Why Are Moderate Dems Trying to Blow Up Biden's Economic Plan?Roundup
tags: economics, Democratic Party, Joe Biden, Economic Policy, Keynesianism
Zachary D. Carter (@zachdcarter) is a writer in residence with the Omidyar Network and Hewlett Foundation. He is the author of The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes.
At the close of 1933, The New York Times published an open letter from the British economist John Maynard Keynes to President Franklin Roosevelt offering both high praise and a dire warning. In the first nine months of his presidency, Keynes argued, Roosevelt had proved himself a hero to all those around the world who believed in “rational change” through “the existing social system.” But Keynes saw danger ahead: Without a robust economic recovery, Roosevelt’s reform program would disintegrate, taking with it liberal dreams of reversing the global slide into authoritarianism.
Roosevelt didn’t always see eye to eye with Keynes, but he ultimately took the advice, ramping up spending on housing, relief payments and direct hiring to better complement his battles against monopolies and the titans of high finance. The recovery strengthened, and American democracy survived as Europe descended into fascism.
Keynes’s wisdom resonates today, though the precise contours of our economic dilemma differ. Like Roosevelt, President Biden entered office in a flood of crises. The pandemic was claiming thousands of American lives each day, vigilantes had just stormed the Capitol, and millions of people remained out of work amid soaring inequality. Each of these calamities threatens not only the political viability of Mr. Biden’s political party but also the future of American democracy. The president recognizes the stakes and has bet everything on his economic agenda.
Over the past few weeks, however, centrists in Mr. Biden’s own party have been chiseling away at his signature legislative proposal, the $3.5 trillion Build Back Better Act, to the point where the bill’s future is in jeopardy. It is not unheard-of for politicians to disagree with members of their own party, but the recent Democratic attacks on the plan have been remarkable for their incoherence.
The president’s critics have explained their opposition by invoking the supposed sanctity of arcane House procedure, telling constituents that their votes for or against certain parts of the plan are meaningless and issuing economic critiques that make no sense. Writing in The Wall Street Journal, Senator Joe Manchin of West Virginia upbraided Democratic leadership for running up the “crippling” national debt — even though Mr. Biden has said that the plan will include enough tax increases to make it budget neutral.
Mr. Manchin’s critique demands particular attention. In addition to his phantom debt fears, Mr. Manchin has accused his Democratic colleagues of using the bill to fan the flames of an “overheating” economy that he insists is already imposing “a costly ‘inflation tax’” on working families.
It’s true that prices have increased unexpectedly this year, and true again that policymakers should be taking reasonable precautions against further increases. But in attacking the Build Back Better plan, Mr. Manchin is working against his purported aims. The law is designed not only to support employment but also to reduce inflationary pressure.
Anyone worried about inflation covertly “taxing” household income — an idea developed by Keynes, incidentally — should be looking for ways to reduce the cost of major items in family budgets. Americans pay far more for prescription drugs than people in many other developed nations, and a key plank of Mr. Biden’s program would allow Medicare to negotiate lower costs with pharmaceutical companies.