By Paul Krugman
© The New York Times Co.
Build Back Better — the Biden administration’s effort to create a better future for America — is resting on a political knife edge. It’s anyone’s guess whether it will become law. What we do know is that to make it through Congress, it will have to weather a perfect storm of bad faith, bad logic and bad arithmetic.
First things first: Build Back Better is primarily a plan to invest in America’s future. About one-third of the proposed spending is on children: pre-K, child care and tax credits that would greatly reduce child poverty. Another third is spending to help restructure the economy to limit climate change. If you include the already enacted infrastructure bill, the Biden agenda is overwhelmingly future-oriented.
And there’s every reason to believe that these investments would be highly productive. This is clearly true of aid to children. There’s overwhelming evidence that helping disadvantaged children makes them much healthier and productive when they reach adulthood; the benefits are so large that even in a narrowly fiscal sense, aid to children may well pay for itself over the long run.
The same is true for environmental investment. Most discussion of such investment focuses on the long-run mitigation of climate change, and rightly so: The prospect of civilizational collapse does tend to focus the mind.
It’s important to note, however, that reducing our dependence on fossil fuels wouldn’t just reduce emissions of greenhouse gases. It also would reduce other forms of pollution, notably nitrogen oxides and sulfur, that have negative effects on death rates, illness and crop yields. And the benefits of reduced pollution would arrive quickly. One recent NASA study suggested that the health gains from climate mitigation policy would not only be worth trillions of dollars but would materialize fast enough to outweigh any costs of energy transition in a decade or less.
So how can anyone be opposed to making these investments?
I guess reporting conventions require that journalists pretend to believe that Republicans have goodfaith objections to the Biden plan — that they’re worried about deficits or the effect on incentives or something. But we all know that their main objection is simply the fact that it’s a Democratic initiative, which means that it must fail.
Also it would tax the rich and help the poor.
Actually can anyone even remember the last time leading figures in the GOP seriously engaged with real policy concerns? The most recent important example I can think of is the enactment of the Children’s Health Insurance Program in 1997. It has been bad faith ever since.
While the most important source of opposition to Build Back Better is simply the desire to see Biden fail while keeping the rich as rich as possible, there may be some sincere concern that the bill would increase budget deficits. Actually it wouldn’t have a significant deficit impact — the Congressional Budget Office says the spending is almost completely paid for, and attempts to claim otherwise aren’t credible. But even if the deficit did rise, why would that be such a bad thing?
I was struck the other day by Elon Musk’s declaration that Build Back Better shouldn’t pass because it would increase the budget deficit. Interesting fact: Tesla was founded in 2003 and had its first profitable year in 2020. That is, it spent 17 years spending more money than it was taking in, because it was investing in the future. If, as many executives like to say, the government should be run like a business, why shouldn’t it be willing to do the same thing?
Again, most of the proposed spending would consist of highly productive investments.
Finally, there’s a lot of talk about how Build Back Better might worsen inflation — talk that mainly seems to involve failure to do the math, for example by confusing decades with single years and failing to divide by gross domestic product.
It’s true that the bill’s $1.75 trillion price tag is, on the surface, a lot of money. But that’s spending over 10 years, which means that annual outlays would be far smaller than the $1.9 trillion rescue plan passed this year or, for that matter, the $768 billion annual defense bill the Senate sent to Biden on Wednesday.
Also much of the spending would be paid for with new taxes. Furthermore, you should never cite a bigsounding budget number without putting it in context. Remember, the U.S. economy is enormous. The budget office estimates that in its first year Build Back Better would expand the deficit by 0.6% of gross domestic product, a number that would shrink over time.
I’m not aware of any economic model suggesting that spending on that scale would make much of a difference to inflation. And because much of the spending would expand the economy’s productive capacity, it probably would reduce inflation over time.
Is Build Back Better perfect? Of course not. But it’s the best legislation we’re likely to get for years to come. And claims that we should let this opportunity pass out of concern over fiscal responsibility or inflation are uninformed at best, dishonest at worst. Paul Krugman joined The New York Times in 1999 as an Op-Ed columnist. He is distinguished professor in the Graduate Center Economics doctoral program and distinguished scholar at the Luxembourg Income Study Center at the City University of New York. In addition, he is professor emeritus of Princeton University’s Woodrow Wilson School.