American Families Plan Would Put 21 Million More People On Welfare: Analysts

Analysts predict that President Biden’s American Families Plan would add 21 million Americans to federal benefit programs.

Writing for The Wall Street Journal, Hoover Institution fellows John F. Cogan and Daniel Heil unpacked their recent analysis, which discovered that the Biden administration’s $1.8 trillion omnibus bill would drastically expand the welfare state.

The federal government’s system of entitlements is the largest money-shuffling machine in human history, and President Biden intends to make it a lot bigger… For the first time in U.S. history — except possibly for the pandemic years 2020 and 2021, for which we don’t yet have data — more than half of working-age households would be on the entitlement rolls if the plan were enacted in its current form.

The academics note that families earning six figures would be eligible for generous handouts. Indeed, “most” of President Biden’s spending would benefit middle-income and upper-income households.

Two-parent households with two preschool-age children and incomes up to $130,000 would qualify for federal cash assistance for daycare. Single parents with two preschoolers and incomes up to $113,000 would qualify. And some families with incomes over $200,000 would be eligible for health-insurance subsidies. Other parts of the plan, such as paid leave and free community college, have no income limits at all.

Under the American Families Plan, 57% of all married-couple children would receive handouts, while over 80% of single-parent households would enter the entitlement rolls. Noting that the legislation has a number of “gimmicks” that hide the extent of its revenue proposals, the report forecasts that President Biden’s proposal would add $1 trillion to the federal deficit over the next decade.

Other economists have expressed similar concerns with the American Families Plan. Analysts from the Penn Wharton Budget Model — a nonpartisan think tank at the University of Pennsylvania’s Wharton School that examines the impacts of major legislation — concluded that the American Families Plan would slow long-term economic growth. 

By increasing income taxes for wealthier Americans, introducing $2.3 trillion in federal expenditures, and spending with borrowed money, the legislation would slash output by 0.4% within the next three decades. The bill would also decrease the capital stock — the total amount of machinery, buildings, and other productive equipment in the American economy — by 1.2% over the same period.

In essence, long-term economic growth would be hindered by greater demand for federal debt financing, which would cause investors to direct money into loans for the government rather than ventures in the private sector. Such a phenomenon would restrict innovation and productivity, inhibiting American economic vitality for decades to come.

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