Biden 2.0: President likely to make another run at stalled parts of Build Back Better agenda
This op-ed is part of a series exploring what a second term would look like for either President Biden or former President Trump.
President Joe Biden, if reelected, would face an economy at a crossroads. Higher interest rates and gradually deteriorating household finances will test consumers’ resilience. Ongoing conflicts in Europe and the Middle East will threaten oil price stability. Rising federal interest payments and ubiquitous turmoil in Congress will endanger investors’ appetite for Treasury debt. While these challenges would shape Biden’s second term, the sitting president — depending on the party composition in Congress — may also have the chance to build on the legislative wins achieved during his first two years in office.
The Build Back Better Act, which passed the House in October 2021 and fell one vote short in the Senate, provides a detailed roadmap to his unfinished agenda. When Build Back Better stumbled in Congress, Democratic leaders repackaged the climate provisions and select revenue raisers into the Inflation Reduction Act and quickly ushered the bill through both houses. The remaining components of Biden’s economic agenda relate to the care economy, including major expansions in social programs and tax increases on higher earners designed to pay for the additional outlays.
Among the yet-to-be legislated parts of the Build Back Better agenda, perhaps the most comprehensive reforms impact health care. The measure would offer more generous premium tax credits to make health insurance more affordable for 9 million Americans, expand Medicaid coverage to 4 million uncovered adults and ensure high-quality home-based care is an option for older Americans and people with disabilities.
Resources for child care would also be overhauled and expanded. Preschool would be universal for every three- and four-year old in the country, child care expenses would be capped at 7 percent of income for almost all households, more working parents would have access to child care at their place of work and paid family and medical leave would be universally available.
These investments in care would be offset by a sweeping overhaul of the tax code, starting with changes to the taxation of multinational corporations, closing a loophole on payroll taxes for upper-income earners and instituting a surtax on taxpayers with over $10 million in income. Expanded IRS enforcement, always a political football, would also be on the table. At the same time, expansions in the Child Tax Credit and Earned Income Tax Credit would collectively drive down poverty rates and strengthen household finances for lower-income families.
The Act’s viability in a second term would be determined by the composition of Congress. Realistically, Biden’s agenda will be dead-on-arrival without a Democratic House and at least a 51 or 52 vote majority in the Senate. Should Democrats fall short in either chamber, Biden’s second-term tenure will most likely resemble that of his predecessor President Barack Obama. Specifically, Biden will grapple with the familiar challenges of an expiring Republican tax cut and a rapidly evolving trade landscape.
Just as Obama in early 2013 negotiated the expiration of tax cuts put in place under President George W. Bush, Biden in 2025 would have to confront the scheduled expiration of the Tax Cuts and Jobs Act legislated under President Donald Trump. (Trump’s tax law made permanent a steep cut in the corporate tax rate, offset by higher taxes for every individual taxpayer due to a change in ways tax parameters grow with inflation.) The difference, however, is that the fiscal outlook is substantially worse: Debt was roughly 70 percent of GDP when Obama was negotiating in late 2012; Biden will negotiate with a debt level that is about 50 percent higher as a share of the economy. This fiscal stress may mean that Biden won’t have the same luxury afforded Obama and congressional Republicans when they agreed to a permanent deficit-financed tax cut. Failure to extend the tax cuts means swapping short-term economic headwinds for a more sustainable long-term fiscal outlook.
A second Biden term, like Obama’s, will face difficult choices on trade policy. Whereas Obama’s presidency featured a concerted — but ultimately doomed — effort to pass the sweeping Trans-Pacific Partnership, Biden will instead have to decide the extent to which he will depart from the protectionist policies of his immediate predecessor, including in particular the administration’s stance towards trade with China. Pursuing new trade agreements in Indo-Pacific and Latin America will likely be part of Biden’s trade legacy as well.
There are pressing second-term questions that the Build Back Better agenda doesn’t address. One is whether Biden would take on the scheduled exhaustion of the Social Security and Medicare Trust Funds. Biden already laid down a marker during the 2020 campaign: a Social Security reform plan which would close about one-quarter of the long-term imbalance and plus-up benefits for vulnerable populations by raising the cap on taxable earnings. Similarly, his last budget advanced a plan to add at least 25 years to Medicare’s solvency by raising payroll tax rates on wealthy earners and expediting prescription drug negotiations. In practical terms, Biden would need either (and perhaps both) large majorities in Congress and strong signals from investors in Treasuries to achieve any measurable reform to major entitlements.
Three years into his presidency, President Biden has demonstrated a clear sense of his top economic priorities: reinvigorate American manufacturing, accelerate the clean energy revolution, adopt pro-labor regulation, bolster U.S. infrastructure, and raise more revenue from corporations and upper-income taxpayers. With four more years and a like-minded Congress, he will likely aim to pass the legislation that came up one vote short in his first term and aim to dramatically overhaul America’s care economy.
Benjamin Harris is the vice president and director of economic studies at the Brookings Institution. He was a long-time economic adviser to Joe Biden and recently served as assistant Treasury secretary for economic policy.