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Is Biden offering a new 'New Deal'?
In the first in our series looking at the policies of US Democratic President Joe Biden, Robin Clapp analyses the various economic and social stimulus packages Biden has announced since he was first elected.
Joe Biden's victory over Donald Trump in last November's bitterly fought US Presidential election has been followed by a whirlwind of policy announcements. These are increasingly being compared to the state expansionist 'New Deal' initiatives unveiled by the Franklin D Roosevelt administration between 1933 and 1939 to counteract the devastating impact of the Great Depression.
Biden came to power promising that his administration would not only combat the Covid-19 pandemic, which has now claimed more than 500,000 lives in the US and triggered unemployment levels not seen since the 1930s, but also deal decisively with the deeply entrenched wealth disparities it has graphically exposed. In the words of the Washington Post: "While Trump claimed he wanted to 'Make America Great Again', Biden is attempting to actually do it".
Upon Biden assuming office, an American Rescue Plan was signed into law, containing a $1.9 trillion coronavirus stimulus boost. This included cheques being directly dispatched to most Americans in another attempt to ameliorate the economic effects of the pandemic.
Grandiose boasts have been made for the success of the Rescue Plan which Biden says will lift more than five million children out of poverty this year and cut child poverty by more than 50%.
Mainstream and left-of-centre Democrats are as incredulous as they are joyful. Bernie Sanders, congratulating Biden, declared that the American Rescue Plan "...is the most significant legislation for working people that has been passed in decades".
Now the White House has brought forward two more massive packages - the American Jobs Plan and the American Families Plan, which together add up to the most ambitious expansion of the US welfare state in many years.
In a speech delivered in Virginia on 7 May, Biden proclaimed that the richest Americans and corporations must pay their "fair share" of taxes, adding that while he is not anti-corporate, it is now "time we started giving tax benefits to working-class families and middle-class families".
In total, the reform packages amount to approximately $6 trillion and have understandably been viewed enthusiastically by many Americans. Spread over an eight-year period, however, there remain many pitfalls in realising these reforms: in the first instance, inevitable opposition from Congress Republicans in both the House and Senate where Biden's majority rests solely upon the casting vote of Vice-President Kamala Harris.
Nevertheless, the commitment to a vast increase in public expenditure promised by the new administration in this honeymoon period constitutes a sharp break with the neoliberal policies that have long been the dominant strategy of US and world imperialism.
Characterised dismissively as 'Sleepy Joe' by Trump, and regarded as a longstanding conservative fixer within the Democratic Party machine, Biden backed Bill Clinton's 'Third Way' in the 1990s, which sought to marry the irreconcilable interests of capital and labour. He was also a cheerleader for fiscal responsibility (budget cuts) under Obama, when the stock of federal debt was only 67% of what it is today.
Historical necessity has now cast Biden in the unfamiliar role of the man who, in order to deal with the multiple and unique geopolitical, economic, health and social crises affecting US imperialism, is forced to conclude that Reagan-era unbridled market capitalism cannot alone rebuild America after the pandemic. He has therefore been compelled to resurrect policies that until recently were regarded as the discredited remnants of state interventionist Keynesianism discarded over forty years ago.
The Trump years saw a huge further widening of inequality between the classes and the slashing of taxes for the super-rich. During the pandemic the multi-billionaires, especially in the tech and banking sectors, have seen their profits further skyrocket, leading even some capitalist commentators to concede that the 'Roaring 20s' described by Scott Fitzgerald in his novel, 'The Great Gatsby', seems by comparison to have been a time of comparative penury for the rich.
For workers the situation has worsened even more in the last year, with the economy still 10 million jobs short of its pre-pandemic peak. There is a brewing crisis in home ownership with half of US households earning less than $35,000 per annum falling behind with their housing payments.
The open sore of racial inequality and racist policing practices that continue to trigger the Black Lives Matter movement are intertwined with staggering poverty levels. One in three young black males is expected to go to jail or prison during his lifetime, and black men, while making up just 6.5% of the population, comprise 40.2% of the total prison population.
The US faces unprecedented geopolitical challenges too in the form of Chinese capitalism which now produces 18% of global output and, through its aggressive Belt and Road infrastructural investment policies, seeks to expand economic and political influence across every continent, including Latin America, long regarded as Washington's own 'backyard'.
Thus Biden is compelled, both through economic expediency and for reasons of prestige linked to trying to decisively turn the page on Trump's extreme isolationist stance, to change course and announce that 'America is back', signified by its rejoining the Paris Climate Agreement.
Yet the almost simultaneous decision to withdraw all combat troops from Afghanistan by 11 September has been attacked by Hillary Clinton, former Secretary of State in Obama's administration, who has warned that the pull-out will only lead to a resurgence of the Taliban and a possible civil war.
US imperialism no longer functions as an unchallenged superpower. In an increasingly volatile inter-imperialist era foreign policy uncertainties abound as China, but also Russia to a lesser extent, comes into conflict with and challenges US hegemony.
The cornerstone of Biden's grand reform announcement presented to Congress is encapsulated in the American Families Plan. This sets out to provide free pre-school for US children aged three to four, paid family leave and free places at community colleges, including for 'Dreamers' (young immigrants residing in the US without legal status).
The administration claims that five million children will directly benefit from this reform, saving the average family $13,000 when fully implemented. All employees in these state government-funded programmes will, according to Biden, earn at least $15 an hour.
The child tax credit that was expanded during the pandemic will be extended until 2025, offering monthly payments to lower-income parents of around $300 per child.
