What’s in Biden’s $1.8 Trillion Family Aid Plan

What’s in Biden’s $1.8 Trillion Family Aid Plan

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Plus, federal Medicaid spending rose by nearly 20% in one year
Wednesday, April 28, 2021

What’s in Biden’s $1.8 Trillion American Families Plan

The Biden administration on Wednesday unveiled its proposal to provide a historic increase in federal assistance to households, with significant new spending on child care, health care, paid leave and education.

Biden’s “American Families Plan” includes $1 trillion in spending over 10 years and $800 billion in tax credits, paid for in large part by a $1.5 trillion tax increase on the nation’s wealthiest households.

Here are some of the major components of the proposal, along with tax increases intended to cover much of the cost.

Child care: Biden wants to spend $225 billion over 10 years to reduce the cost of child care, with low- and middle-income families required to pay no more than 7% of their incomes on care. The White House says the average family would save about $14,800 per year under the plan.

Pre-K: The plan calls for free pre-school for all three- and four-year-olds, with all teachers earning a minimum of $15 an hour, at a cost of $200 billion over 10 years. The White House says the average family would save about $13,000 per year.

Free and reduced-cost college: All students would qualify for two years of free community college, at a cost of $109 billion over 10 years. The plan would also increase Pell grants by $80 billion for students at four-year colleges and spend $62 billion to help disadvantaged students stay in school. 

Nutrition: The plan would spend $45 billion to improve and expand federally funded school nutrition programs, an effort that would include extending free school meals through the summer.

Paid leave: The plan would create a national paid family and medical leave program, at a cost of $225 billion over 10 years. Workers would eventually be eligible for 12 weeks of paid time off in a variety of circumstances, including birth, death and illness, with pay set at two-thirds of average wages, up to $4,000 per month. Low-income workers would receive a higher wage replacement rate of 80%.

Health care: Households that buy their own health insurance through the federal marketplaces would receive $200 billion in additional tax credits over 10 years to help reduce the cost, with an average savings of $50 per month for 9 million people.

Low-income tax credits: Biden wants to make permanent the low-income tax credit for childless workers, at a cost of $125 billion over 10 years.

Child care tax credit: The proposal calls for making permanent the enhanced child tax credit, at a cost of $450 billion over 10 years. Passed as part of the latest pandemic relief package, the enhanced credit provides more assistance to more families, and pays it out as a benefit on a monthly basis.

IRS enforcement: The IRS would get an additional $8 billion per year for 10 years, which the White House says would produce at least $780 billion in new revenue through stricter enforcement of the tax code and new reporting requirements.

Tax hikes: The top income tax rate would rise to 39.6%, up from the current 37%, and households earning more than $1 million a year would face higher taxes on capital gains, with the top rate set at 43.4%, more than twice its current level. The carried interest loophole, which allows private equity investors to treat some types of income as capital gains, would be eliminated, as would a real estate tax break popular with wealthy investors. And the proposal calls for eliminating the “step-up in basis” on inheritances, which allows wealthy families to pass along assets untaxed at death.

What’s not in the bill: The Biden proposal makes no mention of eliminating the cap on the state and local tax deduction, a sensitive topic for some blue state Democrats. It also leaves the estate tax at current levels, despite Biden’s pledge to increase it. And it does not include and expansion of Medicare and changes other Democrats had sought to lower prescription drug prices.

What comes next: Biden is expected to outline his proposal in his address to Congress Wednesday night and may invite Congressional leaders from both parties to the White House next week to discuss the plan. But the proposal, which would mark a significant expansion of the government’s involvement in Americans’ lives if enacted, won’t be easy to pass, in whole or in part.

“The package could face even more challenges than the American Jobs Plan, Mr. Biden’s physical infrastructure proposal, did in Congress,” Jim Tankersley and Dana Goldstein of The New York Times say. “The president has said repeatedly that he hopes to move his agenda with bipartisan support. But ... Republicans have expressed much less interest in additional spending for education, child care and paid leave than they have for building roads and bridges. They have also chafed at the tax increases Mr. Biden has proposed, including the ones that will help pay for his latest package.”

Quote of the Day

“It’s a lot of money, a lot of money. That makes you very uncomfortable.”

Sen. Joe Manchin (D-WV), on the cost Biden’s American Families Plan, as quoted by Bloomberg News. Manchin’s vote would be key if Democrats look to pass the legislation through the Senate along a party-line vote.

U.S. Drug Prices Two to Four Times Higher Than in Other Rich Countries: GAO

A new government analysis commissioned by Sen. Bernie Sanders (I-VT) finds that the United States pays more than two to four times as much for certain prescription drugs as other wealthy countries.

The report from the Government Accountability Office looked at prices for 20 brand-name drugs in the U.S., Australia, Canada and France. It found that the net retail prices paid by U.S. consumers and insurers in 2020 — that is, prices after confidential rebates and other price concessions — were 2.82 times higher than gross prices in Canada, 4.25 times higher than gross prices in Australia and 4.36 times higher than gross prices in France.

The prices for the other countries were based on those listed on public formularies and did not reflect potential discounts. “As a result,” the report notes, “the actual differences between U.S. prices and those of the other countries were likely larger than GAO estimates.”

The report also notes that the United States is the only one of the four countries in the analysis “that does not have an overarching national pricing strategy for prescription drugs, although some of its publicly funded coverage, such as Medicaid and the Department of Veterans Affairs’ (VA) Veterans Health Administration (VHA), use pricing strategies.”

Sanders said in a statement that the report confirmed that the U.S. needs to act now to lower drug prices. “This important GAO study confirms what we all already know: the pharmaceutical industry is ripping off the American people,” Sanders said. “The time is long overdue for the United States to do what every major country on earth does: negotiate with the pharmaceutical companies to lower the outrageous price of prescription drugs. I would urge the President to put this proposal in the American Families Plan and use the savings to expand and improve Medicare for older Americans.”

But while Sanders, Democrats and activists have pressured President Biden to include drug-pricing measures in the American Families Plan being rolled out today, the White House decided to leave out such proposals, including having the federal government directly negotiate prices, lowering the Medicare eligibility age and capping drug costs for seniors.

Chart of the Day: Federal Medicaid Spending Rose by Nearly 20% in One Year

A new report from the Kaiser Family Foundation finds that federal Medicaid spending grew dramatically in the year since the onset of the coronavirus pandemic, reflecting increased enrollment and federal matching funds for state spending on the health care program.

“In the one year since the onset of the pandemic, federal Medicaid outlays totaled $500.8 billion and grew by 19.5%, compared to 6.3% growth in the one year before the pandemic,” the report says.

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