Stephanie Scarbrough/AP Photo
President Joe Biden delivers remarks during a campaign event with Vice President Kamala Harris in Raleigh, North Carolina, March 26, 2024.
This article appears in the April 2024 issue of The American Prospect magazine. Subscribe here.
Media commentators are mystified about why Joe Biden has not gotten more credit for an improved economy, with inflation down nearly to pre-pandemic levels and job creation setting records. The reason is not hard to grasp. None of the recent improvements have altered the basic situation of most Americans, in which reliable careers are scarce, college requires the burden of debt, health coverage is more expensive and less reliable, and housing is unaffordable.
The American dream of a good job, decent health care, homeownership, college education without crippling debt, and a better life for the next generation was once within reach of most Americans. Now, it’s far harder to attain. Even with a two-income family, the cost of good child care is excessive.
The remedies are all necessarily radical. Biden’s State of the Union address was directionally and rhetorically right. He called for containing Big Pharma to reduce drug prices, raising taxes on wealthy individuals and corporations to finance broad benefits such as housing down-payment subsidies and affordable child care, as well as protecting and strengthening Social Security and Medicare. But in a second term, and in his campaign to earn a second term, Biden needs to go a lot deeper.
Since Jimmy Carter, mainstream Democrats in the White House and Congress have been complicit in the corporate erosion of the American dream. They agreed to mixed public-private approaches that resulted in systems that were inefficient, lucrative to for-profit players, and impenetrably frustrating to ordinary citizens. Consider four emblematic cases of policy dead ends that now require radical remedies.
The first is affordable college. When I was a student, public universities were free, as they had been since land grant colleges were invented during the Lincoln administration. If you wanted to design a system to destroy the life chances of young adults, you could not do better than the student loan system.
The debt program was the work of both parties. While state legislatures gradually withdrew tax support for universities, Pell grants steadily dropped in relative benefit. In 1980, a Pell grant covered more than three-fourths of the cost of attending a public university. Today, it covers less than 30 percent; student debt must make up the rest.
In this shift, Republicans at both the state and federal level were worse than Democrats. But today, the typical state university is only about 50 percent tax-supported, and the figure is about the same in blue states as in red ones. At the University of Massachusetts, in a state that has been blue for generations, in-state tuition, fees, room, board, and other needs cost about $37,000 per year. Adjusted for inflation, that’s about what private college cost 40 years ago.
Obama and Biden tinkered around the edges. Obama shifted the student loan program from private lenders to direct federal loans. Biden provided some relief for nearly four million debtors, within the limits of his executive power. But the true remedy is radical: cancel most student debt and make public higher education free. Bernie Sanders has a plan that would do this. You just have to increase taxes on rich people to pay for it. Student debt is an American invention. Several other nations, even ones where a larger percentage of young people attend university, still have free, tax-supported higher education.
Since Jimmy Carter, mainstream Democrats in the White House and Congress have been complicit in the corporate erosion of the American dream.
Or take health care. Liberals, going back to Truman, used to be for national health insurance. Bill Clinton’s proposed plan and its two variants, Romneycare in Massachusetts and then Obamacare nationally, were all variations on the same theme: “managed competition” using the genius of the market to offer choices and contain costs. Insurers would offer policies, with subsidies for poorer people, and then consumers would shop around for the most appropriate plan.
This approach has been a fiasco. Insurers keep devising ways to game the system. In hundreds of counties, there is only one insurer. The ostensibly public parts of the system, like Medicare, keep being privatized: Medicare Advantage profits by denying needed care, private drug plans use the Medicare brand, and there are for-profit mental health carve-outs under Medicaid.
Meanwhile, nonprofit hospitals, in the struggle for market share, are behaving more and more like for-profit ones, and the whole hospital sector is becoming more rapacious. More and more middlemen take a bigger and bigger cut, at the expense of patients and care workers. Cost-containment schemes devised by government backfire and become new ways for commercial players to game the system.
We now spend 18 percent of GDP on health care, for a system that leaves tens of millions without coverage and tens of millions more who are nominally insured unable to afford care because of deductibles and co-pays. The U.K., which has chronically underfunded the NHS, still has better morbidity and mortality statistics than the U.S., because they cover everyone without the sheer waste and gamesmanship.
The radical remedy is not just single-payer national health insurance. We need to de-commodify and de-commercialize the entire system. That would save massive sums by simplifying the system and getting rid of the middlemen, and be easier on both patients and clinicians.
Free higher education and true national health insurance are at the fringes of public debate. Biden could make them mainstream. Competent government run by sane and decent people, in contrast to Trumpian lunacy, ought to be a major selling point with voters this year, but it isn’t. The country is in a populist mood. We will either offer and eventually deliver progressive economic populism, or we will keep getting far-right, nihilist MAGA populism.
HERE ARE TWO MORE ASPECTS OF THE LOST AMERICAN DREAM where radical policies are needed to make a palpable difference. Biden can’t deliver them without a Democratic Congress. But running on these themes makes it more likely that he will get one.
