It’s the Entitlements, Stupid
The guaranteed nature of Biden’s spending is the real threat to America’s economic future.
By The Editorial Board
Sen. Joe Manchin’s public support Sunday for at least $2 trillion in new spending in a partisan budget bill is a huge win for the political left. This means a giant tax-and-spend bill this year is likely, and the biggest expansion of the entitlement state since the 1960s is now possible.
The entitlements are by far the biggest long-term economic threat from the Biden agenda. Tax increases can be repealed by a future Congress. Spending on infrastructure will slow as funding falls. The courts may block his racial preferences. But entitlements that spend automatically based on eligibility are nearly impossible to repeal, or even reform, and they represent a huge tax-and-spend wedge far into the future.
The media won’t talk about this, and Republicans are so far missing in action. But Americans need to understand the stakes.
Hoover Institution scholars John Cogan and Daniel Heil document nearby the entitlement expansions of the Biden Families Plan. It’s an important piece that lists how far the progressive left wants to go in expanding government’s reach into American family life. Federal child care, government paid family leave, free community college, a $3,600 tax credit per child, a permanent expansion of ObamaCare premium subsidies, universal pre-K, permanent expansion of the earned-income tax credit to workers without children, and more.
We’d highlight two points. First is the dishonesty about costs. Entitlements always start small but then soar. The Biden Families Plan is even more dishonest than usual.
For example, it pretends the child tax credit ends in 2025, so its cost is $449 billion over the 10-year budget window that is used for reconciliation bills that require only 51 votes to pass the Senate. But a future Congress will never repeal the credit. An honest accounting would show how the credit will cause the deficit to explode in year 11 and beyond and thus require 60 Senate votes to pass.
Second, these programs aren’t intended as a “safety net” for the poor or those temporarily down on their luck. They are explicitly designed to make the middle class dependent on government handouts.
Sen. Bernie Sanders and the left understand that “universal” benefits are more politically durable. The only entitlement to be reformed in our lifetimes was Aid to Families with Dependent Children, also known as welfare, in 1996. But cash welfare was never a middle-class program, and the work requirement in that reform is nowhere in the Biden Families Plan.
Mr. Cogan’s 2017 book, “The High Cost of Good Intentions,” is a superb history of American entitlements. It is also harrowing reading for anyone who fears American decline. Entitlements always grow over time, as politicians add benefits and increase eligibility.
Social Security benefits have increased often since the program began, and its formula based on the increase in average wages means benefits rise faster than inflation. Medicaid was once a safety-net program but now covers 37% of Californians. Food stamps and nutrition programs started as help for the poor but now cover tens of millions of Americans. Medicare started as coverage for seniors but now Democrats want it to cover anyone over age 55.
For a while, in the 1990s and 2000s, entitlement reform was in the political air. But it always failed, even when Republicans controlled the government. George W. Bush tried to reform Medicare and Social Security, but his party made him expand the first and fled from the second. A GOP majority failed by a single vote to reform ObamaCare in 2017, as three Senators defected.
The result is that on present trend the U.S. is falling into the same entitlement trap as Western Europe. Entitlement spending requires higher taxes, which grab 40% or more of GDP. Economic growth declines as more money flows to transfer payments instead of investment. The entitlement state becomes too large to afford but also too politically entrenched to reform. Incentives for upward mobility erode as dependency on the state grows.
The Biden Families Plan will greatly accelerate the pace of all this. Other spending priorities—notably defense—will be crowded out by automatic entitlement increases. Taxes on the rich won’t be nearly enough to pay for it all. Tax increases on the middle class are an eventual certainty, probably a value-added or carbon tax, or both.
Most remarkable is that Democrats are attempting this economic, social and fiscal transformation without a mandate from voters. In 1933 and 1965 at least they had historic majorities after landslide victories. In 2020 they won a narrow White House victory in the Electoral College, lost seats in the House, and now have only a 50-50 split in the Senate.
They may get away with this because they have the press in their pocket, and because most Republicans these days are preoccupied with the culture war. Only a decade ago the Tea Party fought ObamaCare. Now most Beltway conservatives worry more about Big Tech than they do Big Government. If the Biden Families Plan passes, these conservatives will find themselves spending the rest of their careers as tax collectors for the entitlement state.
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Biden’s Plan for an Entitlement Society
For the first time in history, more than half of all Americans would be on the federal dole.
By John F. Cogan and Daniel L. Heil
The federal government’s system of entitlements is the largest money-shuffling machine in human history, and President Biden intends to make it a lot bigger. His American Families Plan—which he recently attempted to tie to a bipartisan infrastructure deal—proposes to extend the reach of federal entitlements to 21 million additional Americans, the largest expansion since Lyndon B. Johnson’s Great Society.
For the first time in U.S. history—except possibly for the pandemic years 2020 and 2021, for which we don’t yet have data—more than half of working-age households would be on the entitlement rolls if the plan were enacted in its current form. Contrary to Mr. Biden’s assertion that his plan “doesn’t add a single penny to our deficits,” his plan would add more than $1 trillion to the national debt over the next decade.
The American Families Plan proposes several new entitlement programs. One promises students the government will pick up the entire cost of community-college tuition; another promises families earning 1.5 times their state’s median income that Washington will cover all daycare expenses above 7% of family income for children under 5; still another promises workers up to 12 weeks of federally financed wage subsidies to take time off to care for newborns or sick family members.
The American Families Plan would follow longstanding government practice and make temporary emergency programs permanent. In March, Congress enacted the American Rescue Plan, which expanded Affordable Care Act subsidies and refundable tax credits for child care and low-wage workers. The expansions were sold as temporary measures to combat the effects of pandemic lockdowns. A month later, Mr. Biden asked Congress to make them permanent.
These programs extend eligibility for benefits high up the income ladder. Two-parent households with two preschool-age children and incomes up to $130,000 would qualify for federal cash assistance for daycare. Single parents with two preschoolers and incomes up to $113,000 would qualify. And some families with incomes over $200,000 would be eligible for health-insurance subsidies. Other parts of the plan, such as paid leave and free community college, have no income limits at all.
Our analysis shows that the American Families Plan would add 21 million Americans to the list of federal entitlement beneficiaries. With these additional recipients, 57% of all married-couple children would receive federal entitlement benefits, and more than 80% of single-parent households would be on the entitlement rolls.
The share of households receiving assistance would be higher in some areas of the U.S. than in others. This is primarily because federal eligibility for many of the American Families Plan’s programs, particularly its refundable tax credits, don’t account for geographical differences in incomes and living costs.
We estimate that most of the Biden plan’s entitlement benefits would go to middle- and upper-income households. Households in the upper half of the nonelderly income distribution would receive 40% of the new entitlement benefits.
Our estimates are for a full-employment economy, not one in recession. So the percentage of U.S. households receiving benefits from at least one federal entitlement program would only increase if the U.S. economy were to falter.
Where will the money come from to finance this largess? Mr. Biden claims that taxes on the rich will entirely finance his American Families Plan. But his proposed revenue heist falls woefully short of the plan’s true cost. Presidential budgets for years have been littered with gimmicks to hide their true expense. The American Families Plan is no exception.
The plan proposes that the $100 billion annual expansion of the child tax credit will suddenly expire at the end of 2025, reducing the tax credit from a high of $3,600 to $1,000. All other programs in the plan are assumed to be permanent. Why only phase out the child tax credit? The obvious answer: Its expiration reduces the 10-year estimated cost by $465 billion.
The gimmicks don’t stop there. The Biden administration proposes to use more than $200 billion in new business taxes to finance the American Families Plan. Amazingly, it also proposes to use that same money to finance future Medicare spending.
Properly accounting for these gimmicks, and the plan’s overly optimistic revenue assumptions from its Internal Revenue Service compliance initiatives, pushes the American Families Plan deficit to more than $1 trillion during the next 10 years. The president claims that his plan is part of a budget that is “putting the nation on a fiscally responsible path.” Hardly. If passed, it would accelerate the pace of entitlement expansions that began in the late 1960s. Improving the safety net is one thing, but spending more than $1 trillion on mainly middle-class entitlements and financing this expenditure with debt robs future generations while enriching today’s.
