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President Biden’s American Families Plan: Concern Over Possible Social, Economic Implications

Isaac Nuriani    |
May 28, 2021

Joe Biden has been President of the United States for a little more than 100 days, and in that brief period he has proposed three spending plans totaling 6 trillion dollars. As pricey as they are, two of the plans have objectives that seem less sweeping and extensive in nature than the other one. The 1.9-trillion-dollar American Rescue Plan – which already has become law – is primarily concerned with the nation’s recovery from the economic consequences of the global pandemic. The 2.3-trillion-dollar American Jobs Plan is centered on revitalization of America’s infrastructure—although, the administration is accused of being overly generous with its interpretation of just what counts as “infrastructure.”1

The 1.8-trillion-dollar American Families Plan (AFP) is something else altogether. Roundly referred to as “transformational” – even by the White House itself – much of AFP involves expanding and making permanent key family-aid features of the American Rescue Plan.2

AFP is, in my opinion, a purposeful expansion of the government safety net to such a degree that the very essence of the nation is forever changed. I am not the only person who sees it in those terms. Sociologist Dr. Kevin Shafer of Brigham Young University recently referred to the plan as “the most consequential piece of family policy legislation in American history.”3

In addition to the plan’s significant potential social implications, the possible economic implications seem profound as well. Despite the president’s repeated assurances that enaction of the American Jobs Plan and American Families Plan will require no increases in deficit spending, there already is significant doubt he’ll be able to keep that promise. Indeed, if socioeconomic change on the scale proposed by AFP becomes a permanent part of American society, the potential impact on deficits, debt, the dollar – and perhaps precious metals – could be equally “transformational.”

Economist: If Passed, AFP’s “Huge, Transformational Benefits” Won’t Ever Be Repealed

Even a cursory look at the principal features of the American Families Plan suggests a clear step in the direction of democratic socialism, as defined by democratic socialists themselves:4

  • Free universal preschool
  • Two free years of community college
  • Permanent Obamacare tax credit expansion – an expansion so great it enables some families earning substantial six-figure incomes to receive tens of thousands of dollars per year in subsidies5
  • Expansion of American Rescue Plan’s Child Tax Credit extended through 2025; under terms of American Rescue Plan’s enhancements, families with children under age six can receive up to 3,600 dollars per child and those with children age six to 17 can receive up to 3,000 dollars per child
  • Permanent near-tripling of Earned Income Tax Credit (EITC) – a feature of the American Rescue Plan
  • Guaranteed 12 weeks of paid parental, family, and personal illness or safe leave, up to 4,000 dollars per month
  • For low- and middle-income families, no more than 7% of income paid toward “high-quality child care;” per White House, this would translate to credit of nearly 15,000 dollars, on average, to eligible families

If you’re hoping such an effort will be seen as too extreme by the nation as a whole, you may be disappointed. A variety of survey results published in recent years indicates a growing approval by Americans for government intervention in their households. One survey conducted in February by the Center for American Progress is particularly revealing.6 It found that 54% of respondents – including 39% of Republicans – believe the government should provide direct monthly payments to single people who make 50,000 dollars per year or less and to married people who earn 100,000 dollars per year or less.

As for the American Families Plan in particular, some observers – such as economist Paul Krugman – believe there will be no turning back if it’s enacted as law. In a recent opinion piece for the New York Times plainly and transparently titled, “Good Luck to Republicans if Biden’s Family Plan Becomes Law,” Krugman pulls no punches about the impact he thinks the American Families Plan would have on the nation’s psyche:7

If the main elements in Joe Biden’s American Family Plan become law, they’ll be very hard to repeal. Why? Because they’ll deliver huge, indeed transformational benefits to millions.

I mean, just imagine trying to take away affordable child care, universal pre-K and paid leave for new parents once they’ve become part of the fabric of our society. You’d face a backlash far worse than the one that followed Republican attempts to eliminate protection for coverage of preexisting health conditions in 2017. And that backlash quickly gave Democrats control of the House and set the stage for their current control of the Senate and White House as well.

Krugman essentially says that once you give a wealth of “free” goodies to the people, you’re not getting them back. I do believe there still remains a large portion of the American citizenry that appreciates the opportunity to pursue a potentially limitless future without a safety net (without government hovering). But, overall, I think Krugman is right. Once a sizable portion of the nation begins receiving significant government assistance, anyone – or any party – that tries to reclaim it will be viewed most unfavorably.

Washington Post: Biden Math Backing No Deficit Increase is “Complicated”

Now we come to the potential economic consequences of the Biden vision.

This vision already has invited comparisons to landmark presidential public spending initiatives such as FDR’s “New Deal” and Lyndon Johnson’s “Great Society.”8 Accordingly, it seems likely that deficits – and, by extension, the federal debt – will significantly increase during the years of the Biden administration.

