I assume many listeners to WAMC know who John Katko is. He is a Republican Congressman representing New York’s 24th Congressional district (centered in Syracuse). He was one of ten House Republicans who voted to impeach Trump after the January 6 insurrection. He also attempted to work with his Democratic colleagues in the House to create a bi-partisan committee to investigate the January 6 events. After coming up with a plan for a truly bi-partisan version of the Committee, he was cut off at the knees by his House Republican leadership who refused to cooperate in creating that committee. The result was the Democrats created their own committee (with two Republican members). Katko also bucked the House leadership when he voted for the bi-partisan infrastructure bill – the kind of bill that used to pass with massive majorities in the past. For his completely ordinary patriotism in opposition to the January 6 insurrection and for his completely ordinary bi-partisanship in support of traditional infrastructure, Katko has been viciously attacked by the Trumpies in his party. The New York Conservative Party has already promised he would not have their ballot line in November of 2022. Trump, himself, has promised to back a primary challenge to Katko for the Republican nomination, calling him “bad news.”
However, Katko’s independence from his party did not lead him to support the Build Back Better Act. When it comes to Democratic spending programs on people not just roads and bridges, he is a 100% Reaganite Republican. Here is part of a statement he made on November 19 in opposition.
“This measure authorizes one of the largest expansions of the federal government in our nation’s history. It contains radical Green New Deal policies, threatens to further balloon our national debt, … and according to the Tax Policy Center, would raise taxes on middle-class Americans by 30%. [and]…prioritizes the far left’s longstanding policy objectives.”
[The full statement is available at: https://oswegocountytoday.com/politics/katko/katko-votes-against-build-back-better-act/]
Let’s go over these claims. Why does the size of the expansion of the federal government mean anything? The important question is --- what does the Build Back Better Act expand? It expands the child tax credit from the one year authorized in the American Rescue Plan Act (passed in March of 2021) for another year. Without that extension, low and moderate income families with children will face a cut in their incomes as the credit of $3000 or $3600 automatically reverts back to $2000. The Build Back Better Act also expands Medicare coverage. It subsidizes child care.
Don’t take my word for it. There is a full summary of the bill that passed the House (the one Katko voted against) from Time Magazine. [“The House Just Passed Biden’s Build Back Better Bill. Here’s What’s In It,” available at https://time.com/6121415/build-back-better-spending-bill-summary/]. I urge everyone who wants to get past the talking points (on either side of the debate) to actually check it out.
As has been emphasized over and over again, the various elements in the bill are VERY POPULAR. This is why Representative Katko didn’t tell us which of the specific spending programs in the bill would be bad for the country or the people. He just used scare words without substance, hoping the caricatures of proposals like the Green New Deal and claims they furthered longstanding left wing objectives would be enough to turn off low information voters.
Now I could develop the rationale for every one of the elements in the Build Back Better Act but I know better. Even in this written version which is not limited by the time constraints of my oral commentaries, there is a danger that people’s eyes would start to glaze over with too much detail. So I’ll focus on ONE of the spending ideas and also touch on his worry about tax increases for the middle class and the “ballooning of the National Debt.”
Let’s start with the National Debt. As I have stated over and over again the absolute size of the National Debt means nothing. If I told you my small business had $2 million in loans outstanding, would that tell you whether I was in danger of going bankrupt or not? The obvious answer is “NO!” To know whether my being $2 million in debt is a crushing burden on my business or not you would have to know how much it was worth --- and how much revenue was coming in every year. IF I had capital of $5 million, carrying a 40 percent debt load would be very burdensome and dangerous. If I had a capital investment of $50 million, a $2 million debt would be miniscule. Switching to the government version of indebtedness, the crucial point about the nation’s national debt is the RATIO of outstanding debt to GDP and the ratio of interest payments on the outstanding debt to government revenue.
