America Can Build Back Better Even Better

Current Problems with the Build Back Better Initiative

Most Members of Congress seem to support much of what is in the draft Build Back Better (BBB) law. The main problems that have led some Republicans and some Democrats to reject the Build Back Better initiative are cost and coverage. 

For understandable reasons, fiscal conservatives have been concerned that BBB will cost too much (and even more than current estimates indicate), will require too much borrowing and debt, and will further exacerbate inflation. Progressives, on the other hand, are rightly concerned that the effort to scale back the BBB investments to fit within total cost levels  acceptable to fiscal conservatives has left some important investments on the cutting-room floor and has left other important initiatives so underfunded that they may fail simply because of inadequate resources.   

Today our exceptionally high levels of inflation, growing government deficits, rising stock of government debt, swelling trade deficits, and record-setting debts to foreigners have made many think twice about spending even more trillions of dollars to Build Back Better.

A Better Way to Build Back Better - BBB2

This note proposes a way to Build Back Better Better, a program worthy of bi-partisan support that we could call BBB2. This program would be highly complementary to the present BBB legislation because, by adding a simple policy change that would make made-in-America goods internationally competitive again, BBB2 would:

1. Fully pay for most and perhaps all  costs of the initiatives currently in BBB without cutting other important programs and without raising taxes on the average American. This would address the widespread and fully understandable concern that the current legislation could involve incremental budget costs larger than those currently in the legislation and that financing these costs by borrowing and printing money could make our ongoing inflationary problems even worse.

2. Allow many of the BBB initiatives that are currently funded for only a year or two to be funded for the life of the BBB implementation period, thereby addressing some of the key criticisms of those worried about the real cost and long-term effectiveness of BBB. 

(c) Create an environment that would minimize the cost of key BBB initiatives and that would help assure the the cost-effectiveness and lasting success of these initiatives, another concern of some critics.   

In addition to providing an excellent way to pay for the physical and social infrastructure programs currently included in the administration's Build Back Better plans, BBB2 would:

1. Create 3-5 million new well-paying middle-class American jobs, especially in manufacturing and related industries because American workers would be able to produce internationally competitive exports and made-in-America import alternatives.
   
   
2. Increase average wages for all Americans -- including wages for people currently working in low-pay service-sector jobs.
   
   
3. Make real investments in America profitable again while reducing the risk of the financial bubbles and the destructive crises that inevitably follow.
   
   
4. Stimulate state-of-the-art research in areas such as environmental sustainability, green energy, cutting-edge computer technologies, medicine, affordable housing, and other fields that are vital to our national security and global leadership.
   
   
5. Improve training and education programs that will further improve America's international competitiveness and reduce economic and social polarization.
   
   
6. Accelerate US economic growth with benefits distributed widely in ways that reduce America's increasing economic and social inequalities and polarization, measures essential to making the American Dream a reality for more Americans.
   
   
7. Reduce Federal Government budget deficits, the costs of servicing government debt, and the levels of outstanding debt. This outcome, which would be made possible by moving the dollar to a fully-competitive exchange rate by imposing a tax on foreign speculators who make the dollar artificially expensive, would also grow the US tax base and reduce the need for "welfare" payments to families and companies hit by financial and economic crises. 
   
   
8. Assure that BBB benefits can be implemented at the lowest possible costs and become self-sustaining for generations to come.  BBB2 would assure this by creating an environment where Americans to earn as much producing exports as they spend on imports.
   
   
9. Eliminate US trade deficits and reduce the debts to foreigners that we are incurring by living far beyond our means -- debts that our children and theirs will have to repay.
   
   
10. Eliminate the loss of vitally important US factories, production technologies, and jobs to foreign countries. These losses are a major reason for America's growing dependence on countries like China -- countries that openly seek to dominate the United States in critically important economic, political, and military areas. Even in times of peace, our dependence on such countries imposes serious economic burdens -- fragile supply chains, lengthy production delays, and the loss of American jobs and technological leadership. In times of war, the costs of this dependence would be far greater, even existential.

How Can Such Benefits Be Possible?

You may ask how all of these wonderful outcomes could be possible with a simple change in the current BBB draft legislation. 

The answer is simple: Incorporate into the BBB draft legislation the provisions of the Competitive Dollar for Jobs and Prosperity Act (CDJPA) that was presented on a bipartisan basis to the US Senate during the previous session of Congress.

The key provision in the CDJPA is a modest Market Access Charge (MAC) that would be paid by foreigners exploiting our financial markets. The MAC's legal details are available at the CDJPA link in the previous paragraph. Further details regarding the need for the MAC and how it would work are available here on my blog, Americans Backing a Competitive Dollar. Modeling by the Coalition for a Prosperous America (CPA) indicates that the MAC would generate $300-500 billion dollars per year, or up to $4 trillion over the eight-year period that is sometimes given as the implementation period for the BBB initiative. 

In other words, the MAC would make a very important contribution to financing the once-in-a-lifetime investments that America needs to make in its future. Including the MAC as part of the BBB legislation would sharply reduce (or even eliminate) the need to cut other programs, to raise taxes on Americans, or to print money that would almost inevitably increase inflationary pressures. 

Furthermore, all of these benefits of the MAC for the BBB initiative are in addition to the main reason that the MAC has been carefully designed and modeled over the past several years -- namely to end our trade deficits, the loss of jobs and production capacity to foreign countries, the growth of our budgetary deficits, the sharp decline in America's economic growth, and the growing economic, social and political polarization that is threatening our nation.   

Incidentally, a thorough review indicates that  the MAC would be fully legal under US tax law as well as America's international obligations under its bilateral treaties and under the rules of the IMF, the WTO/GATT, and the OECD.

Moving Forward Together

Given the exceptional complementarity and urgency of the BBB and the MAC, the logical way to assure the success of both initiatives would be to combine them in a "BBB2" law to be passed by Congress. The MAC would make it possible to fully fund the excellent initiatives in the BBB in a way that does not require raising taxes on Americans, cutting existing programs that are also important, or borrowing money that could easily increase inflationary pressures.

A BBB2 would address the serious and legitimate concerns of both Republicans and Democrats. Consequently, it should be entirely possible to move forward on a bi-partisan basis to build a better future for our nation.

Alternatively, President Biden could implement the CDJPA by Executive Order under the International Economic Emergency Powers Act (IEEPA). However, including the MAC as part of a revised Build Back Better package would clearly be preferable. In addition to the normal reasons for preferring laws over EOs, implementing the MAC as part of a law like the BBB with the support of both parties would make it clear that the  program was being financed with a clear and exceptionally advantageous "pay for" – one paid by foreigners rather than by US tax payers. 

To paraphrase a famous quote from Russel B. Long many years ago, "Don't tax me. Don't tax thee. Tax that man beyond the sea." 

In summary, implementing the MAC as a pay-for to finance the Build Back Better program – and to trigger a renaissance in U.S. manufacturing that will gradually restore the American Dream for middle and lower income Americans  – holds more promise than any other approach for securing passage of the vitally important Build Back Better initiative.

John R. Hansen, PhD

December 21, 2021

America Needs a Competitive Dollar - Now!