Will Democrats bring “big, bold change” to the U.S. welfare state, as Senate Majority Leader Charles E. Schumer (N.Y.) put it? That is the $3.5 trillion question on Capitol Hill right now. Congressional Democrats are trying to pull together omnibus legislation on health care, housing, child care, and family and medical leave, among other things. The political stakes are high: This bill, alongside the $1 trillion infrastructure package, is the Biden administration’s best shot at getting its “Build Back Better” agenda enacted into law. Because it is rare for one party to control both the executive and legislative branches, many Democrats see this as their biggest opportunity, perhaps in a lifetime, to bring about major changes to the U.S. system of social protection.
How transformative might these changes be? Although European-style social democracy is not on the horizon, some of the reforms could move the United States closer to other advanced industrialized countries in offering broadly available supports to families with children. Other proposals involve incremental additions to existing programs. These would still be significant for beneficiaries and could make it easier to build on the reforms down the road.
But attempts to pay for the reforms largely draw from the usual playbook of taxing the rich — an approach that could imperil support for the package and limit just how big and bold it will be.
On the path to universal family policies
Some of the most transformative proposals commit significant new federal resources to families with children. The United States ranks near the bottom of OECD (Organization for Economic Co-operation and Development) countries in public spending on families, is one of the few countries in the world with no statutory paid parental leave, and has high child poverty rates compared with most other wealthy democracies.
The measures being considered would break with this logic and lay the foundations for a broad-based system of family support. The significant changes include a 12-week family and medical leave benefit and money for states to make prekindergarten programs widely — and maybe universally — available. The bill would also extend the child tax credit that the Biden administration expanded and would cut child poverty rates by 40 to 50 percent in many states. Some Democrats also want to improve child care’s quality and affordability by directing funds to states to bolster child-care workers’ pay and to increase subsidies for lower-income parents using these services.
Together, these initiatives — especially if coupled with greater housing support and two free years of community college, as has been discussed — signify growing acceptance of the notion that responsibility for the costs of raising and educating children should be shared, not privatized.
Incremental expansions
Other measures in the works would make incremental changes to existing programs. That is largely the case in health care. Some political players, like Sen. Bernie Sanders (I-Vt.) and Rep. Pramila Jayapal (D-Wash.), advocate for expanding Medicare to fill holes in coverage — dental, vision and hearing aids; others favor shoring up Affordable Care Act coverage. But both proposals build on current health-care coverage rather than pioneering something new. House Democrats on the Ways and Means Committee have already jettisoned what might have been the boldest potential change: lowering the age of eligibility for Medicare to 60.
Whatever proposals make it into the final bill may lay the foundations for bigger changes down the road — as the Democrats fighting over these measures understand well. One rationale for expanding Medicare is that it could pave the way to a broader system of federally guaranteed health insurance, or Medicare-for-all. Increasing Affordable Care Act subsidies to help people purchase coverage through private insurers, by contrast, may shore up the market-based system that some liberals would prefer to replace. The final bill could also create a federal Medicaid program to cover low-income adults in GOP-led states that refused to expand eligibility for their state-level programs under the ACA. This might accelerate the ongoing expansion of Medicaid from a program that was once targeted at very poor families and now enrolls over 21 percent of people. Medicaid-for-all might become a real possibility.
House Speaker Nancy Pelosi (D-Calif.), trying to tamp down intraparty divisions, has insisted that there is enough money to cover all of the above, enabling Congress to expand spending on the ACA and on Medicare. But is there? In Biden’s words, “Somebody has got to pay.” Who?
Paying for it
To come up with funds to pay for these initiatives, Democrats are proposing to raise taxes on wealthier people and corporations while maintaining or even cutting them for those in the middle. This has energized those who would have to pay, who are working hard to pick off moderate Democrats. Organized interests are also going after the main innovation on the funding side: having Medicare negotiate or even set prescription drug prices, which would lower Medicare spending and create room for expanded benefits. This lobbying onslaught could result in moderate Democrats refusing to support those tax increases — which would limit the available funds and put pressure on Democrats to reduce the overall package.
But even were increasing taxes on the rich politically feasible, such taxes can’t pay for everything. Countries with generous and universal social welfare programs fund them through broad-based taxes on consumption and/or on payrolls. No large welfare state is funded solely through taxes on the rich and corporations. The middle class is where the money is.
Unless Americans are persuaded to broadly pool resources for social benefits, such policies will remain limited. The current reform effort may result in the largest expansion of social policy since the Great Society of the 1960s. If successful, it could make a meaningful difference in the well-being of many Americans. But its approach to revenue curbs its effectiveness, much as has been true with past U.S. social welfare politics and policies.
Kimberly Morgan is a professor of political science and international affairs and director of the European and Eurasian studies program at George Washington University.
