“It’s time to build our economy from the bottom up and from the middle up, not the top-down.”—President Joe Biden
In recent weeks the Biden administration has unveiled two major spending proposals, including an infrastructure plan and the American Families Plan. These plans have a combined price tag of roughly $4 trillion over the next 10 years. Both proposals would require sizeable tax increases, which are being targeted to corporations and top earners. They face significant challenges, not least of which are Republican opposition to the tax increases and disagreement among Democrats on how to pay for the proposals.
The infrastructure plan includes spending for transportation, utilities, manufacturing, job creation and research, as well as home-and community-based care for the disabled and elderly. With an estimated $2.3 trillion price tag, this plan includes a wide range of spending priorities including many beyond traditional physical infrastructure.
The proposal includes roughly $600 billion for transportation projects. Affordable housing would receive $200 billion. Money is earmarked for improving water system safety, removing lead pipes, and providing high-speed broadband access. Roughly $400 billion of the plan is aimed at providing care for elders within their homes.
The second proposal, the American Families Plan, has an estimated cost of $1.8 trillion and includes subsidized childcare and tuition-free pre-kindergarten and community college. It also proposes an extension of the expanded child tax credit which first passed in the American Rescue Plan, the administration’s COVID-19 economic relief package passed in March.
Under the American Families Plan, the expanded Child Tax Credit would be funded through 2025 and would be made permanently refundable. The original expansion passed this spring raised the per-child tax credit from $2,000 to $3,000 with an additional $600 credit for children under the age of six. When the credit was made refundable, it increased its availability to low-income households providing them with the full benefit no matter how little they earned. Changes in March also directed the Internal Revenue Service to start making periodic payments of the credit. These payments are set to begin this summer.
The administration’s proposal would lower the cost of childcare, guaranteeing that low- and middle-income families pay no more than 7% of their income on childcare for children under five years of age.
This provision is estimated to save an average family $14,800 per year on childcare expenses. The amount families pay would be based on a sliding scale. Low-income families would be fully covered. Families earning 1.5 times their state median income would pay no more than 7% of their income on child-care expenses.
An additional provision in the American Families plan focuses on children who quality for free or reduced fee breakfast and lunches. These children would also now qualify for those meals during the summer in an expansion of a program that had been included in the economic stimulus package. This would serve an estimated 30 million children nationwide.
Pre-school and higher education would see a boost from the American Families Plan. Younger Americans would benefit from universal prekindergarten for three- and four-year-olds. Adults would benefit from two years of tuition-free community college.
The preschool program would apply to families of all income levels. It also promises teacher training, wages of at least $15 per hour for all employees, and compensation similar to kindergarten teachers for educators with comparable qualifications.
Tuition-free community college would be available to all Americans. It’s estimated that up to 5.5 million students could enroll and pay nothing if all states and territories were to participate. In addition to community college, the proposal also includes an increase in Pell Grants.
Combined these two proposals represent not only a significant increase in government spending, but also a substantial shift in spending priorities. At a time of significant financial challenges, this administration’s policies appear to place people, and especially families, at the heart of economic recovery.