Mr. Cogan is author of “The High Cost of Good Intentions” and a senior fellow at Stanford University’s Hoover Institution. Mr. Heil is a policy fellow at Hoover.
WSJ Opinion: Was Milton Friedman Wrong on China?
It’s bigness, not capitalism, that lets Beijing get away with so many abuses.
By William McGurn
Main Street: If Joe Biden intends to outcompete Beijing, surely Milton Friedman still offers a more compelling model than simply copying the government-directed approach of Xi Jinping. Images: AP/Getty Images Composite: Mark Kelly
“I predict that China will move increasingly toward political freedom if it continues its successful move to economic freedom.”
So spoke Milton Friedman in 2003. It seemed a good idea at the time, especially after the transformations of the dictatorships in Taiwan and South Korea into messy but functioning democracies. But as Joe Biden is now finding out, Chinese President Xi Jinping operates from a very different premise: that the West has had its day, and Beijing’s blend of Communist Party rule and state capitalism is the ticket to Make China Great Again.
He appears to be getting away with it. Under Mr. Xi, Beijing has carried out genocide against China’s Uyghur minority, threatened Taiwan with invasion, shut down a pro-democracy newspaper in Hong Kong, covered up the origins of Covid-19, and so on. Even so, China’s economy continues to boom—it grew more than 18% in the first quarter from a year earlier—and Friedman now looks to have gotten it colossally wrong about capitalism and freedom.
Or did he?
In reality Friedman was never as deterministic as sometimes portrayed. While he did maintain that a free society couldn’t exist without a free economy, he emphasized that the opposite didn’t hold: A free economy could exist without political freedom.
Today some would argue that global capitalism isn’t the Chinese Communist Party’s enemy but its ally. There’s some truth to this. Certainly without the prosperity delivered by global trade and investment, Beijing wouldn’t be in a position to modernize its military, or to use its investments and foreign aid to expand its influence overseas. But Mr. Xi’s relative immunity from foreign pressure has less to do with any unique genius of what some call its “market Leninism” than something much more prosaic: the country’s 1.4 billion population.
Size has always been China’s lure. In the 1930s, a Shanghai-based American businessman named Carl Crow wrote a book called “400 Million Customers” noting the vast riches that might be had if you could sell each Chinese an apple a day. Half a century later, when the population had more than doubled and China began opening up, the details changed, but the dream was the same: Imagine selling every Chinese a Coke!
This bigness is Mr. Xi’s trump card. Any normal-size nation, even a relatively large one such as Vietnam or Japan, simply lacks the leverage over investors and other countries to get away with what China does routinely.
Nor is Mr. Xi shy about using this leverage. Look at Australia. In April 2020, Prime Minister Scott Morrison called for a genuine World Health Organization investigation into the origins of Covid-19. It came on the heels of other decisions that irked Beijing, such as Canberra’s decision to ban Huawei on security grounds from participating in its 5G rollout and criticism of Beijing over its treatment of the Uyghurs.
China’s response? An all-out war on Australian exports. Australian wines were particularly hard hit, as China imposed tariffs of up to 220% set to last for five years. Australian beef, barley, lobster, timber and coal have also been hit, which is particularly hard for an export-oriented economy such as Australia’s.
That’s why most foreigners doing business in China are so quick to run up the white flag when Beijing shows displeasure. John Cena, professional wrestler and star of the new “Fast & Furious” movie, recently issued a groveling apology after referring to Taiwan as a “country” during an interview. Hollywood appreciates that China now offers a larger box office than the U.S.
All that said, the story of capitalism in China is far from over. No one knows how lasting Mr. Xi’s actions will prove, or the real costs of China’s many inefficiencies. After all, there was a day, not so long ago, when the received wisdom held that America was doomed to lose its global dominance to another brand of Asian state-directed insider capitalism—Japan Inc.
Meanwhile, China faces significant constraints, including a rapidly aging society and a grossly skewed male-to-female sex ratio, both consequences of its disastrous population policies. China doesn’t even have a convertible currency. And the wrecking ball Mr. Xi is taking to Hong Kong doesn’t exactly inspire confidence about Beijing’s appreciation for international financial centers.