The American Jobs Plan certainly echoes Roosevelt's New Deal in its bombastic claims, with Biden declaring it to be "a transformational effort that could create the most resilient, innovative economy in the world," and "a blue-collar blueprint to build America". But while the original New Deal represented around 40% of total US GDP (total economic output) at the time, Biden's three plans combined, if implemented, would constitute around 25% of current GDP.
Billed as an infrastructure package, the American Jobs Plan seeks to invest in public transit, rail, airports, roads and bridges, veterans' hospitals and childcare centres, while spending money on combating racial disparities.
There would be a massive injection of dollars into rebuilding 20,000 miles of roads, while $80 billion would be earmarked for Amtrak and freight rail infrastructural improvements. The ten most economically important bridges in the country would be repaired and 10,000 smaller ones modernised to current safety standards.
$42 billion would be spent on ports and airports, $100 billion to extend high-speed broadband and $111 billion for water infrastructure, with the aim of eliminating lead pipes from the nation's water supplies.
20% of the nation's fleet of yellow school buses would be converted into electric vehicles, while $300 billion would be allotted to promote advanced manufacturing, including a four-year plan to restock the country's national stockpile of pharmaceuticals, including vaccines, in preparation for future pandemics.
In total, many of the items in the plan are equivalent or greater than the price tags that would have filled entire, ambitious bills in past administrations.
There are big pledges in relation to climate change too, but Columbia University's Adam Tooze has punctured those by pointing out that the President's climate spending amounts to just 0.5% of US GDP, an amount ten times smaller than that required to decarbonise the economy.
The White House says both plans, if passed by Congress, would be "fully paid for" by tax hikes on the richest Americans and corporations. The capital gains tax rate on incomes above $1 million would be doubled to 39.6% and the top income tax bracket would likewise be increased to the same level for households earning more than $400,000.
The corporate tax (taxes on businesses) rate moreover would be raised from 21% to 28%, partially though incompletely reversing Trump's handout to the big corporations (his 2017 tax bill slashed the corporate rate to 21% from 35%). But this projected increase doesn't begin to come near the 50% rate of corporation tax that prevailed in the 1950s.
After years of neoliberalism, the US raises less corporate tax revenue as a share of economic output than almost all other advanced economies, according to the OECD.
Unlike the American Rescue Plan, which was able to be carried out by Presidential Executive Order, the new proposals have to wend their tortuous ways through Congress, with hostile Republicans already preparing for a legislative fight at every stage and prepared to use the filibuster - a stalling tactic that holds up legislation unless 60 senators agree to pledge support.
Republicans and business groups have not surprisingly attacked the tax proposals, calling them immovable obstacles to meaningful bipartisan negotiations. Republican leader in the Senate Mitch McConnell declared: "President Biden ran as a moderate, but I'm hard pressed to think of anything at all that he's done so far that would indicate some degree of moderation."
Biden has said that, if approved by Congress, these measures would end decades of stagnation in federal investment in research and infrastructure, returning investment in those areas, as a share of the economy, to their highest since the 1960s. He has particularly sought to win over Republicans by emphasising the importance of standing up to Chinese competition stressing that it is vital for the US "to win the 21st century" and stop the "undermining of American values by the world's autocratic nations."
A recent study found that the top 1% failed to report 20% of their income and avoided paying over $175 billion in owed taxes. Biden is seeking to end that by making sure the wealthiest citizens play by the same set of rules as all other Americans.
It is clear, however, that such Presidential ambition will never be able to close the many loopholes that US firms and individuals use to escape taxation. In total, over $1 trillion in unpaid taxes stays in the pockets of the super-rich every year, and the Internal Revenue Service is equipped to do little about it, having had its enforcement budget cut by 25% since 2011.
Biden intends that his proposed doubling of the tax rate on Global Intangible Low Taxed Income earned by foreign subsidiaries of US firms from 10.5% to 21% will raise $1 trillion over 15 years, while a new 10% surtax on corporations that "offshore manufacturing and service jobs to foreign nations in order to sell goods or provide services back to the American market" would be imposed.
In order to encourage US businesses to invest at home, an advanceable 10% 'Made in America' tax credit for activities that restore production, revitalise existing closed or closing facilities, retool facilities to advance manufacturing employment, or expand manufacturing payroll would be offered as an incentive.
In unveiling these tax plans, that have caused uproar from Wall Street to Silicon Valley, Biden has floated the idea that other countries should raise their corporate tax rates too. But an enforceable global minimum tax rate is utopian between competing capitalist nation states, while raising domestic corporate tax rate unilaterally will only make American businesses less competitive, and determined to seek out additional loopholes and more lucrative areas for global investment.
Unstable and weak
Despite massive stimulus policies being enacted to deal with the pandemic, capitalism in the US and internationally has not stabilised its system. In every sphere the Trump years further weakened America.
Biden's plan harks back to the New Deal, but his programme will prove to be wholly inadequate to restore US capitalism to its former pre-eminence. Social and class polarisation are growing. As the reforms get bogged down in Congress, while life for workers and the middle class becomes ever less secure, notwithstanding the current and temporary upturn in economic growth, demoralisation with the Democratic presidency will sink in, enabling Trump and his supporters to capitalise on the dashed hopes of millions.
But despite its many limitations, which will be exposed by the hammer blow of events, Biden's partial rejection of the economic orthodoxy that has prevailed for four decades opens up a new phase of struggle in US society and will cause workers to draw fresh conclusions about the system they toil under.
The key tasks for socialists in the US are to step up the struggle to create fighting trade unions, reach out to the more than 50% of young people who now view the idea of socialism favourably and construct a new workers' party in which Marxists will play a decisive ideological and organisational role in clearing the path to the socialist revolution.
In The Socialist 12 May 2021: