June 6, 2021
Saturday evening, just in time for the anniversary of D-Day today, President Joe Biden published an op-ed in the Washington Post explaining that his upcoming trip to Europe is part of a larger defense of democracy.
This week, Biden will be meeting with the Group of Seven—also known as the G7—an informal organization of wealthy democracies including Canada, Japan, Italy, France, Germany, the United Kingdom, and the U.S. He will meet with leaders of the European Union and with allies in the North Atlantic Treaty Organization (NATO), a 30-nation military alliance begun in 1949 "to safeguard the freedom, common heritage and civilization of the peoples, founded on the principles of democracy, individual liberty and the rule of law."
“In this moment of global uncertainty, as the world still grapples with a once-in-a-century pandemic,” Biden wrote, “this trip is about realizing America’s renewed commitment to our allies and partners, and demonstrating the capacity of democracies to both meet the challenges and deter the threats of this new age.”
Identifying the need for unified effort to end the coronavirus pandemic and to push back against the governments of China and Russia, Biden called for America once again to lead the world from a position of strength. He pointed to America’s rebounding economy, thanks to the vaccine distribution program and the American Rescue Plan, as an indication that the U.S. is recovering, and noted that “we will be stronger and more capable when we are flanked by nations that share our values and our vision for the future—by other democracies.”
Biden called attention to the fact that Treasury Secretary Janet Yellen pulled off a major deal on Saturday when she led the G7 finance ministers to reverse forty years of corporate tax cuts and agree to a global minimum tax of at least 15% on multinational corporations. After the deal, Spain, which is not part of the G7, endorsed the plan. Negotiators hope to expand the deal to the G20—twenty countries whose economies make up around 80% of world trade—this fall.
This agreement is a huge deal. If accepted, it would stop countries from trying to attract multinational businesses by cutting taxes on them, a so-called “race to the bottom” that reduces the amount of tax money available for public investment while pumping money into the largest multinational corporations. In 1980, the average global corporate tax rate was about 40%. By 2020, it was about 23%. By 2017, multinational firms had about $700 billion stashed in tax havens.
Yellen’s plan would help pay for Biden’s domestic agenda by making a domestic tax increase on corporations more acceptable to Republicans. Trump’s 2017 tax cut, passed by a strict partisan vote, slashed domestic corporate taxes from 35 to 21 percent. Trump promised that the cuts would help everyone by supercharging the economy and would pay for themselves. But in fact, according to the nonpartisan Tax Policy Center, 60% of the benefits of the tax cuts went to those in the top 20% of the economy, and corporate tax revenues fell 31% in the first year after congress passed the tax cut. In that year—which was before the coronavirus pandemic—our deficit exploded to $984 billion, unheard of in a time without a recession or a war. The cuts did not produce economic growth, either: the economy grew at 2.9%, the same as it did in 2015.
Biden wants to take the domestic corporate tax rate back to 28%, hoping to raise $3 billion to pay for infrastructure and education. This plan is popular with 65% of registered voters, while only 21% oppose it, but it faces huge headwinds among Republican lawmakers, who have said that higher domestic corporate taxes would simply send businesses overseas. An international tax floor helps to defang that fear. In addition, some U.S. companies are willing to exchange slightly higher taxes for certainty in international tax rules.
Countries have talked about international cooperation on taxes for many years, and Yellen’s fast victory in finding common ground has economic experts calling it “impressive,” although much more work will be necessary to get the plan accepted by national governments both overseas and at home. International treaties require a two-thirds majority in the Senate to pass, and Republicans, who have vowed to oppose any tax increases, are unlikely to approve.
Nonetheless, Biden is continuing to press forward. His op-ed makes the case for clean energy and infrastructure investment to enable democracies both to compete with China and to protect their people against unforeseen threats. He plans to reiterate U.S. support for our allies “who see the world through the same lens as the United States” before he meets with Russian President Vladimir Putin in Geneva.
Biden’s administration has broken the recent U.S. policy of seeing Russia as a monolith. He has pressured Putin over human rights, election interference, and cybersecurity, but has indicated he is willing to work with him on arms control and international stability. He promises to stand firm on the issue of human rights as a defining feature of his foreign policy.
Biden recognizes that we are at a defining moment in world history. In his op-ed, he asks: “Can democracies come together to deliver real results for our people in a rapidly changing world? Will the democratic alliances and institutions that shaped so much of the last century prove their capacity against modern-day threats and adversaries?”
Autocratic leaders, including Chinese President Xi Jinping and Putin, have said that democracy is obsolete and autocracy is the form of government that will dominate the future. Biden is dedicating his presidency to the defense of democracy. Can democracy stand firm in the modern day?
Says Biden: “I believe the answer is yes. And this week in Europe, we have the chance to prove it.”