In 2020, the National Debt peaked at 113 percent of GDP. (That ratio is lower now.). In 1945 as World War II was ending the National Debt was 114 percent of GDP and it actually went up to 119 percent the next year before starting to fall. As I argued in my last commentary, the fights against COVID 19 and to reverse global warming are as important today as fighting and winning World War II was back in the 1940s. In addition, it is important to note that the original Biden proposals that ultimately (as a result of compromises) ended up as the Build Back Better Act involved significant increases in federal revenue to pay for the spending. If Republicans were really concerned about increasing the National Debt they would stop resisting the tax increases that have been proposed. But we all know that the crocodile tears Republicans cry about the National Debt is only related to spending programs put forward by Democrats. The massive tax cut passed by the Republicans in 2017 ballooned the National Debt dramatically but that was okay because Republicans assured us they would pay for themselves with dramatic increases in growth – which of course did NOT occur.
Let me briefly take up the very dishonest statement that taxes on the middle class will go up 30%. Here Katko just didn’t read the report from the Tax Policy Center correctly. Here is where Katko got that 30% figure: “Taking into account all major tax provisions, roughly 20 percent to 30 percent of middle-income households would pay more in taxes in 2022. However, their tax increases would be very small. Among those with a tax increase, low- and middle-income households would pay an additional $100 or less on average.” [See Howard Gleckman, “Build Back Better 2.0 Still Raises Taxes For High Income Households And Reduces Them For Others” November 11, 2021 available at https://www.taxpolicycenter.org/taxvox/build-back-better-20-still-raises-taxes-high-income-households-and-reduces-them-others.]. In other words, taxes won’t go up 30%. Instead 30% percent of middle class tax payers will see their taxes go up a negligible amount.
Now let me focus on one of the elements that Katko refers to as a “radical Green New Deal” proposal.
There is $10 billion for public transit access for low income people and another $10 billion for high speed rail. The way this works is the $10 billion is available as grants to state and local government willing to spend that money to increase public transit access to affordable housing and to enhance mobility for low-income riders and residents of low income communities. Affordable housing works when residents have easy access to public transportation. Most of these grants will create public transit routes specifically designed to make it easier for low income communities to use them. The second $10 is pretty straightforward. The fact that the US has probably the slowest intercity rail service of the industrialized world is a total scandal. High speed rail is the way to reduce the need to fly between cities as well as an inducement to get out of your cars for such trips.
Considering that the entire federal budget for 2020 was $4.8 trillion, this $20 billion is miniscule. Looking only at transportation spending, the federal government spent $69 billion on highways alone in 2020 – one year. Meanwhile, the $20 billion in the Build Back Better Act is spread over five years.
Still, what about that complaint that this is an unwarranted expansion of the role of the federal government. I taught Public Finance for decades during my career as a professor and one exercise I would always use with my students was to ask them which level of the government --- local, state or federal --- should finance different services. Most public services are the responsibility of local and state governments --- police, fire, education, sanitation, transit, etc. On the face of it, one would think that local (or at least state) taxpayers should be on the hook for something that clearly benefits local people. I mean no one in Montana takes the New York City subway to work nor Amtrak to Washington, DC. Why should federal taxpayers subsidize New Yorkers’ transportation desires?
Well in fact, people in Montana as well as all around the world benefit from investments in public transit that reduce the amount of commuting or intercity travel in fossil fuel burning automobiles. In the era when global warming has become a five-alarm fire threatening the very survival of human civilizations --- if not humanity itself --- any expenditure that lessens the carbon footprint of humanity WHEREVER THAT EXPENDITURE OCCURS has an almost infinite rate of return.
This is not hyperbole. The future of humanity requires severely cutting back and ultimately eliminating the carbon footprint of our current economic systems. That small $20 billion investment has a very large positive impact all over the world. Yes, much of the benefit will be local --- there will be less congestion, there will be less local pollution. But the global benefit will be there, too.
Given the very high level of benefits that will result from improved and expanded public transportation systems that take people out of their cars when they go to and from work or between cities, there should be much more money appropriated for Green New Deal projects. Nevertheless, this $20 billion is a step in the right direction – a step that will benefit all of us but especially our grandchildren.
Michael Meeropol is professor emeritus of Economics at Western New England University. He is the author with Howard and Paul Sherman of the recently published second edition of Principles of Macroeconomics: Activist vs. Austerity Policies
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