A new New Deal? How Biden's spending plans stack up to past presidential proposals
WASHINGTON – A new New Deal? A reversal of the decades of focus on tax cuts and efforts to limit spending growth ushered in by former President Ronald Reagan? Spending that approaches levels in social democracies?
President Joe Biden has ambitious proposals to not just get the economy back on track after the coronavirus pandemic, but to also make generational investments to improve infrastructure, fight climate change, reduce inequality and increase the nation’s global competitiveness.
Less than two months after he took office, Congress approved $1.9 trillion in coronavirus relief spending. Biden has requested about another $4.1 trillion in what he’s calling his American Jobs and American Families plans.
Conservative critics have attacked Biden’s agenda as “tax and spend on steroids.”
So how big is Biden’s plan?
Here’s a look at how it compares with past presidential proposals and how it would change the size of the government.
How does Biden’s agenda compare to the New Deal?
There’s no easy way to match up Biden’s major spending proposals against the New Deal, which included a range of initiatives, some of which – such as Social Security – are much bigger today than they were at the start. In addition, Biden’s plans are mix of short-term stimulus and longer-term spending.
But comparisons made two different ways show the New Deal was bigger.
Bill Dupor, an economist and assistant vice president of the Federal Reserve Bank of St. Louis, calculated that the approximately $41.7 billion in economic relief from the New Deal was 40% the size of the nation’s economy in 1929. The $1.9 trillion coronavirus relief package that passed in March combined with about $4.1 trillion in additional spending Biden initially proposed is about 28% as large as the economy was in 2019, before the pandemic hit. So Biden’s plan is smaller – and the White House has been negotiating a less expensive package in an attempt to get bipartisan support. But, when combined with the $3.3 trillion in coronavirus relief spending that passed in the last year of the Trump administration, the total cost would be about 43% as large as the 2019 economy. That would be comparable to the New Deal.
Taking a different approach, the left-leaning Center on Budget and Policy Priorities estimated that the boost in federal spending between 1933 and 1940 equaled about 6.1% of GDP. And when spending ramped up for World War II, it averaged an additional 28% of GDP.
By comparison, the $1.9 trillion coronavirus relief package was about 3.8% of the size of the 2021 and 2022 economies. The approximately $4.1 trillion Biden initially proposed through his American Jobs and American Families plan would boost spending by an average of 1.6% of GDP over ten years, according to the Center. So his longer-term proposals are big in every meaningful sense of the word but not as big as the New Deal.
How would Biden’s infrastructure plan stack up historically?
The height of U.S. infrastructure spending came in 1933 with Roosevelt’s New Deal programs, when spending equaled 2.96% of the country’s GDP, according to a Brookings Institution analysis.
There was another spike during the interstate highway era of the 1950s and 1960s and a boost up to 2% of GDP in the 1970s, when the federal government supported new water and storm water projects.
Biden vs. GOP plans on infrastructure:4 charts break down how far apart they are
Since the mid-1980s, the U.S. has typically spent less than 1% of its GDP annually on infrastructure.
Biden’s infrastructure proposal would reverse this trend dramatically.
If Congress passes a $1.6 trillion infrastructure plan with $200 billion in annual spending over eight years – close to what Biden has discussed – the share would be nearly 2% of GDP, the largest since the late 1970s, according to Brookings, and more than the interstate highway era. If the spending reaches $3 trillion over eight years, the share would be 3% of GDP, equal to the single-year record set in 1933.
How does Biden’s agenda compare to expensive bills passed under President Donald Trump?
The $1.9 trillion coronavirus relief package passed in March is smaller than the combined $3.3 trillion in pandemic response approved in 2020. In both years, costs were added to the deficit.
Trump’s signature tax cuts, which were not offset by spending reductions, cost $1.5 trillion over ten years. Biden wants to spend about $4.1 trillion over 10 years but has proposed tax increases to cover costs.
How does Biden’s agenda compare to expensive bills passed under President Barack Obama?
The 2009 stimulus package passed to lift the economy out of the Great Recession cost about $800 billion, the most Democrats thought they could get through the Senate to overcome a GOP filibuster. Democrats’ belief that there would have been a faster recovery under a bigger package influenced the March passage of their $1.9 trillion coronavirus relief package that Republicans unanimously opposed.
Obama’s signature health care legislation cost $938 billion but was offset with tax increases and spending cuts. Biden’s American Jobs and American Families plans would raise spending by about $4.1 trillion and increase taxes on corporations and the wealthiest Americans to pay for it.
How does Biden’s agenda compare to President Ronald Reagan’s tax cuts?
Reagan declared in his 1981 inaugural address: “Government is not the solution to our problem, government is the problem.” His 1981 tax cut was 2.89% of GDP, according to the U.S. Treasury which used a four-year average cost.
The size of Biden’s American Jobs and American Families plans averages about 1.6% of a share of the economy over 10 years, according to the Center on Budget and Policy Priorities. His proposals are an attempt to significantly reverse the trend, started by Reagan, to constrain the size and role of government.
How does Biden’s agenda compare with the current size of government?
Republicans like to compare Biden’s $6 trillion in spending on the coronavirus and the proposed American Jobs and American Families plans with the size of the budget. Before the pandemic hit, the federal government spent $4.4 trillion in 2019. But that’s a one-year number compared with the 10-year cost of Biden’s plans. The budget outlook Biden released in May estimates the federal government would be about 8% bigger under his proposals than if spending continues at its expected current pace.
How would federal spending change under Biden’s plans?
Federal spending, relative to the size of the economy, would be at its highest sustained levels since World War II, under the 10-year budget outlook Biden sent Congress in May. It would be nearly one-quarter the size of GDP each year over the next decade.
How would federal revenue change under Biden’s plans?
Taxes and other federal revenue would rise to about 20% of GDP by 2031. The 50-year average is 17.3% of GDP, according to the Center for a Responsible Federal Budget. Revenue last hit 20% in 2000, after the dot-com boom, and in 1944, after taxes were raised to help pay for WWII.
How big are Biden’s proposed tax increases?
Higher taxes for corporations and high earners that Biden has proposed would be the first major tax hike since 1993, according to Moody’s Analytics. But they would rank 24th as a share of GDP among tax hikes since WWI.
How would the corporate tax rate change?
Biden wants to raise the corporate tax rate to 28%. That would still be below the rate at which corporations have been taxed for decades, before rates dropped from 35% to 21% under Trump.
How would the top income tax rate change?
Biden wants to raise the top income tax rate to 39.6% from 37%. That would revert the highest level back up to where it was before Trump’s tax cuts were enacted.
How do Biden’s plans compare with taxes and spending in European countries?
Republicans have charged that Biden is trying to turn the country toward socialism. Both spending and revenues, however, would still be far below levels in Europe’s social democracies under Biden’s proposed budget.
Before the pandemic, government spending at all levels in the United States was around 35% of GDP compared with an average of 46.5% in European Union countries, according to a Brookings Institution analysis of data from the International Monetary Fund. Under Biden’s plans, spending would increase by nearly 4 percentage points, not enough to close the gap.
On the tax side, the United States collected revenue equal to about 30% of GDP before the pandemic compared to about 46% in European Union countries. Under Biden’s plans, revenue would increase by nearly 3 percentage points, which would still leave a large difference.