How Biden’s $3.5 trillion economic plan compares to LBJ’s Great Society and FDR’s New Deal
President Joe Biden’s $3.5 trillion economic agenda — and the social spending it would usher in — has few parallels in modern U.S. history.
The New Deal era of the 1930s and the Great Society of the 1960s are its closest comparisons, according to economists and historians.
Those periods of vast social expansions — marshalled by Presidents Franklin D. Roosevelt and Lyndon B. Johnson, respectively — saw the creation of some of our nation’s most popular programs, such as Social Security, Medicare, Medicaid and unemployment insurance.
Biden’s Build Back Better reforms — which would expand spending in areas like childcare, health care, paid leave and education — shares traits with these past eras but diverges in significant ways, experts said.
“They’re all important,” Stephen Marglin, an economist at Harvard University, said of the prongs of Biden’s agenda. “They’re all part of what we should be regarding as necessary infrastructure, social infrastructure, that’s important to a 21st century economy.”
The national government was small when the Great Depression hit in 1929. At the time, most social welfare programs were funded and administered by local government, according to John Joseph Wallis, an economic historian and professor at the University of Maryland.
But FDR’s series of New Deal programs in the 1930s fundamentally changed the public’s expectation from Washington and the government’s role in their lives.
Social Security retirement benefits and unemployment insurance were the most consequential and lasting reforms of that period, according to economists. Some modern-day programs — like the Supplemental Nutrition Assistance Program (food stamps) and Temporary Assistance for Needy Families (also known as welfare) — have their roots in New Deal reforms.
Later, in 1965, President Johnson’s War on Poverty led to the creation of Medicare and Medicaid, public health plans for seniors and the poor.
The federal government also roughly doubled the value of Social Security benefits between 1965 and 1972, and began pegging them to increases in the cost of living, according to Irwin Garfinkel, a professor and co-founding director of the Center on Poverty and Social Policy at Columbia University. (Some of those reforms occurred during President Richard Nixon’s tenure.)
“What we did in the 60s, what was most remarkable, was we nearly wiped out poverty among the aged,” Garfinkel said.
Biden’s proposals come at a time of similar U.S. economic and social upheaval.
The pandemic downturn was the worst recession since the Great Depression, hurtling millions into unemployment overnight. The country’s concurrent reckoning with racial inequality following the murder of George Floyd harked back to the civil rights movement of the 1960s and put a spotlight on the recession’s unequal impact on minorities and the poor.
While U.S. social programs had largely tilted toward the elderly, Biden’s agenda would somewhat shift that focus to children and families, according to experts.
By one estimate, his proposed expansion of the child tax credit would cut child poverty by half. (Child poverty is the share of kids living in poor households.)
“It’s not quite as we did for the aged, but it’s not bad,” Garfinkel said.
Biden’s proposal would expand programs for seniors, too, by adding vision, dental and hearing benefits for Medicare, for example.
Program cost
Comparing the overall cost and spending of Build Back Better versus the New Deal and Great Society eras is challenging.
For one, the budgeting tools the federal government uses today to gauge cost weren’t around then. But examining cost as a share of the U.S. economy is among the best ways to judge programs’ relative scope, economists said.
The $3.5 trillion plan Biden proposed would be spent over 10 years. That amounts to roughly $350 billion per year, or about 1.5% of the country’s current $22.7 trillion gross domestic product, a measure of economic output.
That 1.5-point increase is a big jump from the last several decades but is smaller than those during the Roosevelt and Johnson eras.
By 1939, the share of federal social-welfare spending hit a New Deal-era peak of 3.6% of GDP, according to an analysis by Price Fishback, a professor at the University of Arizona who studies New Deal political economy. That’s a 2.7-percentage-point increase relative to 1933.
In 1963, social spending was 4.1% of GDP; by 1973, it had jumped to 7.4%, an increase of 3.3 points, Fishback said.
“This is a pretty hefty slug of money,” Fishback said of Build Back Better. ”[But] it doesn’t look like a big budget buster,” he added.
The picture is somewhat different when considering spending per capita, to account for U.S. population growth over the last century.
Social spending would increase about $1,060 per person per year under Biden’s plan, Fishback said. By comparison, New Deal policies had swelled spending about $400 per person by the end of the 1930s; spending grew $2,571 per person over 1963-73.