The progressive hits keep coming from the Biden Administration, and the latest is the $1.8 trillion American Families Plan introduced in broad strokes on Wednesday. It’s more accurate to call this the plan to make the middle class dependent on government from cradle to grave. The government will tell you sometime later, after you’re hooked to the state, how it will force you to pay for it.
We’d call the price tag breathtaking, but by now what’s another $2 trillion? Add $2 trillion or so each for the Covid and green energy (“infrastructure”) bills, and that’s $6 trillion of new spending in 100 days. That doesn’t include the regular federal budget of more than $4 trillion a year. No worries, mate, the Federal Reserve will monetize the debt.
But the cost, while staggering, isn’t the only or even the biggest problem. The destructive part is the way the plan seeks to insinuate government cash and the rules that go with it into all of the major decisions of family life. The goal is to expand the entitlement state to make Americans rely on government and the political class for everything they don’t already provide.
The White House talking points pitch this in the smothering love of the welfare state: “making care affordable”; free medical and family leave; “free education”; two years of “universal pre-school”; “invest in the care workforce.” Subsidies and millions of new care givers, all licensed and unionized, will nurture you through the challenge of earning a living and raising a family.
One question to ask is: Haven’t we tried this before? What is Head Start if not government pre-school education and child care? Weren’t school lunches and the Women, Infants and Children program supposed to prevent child hunger? Food stamps, welfare checks, child-care subsidies and a supplement to earned-income, plus public housing. Weren’t all of these programs and more from previous decades supposed to end poverty?
Why did the trillions of dollars spent on those programs fail? And if they didn’t work, why do we need more?
For the candid answer, listen to
the Chicago Democrat who explained the political calculation this week to the Washington Post: “Once everyone’s in, all the parents want in. Then it’s not a poor person’s program or a poverty program. It’s an education program. . . . That to me, that is essential. It changes the center of gravity once it’s for everybody.”
So much for the “safety net” to prevent poverty. This is now about mainlining benefits to middle-class families so they become addicted to government—and to the Democratic Party that has become the promoting agent of government.
Democrats are enamored of this principle of “universality” because it has worked to sustain the popularity of Social Security and Medicare, despite their failing finances. But those programs promise benefits in return for work across a lifetime. The Biden New Deal isn’t a deal at all. Most of its programs are free handouts on the model of the 1960s Great Society.
The new pre-school entitlement will go to all families, as would free community college. The tax-credit expansion to $3,600 per child in the Covid bill, which Mr. Biden wants to make permanent, is on top of the other welfare subsidies. The Biden plan also makes permanent an expansion of ObamaCare subsidies for more affluent adults, eliminating the subsidy cap that was 400% of poverty. A new paid family leave entitlement will be an incentive for companies to drop leave benefits that already cover most workers.
All of this adds up to healthy guaranteed annual income largely untied to the social contract that requires work, which is the real path to independence and self-respect.
The White House is also less than honest about how it will pay for all this. Its short answer is that more taxes on the wealthy and more IRS audits are enough. But that doesn’t come close.
The permanent child-tax credit expansion would cost $1.6 trillion over 10 years, according to our friends at Cornerstone Macro. The White House says it only costs $420 billion, but that’s because it only includes four years through 2025. The new entitlements ramp up slowly but explode in the later years, while the tax increases are immediate and won’t raise the revenue they expect.
That’s especially true of the increase in the top tax rate on capital gains to 43.4%, which would lose money by all historical experience. The White House tries to get around this by eliminating the step-up basis for paying capital gains at death, meaning an heir would pay the tax based on accrued value over a lifetime. This is a back door addition to the current death tax rate of 40%.
The White House also predicts that unleashing thousands of new IRS agents will find $700 billion in unpaid tax bills. But this prediction is based in part on old IRS data, before the 2017 tax reform that removed many tax loopholes, especially in the corporate tax code. The only benefit of the IRS audit army is that its $700 billion bogey replaces what would be another tax increase.
The new taxes are destructive, but their impact will take time to be felt as the post-pandemic economy soars. The GOP shouldn’t ignore the taxes and spending. But a more potent political target may be the bill’s tripling down on a welfare state that disdains the dignity of work and seeks to make Americans the wards of government.
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