Plainly China-style capitalism is on President Biden’s mind. When he announced his American Jobs Plan back in March, the president sold this huge increase in the federal role in the economy as a way “to win the global competition with China in the upcoming years.” Milton Friedman may once have been a tad too optimistic about prospects for freedom in China. But if Joe Biden seriously intends for the U.S. to outcompete China, surely the Friedman prescription for a freer, more nimble U.S. private sector would serve him better than a paler version of Xi Jinping’s government-directed growth.
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Liberals eliminated God decades ago. They have elevated themselves above God:
SHALL WE HIRE A MONUMENT ENGRAVER TO GO TO ARLINGTON NATIONAL CEMETERY AND ADD THE MISSING WORDS?
THIS IS A MESSAGE FROM AN APPALLED OBSERVER:
Today I went to visit the new World War II Memorial in Washington , DC . I got an unexpected history lesson. Because I'm a baby boomer, I was one of the youngest in the crowd. Most were the age of my parents, Veterans of 'the greatest war,' with their families. It was a beautiful day, and people were smiling and happy to be there. Hundreds of us milled around the memorial, reading the inspiring words of Eisenhower and Truman that are engraved there.
On the Pacific side of the memorial, a group of us gathered to read the words President Roosevelt used to announce the attack on Pearl Harbor :
'Yesterday, December 7, 1941--a date which will live in infamy--the United States of America was suddenly and deliberately attacked.'
One elderly woman read the words aloud:
'With confidence in our armed forces, with the abounding determination of our people, we will gain the inevitable triumph.'
But as she read, she was suddenly turned angry. 'Wait a minute,' she said, 'they left out the end of the quote. They left out the most important part. Roosevelt ended the message with'so help us God.'
Her husband said, 'You are probably right. We're not supposed to say things like that now.'
'I know I'm right,' she insisted. 'I remember the speech.' The two looked dismayed, shook their heads sadly and walked away.
Listening t0 their conversation, I thought to myself, 'Well, it has been over 50 years; she's probably forgotten.'
But she had not forgotten. She was right..
I went home and pulled out the book my book club is reading --- 'Flags of Our Fathers' by James Bradley. It's all about the battle at Iwo Jima ..
I haven't gotten too far in the book. It's tough to read because it's a graphic description of the WWII battles in the Pacific.
But right there it was on page 58. Roosevelt 's speech to the nation ends in 'so help us God.'
The people who edited out that part of the speech when they engraved it on the memorial could have fooled me. I was born after the war! But they couldn't fool the people who were there. Roosevelt 's words are engraved on their hearts.
Now I ask: 'WHO GAVE THEM THE RIGHT TO CHANGE THE WORDS OF HISTORY?????????'
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| Former Chinese Party Insider Calls U.S. Hopes Of Engagement 'Naive' |
| via The Wall Street Journal Hoover’s Project on China’s Global Sharp Power has released a new essay by Cai Xia, a dissident and former professor at the Central Party School of the Chinese Communist Party (CCP), that presents an insider’s account of the CCP’s historical world view and reveals the current perspective of Beijing’s leaders about their relationship with the United States. ++++++++++++++++++++++++++++++++++++++++++++++ Politicians are people who, when they see light at the end of the tunnel, go out and buy some more tunnel. ~John Quinton, American actor/writer +++ Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~Oscar Ameringer, "the Mark Twain of American Socialism." +++ Most politicians are slow to act but quick to spend They also pass laws that impact everyone but themselves. Dick Berkowitz +++++++++++++++++++++++++++ I heard recently that 22 cities, all run by Democrats, defunded their police departments to the tune of $1 billion. Radical Democrats have been busy blaming police for racial issues while other radicals burned down their cities and they did nothing to stop them. In fact, some Democrat mayors praised their actions. Now the Democrats accuse Republicans of having pushed defunding. That dog not only want hunt but also is beginning to bite the Democrats so they do what they always do when facts get too close, for comfort, they try to lie their way out and project. +++++++++++++++++++++++++++++ |
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