The president has said he’ll pay for the American Jobs Plan and American Families Plan with tax increases, including an onerous doubling of the capital gains tax for those who earn more than one million dollars per year. Few, however, seem genuinely convinced the president won’t turn to the government printing press for support. This includes the Washington Post, which refers to the math Biden is using to explain how deficits will not be relied upon to fund his ambitious agenda as “complicated.”9

On the basis of just the one Biden spending plan that has become law (the American Rescue Plan), there now are projections that the 2021 federal budget deficit will reach a new record high.10 The mind reels at what’s in store for the deficit and debt if Biden and the Democrats continue pursuing an unprecedented permanent expansion of the government safety net through such initiatives as the American Families Plan. Note, too, that as comprehensive and expensive as AFP is, some Democrats say it doesn’t go far enough.11

So, yes, I believe deficits and growing federal debt against a backdrop of the Federal Reserve’s firm commitment to keeping rates at or near all-time lows is a formula for significant dollar weakness. However, if you look at history, this also can be, at times, a formula with the potential to cue strengthening in physical assets that some view as safe havens. Precious metals are one example. As it happens, the dollar has been falling steadily since the end of March.12 During the same period, gold and silver have risen sharply. From March 31 through today, gold appreciated roughly 13% and silver jumped 15.5%.

Analyst: Low Rates and Massive Government Spending Point to Ideal Metals Climate

It remains to be seen if precious metals will continue the strong upward push evident over the last two months. But it’s becoming increasingly easy, in my opinion, to view the current metals climate as ideal. I am by no means alone in that assessment. Numerous professional observers think precious metals are poised to enjoy a robust future, given the anticipation that we’ll continue to see both a free-spending presidential administration and a highly accommodative central bank.

“You can’t have a better environment for gold,” Forexlive.com chief currency strategist Adam Button recently told Kitco News.13 “The government wants to spend more money and the central bank is going to keep interest rates low.”

“With everything that is going on, you just can’t help but be bullish on gold,” Button added.

That “everything” that’s going on now appears it will include a strong move by the Biden administration to make fundamental, lasting changes in the government safety net, changes that go far beyond emergency economic stimulus. And if the American Families Plan becomes law in some meaningful form, I’m inclined to agree with Paul Krugman that there will be no turning back.

Beyond that, it makes sense that a citizenry expecting ongoing freebies will expect those freebies to get bigger and better over time. Under such conditions, it’s difficult for me to see how higher deficits and a continually soaring federal debt will not be standard.

 

1 Shannon Pettypiece and Lauren Egan, NBCNews.com, “Beyond roads and bridges, Biden seeks to redefine ‘infrastructure’ amid GOP criticism” (April 7, 2021, accessed 5/26/21).

2 WhiteHouse.gov, “American Families Plan” (accessed 5/26/21).

3 Kevin Shafer, Deseret News, “Biden’s American Families Plan will update the U.S.’ outdated family policy” (May 17, 2021, accessed 5/26/21).

4 Jeremy Hobson and Allison Hagan, WBUR.com, “What Democratic Socialism Means in the U.S.” (March 5, 2020, accessed 5/26/21).

5 Peter Suderman, Reason.com, “In the Name of Pandemic Relief, Biden Would Expand Obamacare Subsidies to Households Making $350,000 a Year” (March 4, 2021, accessed 5/26/21).

6 John Halpin, Karl Agne, and Nisha Jain, Center for American Progress, “Americans Want the Federal Government to Help People in Need” (March 10, 2021, accessed 5/26/21).

7 Paul Krugman, The New York Times, “Good Luck to Republicans If Biden’s Family Plan Becomes Law” (April 29, 2021, accessed 5/26/21).

8 Ron Elving, NPR.org, “Can Biden Join FDR and LBJ in the Democratic Party’s Pantheon?” (April 17, 2021, accessed 5/26/21).

9 The Washington Post, “Not so simple: Biden keeps promising his spending plans won’t increase the deficit” (May 6, 2021, accessed 5/26/21).

10 Kimberly Amadeo, The Balance, “What Is the Current U.S. Federal Budget Deficit?” (May 9, 2021, accessed 5/26/21).

11 Marisa Schultz, FoxNews.com, “Progressives think Biden’s latest $1.8T families plan isn’t big enough” (April 28, 2021, accessed 5/26/21).

12 CNBC.com, “Dollar slide continues, yuan rally gets attention” (May 25, 2021, accessed 5/26/21).

13 Neils Christensen, Kitco News, “Gold looks good as Biden pushes trillions in new infrastructure, education spending in Address to Congress – Analyst” (April 28, 2021, accessed 5/26/21).

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