democrats’ ability to maintain unified control of the federal government. As I wrote in a Washington Post op-ed a year ago:
Since 1968, Democrats have controlled both Congress and the White House three times, and each one of those periods ended with a hard turn right. Altogether, the years of unified Democratic government add up to just eight out of the past 52: four when Jimmy Carter was president, and the first two years of Bill Clinton’s and Barack Obama’s first terms. Carter’s presidency ended with Ronald Reagan’s election in 1980, Clinton’s first years with Newt Gingrich’s “Republican Revolution” in 1994, and Obama’s first years with the tea party insurgency in 2010.
Even before the pandemic, it was clear that if Democrats won control of both Congress and the presidency, they needed to prioritize “early deliverables” to the voters—visible material benefits—to avoid repeating the disastrous reversals in midterm elections the party suffered under Clinton in 1994 and Obama in 2010. The pandemic has made those early deliverables only more urgent, and the big relief bill is providing them. With their narrow majorities in both houses of Congress, Democrats will need all the help they can get to retain control.
But short-term measures ought to support a long-term vision, and the relief legislation does that too. Indeed, it advances a second goal that has eluded Democrats for a long time: rebuilding a bottom-up political majority, encompassing both low-income working people and the middle class.
One of the reasons that Clinton and Obama devoted their first two years in office to universal health coverage was its potential for promoting that kind of cross-class support. Universal coverage would help both the uninsured poor and many in the middle class denied protection for pre-existing conditions and facing unaffordable health costs. But although Obama succeeded where Clinton failed, the Affordable Care Act was slow in delivering benefits, and its limitations still prevent it from enjoying the broad cross-class support that Medicare enjoys.
The Biden relief legislation has two key elements, improvements to ACA subsidies and child care tax credits, that extend benefits from the poor into the middle class. Both thereby try to avoid the political weaknesses of programs solely identified with the poor. But both have been enacted on only a temporary basis, and with no votes to spare in the Senate it will be an enormous challenge to make them permanent in a follow-up reconciliation bill before the 2022 election.
Under the ACA, people who enroll for coverage through the insurance marketplaces are eligible for premium subsidies on a sliding-scale basis. Until now, however, the law has cut off subsidies entirely at 400 percent of the federal poverty level ($51,040 for a single person). That cutoff point, or “subsidy cliff,” may seem reasonable enough, but many people with incomes just above that level face extremely high costs. For example, as Katie Keith points out at Health Affairs, a 60-year-old earning just over the 400 percent cutoff faces an average annual premium of $12,886, or about 25.8 percent of income, not counting out-of-pocket health costs, which may also be substantial. Consequently, many middle-class people don’t see the ACA as offering them much financial protection.
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The Biden rescue plan, as Jon Walker has argued, finally attempts to make good on the promise of affordable insurance. For 2021 and 2022, it extends subsidies to people above the cutoff, limiting their premiums to 8.5 percent of income. It also increases subsidies at lower incomes; in fact, people with incomes between 100 and 150 percent of the poverty level—and anyone who received unemployment benefits during 2021—will be eligible for a silver plan on the marketplace at no premium.
The expanded child tax credits are potentially even more significant as a cross-class measure than the improved health insurance subsidies. Most of the news coverage about the child tax credits has focused on the stunning point that they will cut child poverty nearly in half. But this may obscure the politically crucial fact that the child tax credits are not an anti-poverty program in the sense of being targeted exclusively, or even primarily, to the poor.
Like the expanded ACA subsidies, the relief plan’s child tax credits have cross-class benefits. The full credit—$3,600 per child under age 6, and $3,000 per child from ages 7 to 17—will begin to phase out only at incomes well into the middle class ($112,500 for single heads of household; $150,000 for married couples). Even with incomes up to $400,000, couples with children will get partial credits. Many low-income families who do not receive the existing $2,000-per-child credit because their earnings are too low will also benefit from the legislation because it makes the enlarged credit “fully refundable,” which means that even those without tax liability will be able to receive the credit.
Not only do the child tax credits have potential cross-class support; they also have potential cross-party support because many conservatives see them as a pro-family policy.
The child tax credits are effectively what other countries call family allowances. Some analyses have suggested that in supporting the tax credits, Democrats are reversing the position they took during the 1990s in seeking to “end welfare as we know it.” That’s true in one sense: The new benefits are not work-related. But, in another sense, the child tax credits are the fulfillment of the promise to “end welfare as we know it.” Like family allowances elsewhere, the Biden tax credits don’t phase out when low-income parents take paying jobs, so they don’t have the kind of work disincentive effect that means-tested welfare assistance has had.
Not only do the child tax credits have potential cross-class support; they also have potential cross-party support because many conservatives see them as a pro-family policy—indeed, as a policy that supports more traditional families where the mother stays home with young children. The tax credits thereby avoid some of the ideological divisions that have erupted over public subsidies for child care ever since Richard Nixon vetoed child care legislation in 1971.
Nonetheless, the opposition to making the expanded ACA subsidies and child tax credits permanent will be intense. The opponents will claim that making middle-class people eligible for benefits is costly and unnecessary. They will cite data showing that the programs will be more “progressive” in the strict sense of directing benefits more to the poor if eligibility ends at low incomes. But by limiting benefits to the poor, the opponents will be inviting a return to all the old political and incentive problems of welfare.
Can Democrats succeed in turning these temporary policies into a new foundation for social provision in the United States? For the immediate future, the answer will depend on the Democrats’ precarious majority in the Senate. In a New York Times op-ed the other day, law professor Paul Campos urged Justice Stephen Breyer to retire immediately because the death or incapacitation of a single Democratic senator over the next 22 months could return Mitch McConnell to the position of majority leader, once again able to obstruct a Democratic Supreme Court nominee. Campos pointed out that six Democratic senators over age 70 represent states with Republican governors who could replace them with a Republican; five Democrats represent states where vacancies would go unfilled for months until an election. A single loss in one of these states would also likely end hopes for progressive reform in this Congress, including the extension of the ACA subsidies and child tax credits.
With their tenuous Senate majority, Democrats ought to be in a hurry to do whatever they can on infrastructure, taxes, and other issues. They have already made the most out of the least—the most substantial relief measure conceivable with the thinnest possible Senate majority. If they can turn that relief measure into a permanent transformation of social policy, it will be one of the most brilliant acts of liberal political magic we have seen in a very long time.