Fifty years ago, the typical worker in a primary labor market job had a true pension. The pension was based on years of service times wages paid in the final few years. A worker might retire with 80 or 85 percent of his or her final wages. These so-called defined pensions operated not just in unionized companies but in Fortune 1000 employers generally.
In the 1970s, when industry had a bad decade, major companies began shifting to 401(k) plans, where the worker paid more of the cost and bore all of the risk. Today, only 11 percent of workers have traditional pensions, and only a small fraction of workers in their fifties and sixties have enough money in 401(k) plans to finance more than a few years of retirement. Workers risk outliving savings, getting caught in a down stock market, and making bad choices in terms of which financial companies hold and manage their accounts.
All told, 401(k) accounts hold about $7 trillion of assets. If Wall Street middlemen take out 2 percent, that’s $140 billion a year. Comparatively speaking, the public Social Security system is simplicity itself. You pay FICA taxes during your working life, and when you retire the government cuts you a check that reliably comes every month. It’s adjusted for inflation. It comes as long as you live. Administrative costs are trivial and no fees are taken out by middlemen. There is no risk of making bad investments.
We are not likely to go back to a traditional pension system. We don’t have the stable corporate structure of that era, and it was easier to build such a system during the postwar boom when the ratio of workers to retirees was more favorable.
The sensible and radical remedy is to create a second tier of Social Security, as a universal, portable pension. Unlike Social Security, which is pay-as-you-go, the second tier would be funded. Income on the fund, as in a traditional pension, would pay out benefits. That would require higher taxes—on the rich, please. The system would take a generation to mature. Canada is moving toward such a system.
It’s great that Biden is defending Social Security against Republican cuts. But the 40 percent of the elderly whose sole source of income is Social Security are close to poverty. The deeper problem that requires radical remedy is inadequate income in old age.
Biden could serve a more profound transition, back (and forward) to Roosevelt-style progressive populism that delivers for ordinary Americans.
More jobs are becoming gigs. Biden has made a good start by having his Labor Department crack down on misclassification and wage theft, by embracing unions, and requiring that jobs created by his several infrastructure programs be union-friendly. His National Labor Relations Board has administratively enacted some of provisions of the PRO Act, such as banning captive anti-union meetings. With a working majority in Congress, Biden could do a great deal more.
The final core pillar of the American dream is a variant on the same story—housing. This is in some ways the most difficult. Earlier postwar generations enjoyed economic tailwinds that made it easy to have benign policies on housing. Our parents and many of us bought homes when they were affordable and enjoyed a lifetime of wealth appreciation.
The main reason for this windfall was a combination of cheap land, government-backed mortgages, and tax benefits. We cannot recreate the cheap land, much of which was converted from farmland. But we could subsidize homeownership for first-time buyers. Biden in his State of the Union offered the beginnings of such a policy: a tax credit (which is as good as cash) of up to $400 a month for first-time homebuyers. Removing the burden of student debt would also be a huge help for young would-be homeowners.
Transportation policy could complement housing policy. There is a great deal of affordable housing within 75 miles of major metro areas, but commuter rail is in such dismal shape that if you work, say, in Boston, and live in affordable Springfield, it takes forever to get to work. High-speed rail on commuter lines would be good policy in its own right and bring affordable housing to more people.
We have defunded public rental housing and substituted two policies that create unreliable substitutes by subsidizing developers, middlemen, and landlords. One is housing vouchers, the so-called Section 8 program; the other is the Low-Income Housing Tax Credit (LIHTC). Both are expensive and inefficient, and neither produces enough rental housing for people who nominally qualify. With Section 8, the landlord is free to evict the tenant when the neighborhood gentrifies. The LIHTC lines the pockets of middlemen who syndicate the tax shelter, and creates a bureaucratic maze for low-income developers.
Good social housing, of the sort widely used in Austria and the Netherlands, is the remedy. In both countries, it is attractive to the middle class as well as the poor. That strategy, in turn, reduces NIMBYism.
None of this is going to be enacted anytime soon. But there is a latent constituency for more radical policies. In 2016, Bernie Sanders was suddenly among the most popular political leaders in America. The press was mystified. Sanders was at the radical fringe of American politics; he was a socialist. Yet voters, especially young people and working-class people, loved him, because he spoke to their needs. He was the plausible alternative to Trump.
Biden surprised most of us by governing more in the spirit of Sanders and Elizabeth Warren.
He did so in part because of the economic emergency he inherited, but his progressivism persisted. He has accomplished much, given a legislative majority that has ranged from scant to nonexistent. In 2020, Biden said he expected to be a transitional president to a younger generation of leaders. But he could serve a more profound transition, back (and forward) to Roosevelt-style progressive populism that delivers for ordinary Americans.
In his State of the Union address, Biden aptly framed America’s choice as hate and retribution versus hope and possibility. To save his presidency, our democracy, and the aspirations of Americans, Biden needs to go even bigger.
