President Joe Biden is kicking off the campaign to get his second big initiative – a massive infrastructure package – enacted by the summer.
Upgrading the nation’s infrastructure was on President Donald Trump’s wishlist, but he was not able to get it done. Biden is eager to show that he can deliver where the last president failed. Fixing the nation’s infrastructure has widespread support across the political spectrum because it creates jobs and tangibly improves nearly every community in the nation. The logjam in Congress has always been how to pay for the upgrades: raise taxes and tolls, cut other programs or take on more debt?
Biden is opting mainly for the tax-hike option. He is proposing tax hikes on corporations. There’s already pushback from business leaders who claim this will hurt U.S. competitiveness. And there’s a vocal chorus questioning the White House math that says eight years of infrastructure spending would be paid for by 15 years of higher taxes on businesses.
As Biden makes his opening pitch for his infrastructure plan, here are the key takeaways.
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This is long overdue
The American Society of Civil Engineers gives the United States a “C-” grade for infrastructure, noting that nearly four out of every 10 bridges are more than a half-century old and that a water main ruptures every two minutes. In most communities across the nation, people can quickly point to roads, bridges, pipes, ports and airports that look dated – and dangerous.
And there’s the lack of reliable Internet connectivity in parts of the nation. The consequences of not having adequate high-speed connections have been on display during the pandemic as low-income students dropped out of school, because they did not have sufficient Internet access to attend online classes.
The White House is pitching this as a jobs plan and a way for the United States to keep up with other nations that are investing heavily in all different types of infrastructure, especially China.
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It includes more than roads and bridges
About half of Biden’s plan goes toward traditional infrastructure. He calls for about $620 billion for the roads, ports and bridges, including about $100 billion to bring high-speed Internet to all Americans. There’s another $111 billion to replace antiquated lead pipes to make drinking water safer, and $100 billion for retraining so workers can get higher-skilled jobs.
The other half of the bill makes investments to reduce climate change and modernize schools, manufacturing hubs and eldercare facilities. The White House argues these should also be viewed as critical infrastructure, but others see them as partisan Democratic priorities. This second $1 trillion in spending is where much of the debate is going to focus. Biden will have to chose, as he did on the stimulus package, whether to take some of this other spending out to try to win GOP votes, or to stick to his plan and pass the bill with only Democratic votes.
For example, the proposal calls for $400 billion for housing for the elderly and disabled, more than $200 billion to upgrade public housing and low-income homes, and $100 billion for retrofitting schools. Then there’s a big investment in clean energy and climate change research and $50 billion for U.S. semiconductor manufacturing. Biden also wants to include the Protecting the Right to Organize Act, the PRO Act, that would make it easier for workers to organize unions.
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Biden wants to raise taxes on companies
To fund his $2 trillion-plus plan, Biden is asking companies to pay up. Trump enacted the largest corporate tax cut in U.S. history, slashing the business tax rate from 35% to 21%. Biden wants to increase it to 28%. The plan also calls for ensuring that companies pay at least some taxes by imposing a 15% minimum tax on income and by taxing some foreign income of large global corporations to discourage them from moving operations overseas to tax havens.
Classic economic theory says a tax increase will have some negative effects such as less investment or hiring. But many Democratic economists say that the positives far outweigh the negatives, and that companies can handle this new level of taxation. They point out that this is a major investment that will make business easier in the United States.
But business groups including the U.S. Chamber of Commerce are already pushing back, saying that this could make it harder for U.S. companies to compete with foreign ones that have lower tax rates, and that these major upgrades should be paid for by a wider group of the people who use them – such as by tolls on roads or raising the gas tax.
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The White House is using fuzzy math to say how the plan will be funded
The White House is already getting criticized for portraying this as a plan that is “paid for” by tax increases when the numbers do not add up.
The proposal calls for about $2.3 trillion in spending over eight years, yet it would take 15 years for the proposed tax increases to generate that amount of money. That’s not how budgeting normally works.
“Put another way, roughly half of the spending will be paid for,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center.
The standard way to look at spending like this is to add up how much it costs over a decade and how much of that cost is paid for over the same 10-year window. The proposed tax hikes generate about $1.5 trillion over a decade, meaning this plan would add close to $1 trillion to the U.S. debt.
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It probably will bring well-paying jobs
The United States still has nearly 10 million people out of work – more than the worst days of the Great Recession. While many economists predict a boom this summer as most Americans get vaccinated and start traveling and dining again, there are likely to be people left behind. This infrastructure bill is widely expected to create a lot of well-paying jobs. The typical wage for a construction job is close to $30 an hour, according to the Labor Department, which is significantly higher than the median pay of $19 an hour for all U.S. jobs.
Biden is haunted by the “jobless recovery” that occurred after the Great Recession, after which it took nearly a decade to get everyone back to work. It’s why he wanted the large pandemic relief package that passed this month. This infrastructure package is another effort to ensure that jobs return quickly.
While much of the money from Biden’s $1.9 trillion coronavirus relief bill probably will be spent in the next six months, this first-round $2 trillion infrastructure package would pump money into the economy for years to come, helping provide an extra boost to jobs and the economy throughout Biden’s first term.