If Democrats take the White House and Senate, Joe Biden will be in a position to pass legislation that will shape the economy for decades to come. But before the party gets into the policy weeds, there’s a major mental hurdle that needs to be cleared. Biden and his administration will need to rapidly spend money and maintain deficits not seen or even debated in decades. We are entering what I’m calling the Era of Large Numbers: massive spending, giant deficits, a high debt-to-GDP ratio. It is important to understand why this is necessary and why we must defend it from opportunistic opposition.
To start, let’s look at what Biden has already planned to accomplish. His Build Back Better agenda would commit $700 billion to research and development and investments to create millions of manufacturing jobs. It also pledges $2 trillion to fight climate change and $775 billion for investing in the care economy, including resources for child care, universal pre-K, and home- and community-based care for those with long-term needs. There are additional promises beyond that: a public option for health care, a child allowance that would dramatically cut childhood poverty, and expanded access to college. According to an estimate from the Penn Wharton Budget Model team, this essential spending would add up to more than $5 trillion over 10 years.
Some commentators will balk at the notion of funding anything new, but we need to understand that $5 trillion in additional spending should be the minimum proposal in any serious discussion. The needs in this country are tremendous. We face the health emergency of the coronavirus pandemic, mass unemployment from our recession, a lack of investment in the country since the Republicans took control of the Senate, and larger crises in caregiving and climate. The spending will need to be big enough to match the scale of the problems. Luckily, such projects should also be big hits politically, as many of these would come online quickly. In short order, they would show the public that Democrats are better at creating an economy that works for everyday people.
We need to be thinking large numbers because this money can now move fast, especially compared with the first years of the Obama and Trump presidencies. Barack Obama’s main early initiatives required creating marketplaces for health care and regulatory structures for the financial industry—acts that are time-intensive and less direct than simply spending cash resources. Many of Biden’s planned actions, like a public option and expanding Medicare to those age 60 to 64, would plug into existing regulatory infrastructure. In the past, Democrats boxed themselves in by worrying about deficits and rising interest rates that never materialized. But liberal economists now believe that because interest rates are lower than the growth rate of the economy, there is more space to tackle our problems through deficit spending. Climate infrastructure, notably, is the kind of investment that should be debt-financed, as real interest rates are slightly negative in the long run.
Republicans don’t mind debt when they are governing. But under Trump they had no plan for what to do about health care, especially as they campaigned on improving access and affordability even as their agenda was to worsen both. The conservative dream of destroying social insurance ran into the reality that Americans use and will defend these programs. What Biden wants to do, however, will be popular and address real needs. He can drive economic change that neither Obama nor Trump could.
There are other reasons the spending can happen quickly. Given Republican opposition to fighting the Great Recession, the realization that their supposed balanced budget credentials went out the door for corporate tax cuts, and their theft of Supreme Court seats, the urge among Beltway Democrats for bipartisanship is weaker than in the past. Democrats should target the Senate filibuster, which Mitch McConnell eroded for Supreme Court nominations and which never hampered Republican tax and spending cuts. While some of Biden’s projects could be passed through reconciliation, the filibuster must be removed or altered to accomplish many of his administration’s progressive goals. The moment is urgent, and if the Republicans have no interest in governing, that should not stop the Democrats. The problems we face are large. But so is our ability to spend.