Build Back Better Framework: The Bad and the Ugly

F rom a conservative standpoint, nothing good was ever going to come out of a massive reconciliation bill passed by President Biden and congressional Democrats. All along, the only question was how bad the final legislation was going to be. On Thursday morning, as part of the latest push to get something across the finish line, the White House unveiled a revised framework, with $1.75 trillion in new spending (plus an additional $100 billion if they can squeeze in immigration), which they seek to offset mostly by tax hikes.

One general way to think about the current Democratic proposal from a limited-government perspective is that while more federal spending is bad, not all spending is equally destructive in the long-term. When Democrats blow through money over a short period of time, it is less bad than anything that would create a permanent new entitlement. And one silver lining of the current proposal is that, in order to trim the cost, many of the provisions expire within a few years, meaning that there will be a chance to unravel them with Republicans in charge. To be sure, I have no faith in Republicans ever actively repealing government programs. But I have some glimmer of hope that if Republicans were in the majority, they would allow some of Biden’s signature legislative achievements to expire by simply doing nothing. So, with that as prologue, I offer the following take on the current framework, which I divide into two categories: The Bad and The Ugly.

The Bad

Noticeably absent in the current framework is any sort of effort to reduce carbon emissions. Instead, the climate part of the bill is focused on $555 billion in clean-energy investments. This might be the least-pernicious part of the bill, because it mostly blows a lot of money on encouraging clean energy, divided into tax credits, spending on “resilience,” subsidies for manufacturing such as on solar and batteries, and money for the government to purchase greener technologies, such as “clean construction materials.” In a nod to FDR, it also includes a Civilian Climate Corps that would employ thousands of young people to work on climate-change mitigation projects. Again, none of this would be described as conservative legislating, but I’d much rather have lots of Solyndras than another Obamacare.

The bill would also extend the policy that provided families with up to $3,600 per year per child. Advertised as a child tax credit (but effectively, a monthly welfare payment), it was passed as part of the earlier $1.9 trillion spending package and liberals have been pushing to extend it. The silver lining is that they were only able to find the money to expand it for one year, so there’s an opportunity for Republicans to let it lapse if they take control of either chamber of Congress. Coupled with a one-year expansion of the earned-income tax credit, the White House projects it would cost $200 billion.

There are also a number of other one-off spending initiatives, including $150 billion on affordable housing, $40 billion on subsidies for post-high-school education, and $90 billion on a hodgepodge of “equity and other investments,” which the White House says would include, “maternal health, community violence initiatives, Native communities, disadvantaged farmers, nutrition, pandemic preparedness, supply-chain resilience, and other areas.”

The Ugly

Here’s where we get into the more troublesome provisions in which Democrats are expanding existing programs, creating new ones, and funding them for longer with the aim of making them permanent.

On the health-care front, the current framework would expand Obamacare’s subsidies, a policy that originated with the Democrats’ earlier $1.9 trillion “COVID-relief” bill, through 2025. One of the tricks of Obamacare is that it made regulatory changes that dramatically increased health-insurance premiums, thus making those who didn’t qualify for subsidies much worse off than they were before the law passed. Rather than do the responsible thing, which would be to scale back regulations and give individuals more choice over the type of policies they can purchase, Democrats have responded by simply hiking the subsidies. What’s ironic is that, for all the talk of ending private insurance during the Democratic primaries, the end result of full Democratic control of Congress will have been to funnel hundreds of billions of dollars into the pockets of private insurers. But extending this policy through 2025 (at a cost of $130 billion) gives the policy a better chance of remaining permanent, meaning we are extending the vicious cycle, with more government regulations, leading to higher prices, leading to more demands for more government spending.

The bill would also add hearing coverage to Medicare at a cost of $35 billion. While this is less bad than the original proposal that would have also added dental and vision coverage, given that the core hospital Medicare program is on track to run out of money within five years, it is simply reckless to expand benefits in any way. In addition to the expansion of Medicare, the proposal would also expand Medicaid by increasing subsidies of the home-care element of the program, at a cost of $150 billion. All told, these health-care provisions add up to $315 billion.

Additionally, the proposal would spend $400 billion to create new programs to offer universal preschool for every three- and four-year-old and to subsidize child care. In addition to the cost, studies have shown that universal pre-K programs have not had the promised long-term academic benefits. And even some who are more sympathetic to the idea of federal funding have raised concerns about an approach that would focus on expanding programs in public schools, even though many parents have their children in schools run by private day-care providers, faith-based organizations, or local non-profits. Another measure would seek to limit child-care costs to 7 percent of income for families with household income up to 250 percent of the state median income. To provide some idea, the national median income is $67,521, making 250 percent nearly $170,000. (In Maryland, it would apply to families making up to $236,000). It is unclear how the child-care work force would expand quickly enough to meet the huge surge in demand created by this program. But both the child-care and universal pre-K programs would be funded for six years, creating a greater risk that they could become permanent as they gain dependents and create a greater constituency.

One thing to note. The official White House fact sheet claims that the bill would cost $1.75 trillion, but then has an additional line item for immigration, slated at $100 billion. The description only reads “improve our immigration system consistent with the Senate’s reconciliation rules.” But there is no clarity on what that would actually mean, or how they expect to figure out a plan that would pass muster with the Senate parliamentarian.

Additionally, the framework proposes nearly $2 trillion in tax increases plus claimed IRS enforcement-generated revenue, which would be incredibly destructive at a time when the latest economic news shows the economic recovery sputtering. Democrats want to raise corporate taxes by $800 billion, including what would essentially be a 15 percent alternative-minimum tax on companies, a tax to stop buybacks, and unspecified international corporate-tax changes. There is an additional $650 billion in taxes on higher-income individuals. The proposal also claims to raise $400 billion from “IRS investments to close the tax gap,” but it offers no specifics on how much more enforcement spending would be required or how it would go about capturing more money. The idea of raising lots of money by targeting fraud and abuse is something that is such an evergreen idea that even Barack Obama joked about it as president. The proposal also claims an additional $170 billion by applying another classic gimmick — simply repealing something that has never gone into effect and claiming savings relative to the baseline expectations. In this case, it’s a Trump era rule that, if it were ever implemented, would have changed the way drug-manufacturer rebates are distributed so that they would go directly to consumers.

Overall, the current iteration of the framework is less bad than the earlier $3.5 trillion version. But it still represents a reckless expansion of the welfare state, and some of it may end up becoming permanent.