Biden Unveils $2.3 Trillion Infrastructure Plan, With Tax Hikes to Pay for It

By Yuval Rosenberg

Biden Unveils $2.3 Trillion Infrastructure Plan, With Tax Hikes
to Pay for It

President Biden on Wednesday unveiled a sweeping $2.3 trillion
plan meant to rebuild and modernize America’s infrastructure,
create millions of new jobs and strengthen the nation’s
competitiveness, particularly with China.

"This is not a plan that tinkers around the edges," Biden said
during a speech in Pittsburgh Wednesday. "It is a
once-in-a-generation investment in America, unlike anything we’ve
done since we built the interstate highway system and the space
race decades ago."

More than just roads and bridges: The White House says
the proposal, which it is calling the American Jobs Plan, would
modernize highways and roads, fix bridges and upgrade ports,
airports and public transit systems.

The administration is quick to add, though, that the plan will
go well beyond rebuilding crumbling transportation infrastructure
to also invest in other areas, including eliminating lead pipes to
provide more Americans with clean drinking water; renewing the
electric grid; building or renovating housing, schools and other
public buildings; and expanding access to high-speed broadband. The
administration is also emphasizing that the plan would help address
economic inequality and speed efforts to fight climate change by
transitioning to green energy sources.

"This is the moment to reimagine and rebuild a new economy," The
White House said in a document detailing the new proposal. "The
American Jobs Plan is an investment in America that will create
millions of good jobs, rebuild our country’s infrastructure, and
position the United States to out-compete China."

What’s in the Biden plan: In all, Biden is calling for
more than $2 trillion in spending over eight years. The chart below
from
The Washington Post provides a useful visual
breakdown, but the major categories include:

* $621 billion for transportation infrastructure
and resilience: The plan would modernize 20,000 miles of
highways and roads; fix the 10 most "economically significant"
bridges and 10,000 others; double federal funding for public
transit with an $85 billion investment; and provide another $80
billion for Amtrak. The plan also includes $25 billion for
airports; $17 billion for waterways, ports and ferries; $20 billion
for road safety programs and another $20 billion to undo
neighborhood divisions caused by highway projects. Biden is also
calling for a $714 billion investment to spur use of electric
vehicles and "win the EV market."

* $580 billion for manufacturing; research and development;
and job training: This includes $180 billion to advance
research in areas such as artificial intelligence, semiconductors
and biotech along with money for climate research and clean
energy.

* $400 billion for the care economy: The White House says
essential home care workers are among the lowest paid, and that one
in six workers in the sector live in poverty. Biden is calling for
funding to expand Medicaid access to home or community-based care
for seniors and people with disabilities and giving care workers
increased pay and stronger benefits.

* $313 billion for schools and housing: The plan calls
for more than $200 billion in tax credits and grants to build and
improve affordable housing and $100 billion to "upgrade and build
new public schools, through $50 billion in direct grants and an
additional $50 billion leveraged through bonds."

* $111 billion for clean water: Biden proposes to replace
100% of the nation’s lead pipes and service lines and upgrade water
systems.

* $100 billion for digital infrastructure: Biden wants to
build "future proof" broadband infrastructure to extend high-speed
internet to unserved and underserved areas and reach 100% coverage
nationwide.

How Biden proposes to pay for it: Broadly
speaking, infrastructure spending has strong bipartisan appeal
given that it can create jobs and deliver improvements to both blue
and red regions. The obstacle to enacting any infrastructure plan
has typically been how to pay for it — whether to raise new
revenue, cut other spending or borrow more to cover the costs.
"Everybody’s for doing something about infrastructure," Biden said
Wednesday. "Why haven’t we done it? No one wants to pay for
it."

Biden’s preferred method of paying for his plan is through
corporate tax increases, though the White House says it would take
15 years of his tax hikes on businesses to offset the eight years
of spending.

Biden would raise the corporate tax rate to 28%, up from
the 21% set by the 2017 Republican tax overhaul. Biden would also
impose a higher global minimum tax on U.S. multinational
corporations to discourage them from moving operations offshore. He
would also levy a 15% minimum tax on the income corporations report
to investors, eliminate provisions that allow companies to avoid
taxes on some foreign earnings and wipe out tax breaks for fossil
fuel producers. The plan also calls for increased enforcement by
the Internal Revenue Service to crack down on corporate tax
avoidance.

Republicans quickly denounce the plan: Elements of
the plan, including the proposed tax increases, are already being
met with objections from Republicans and business groups. "It’s
like a Trojan horse," Senate Minority Leader Mitch McConnell (R-KY)
said Wednesday. "It’s called infrastructure, but inside the Trojan
horse it’s going to be more borrowed money, and massive tax
increases on all the productive parts of our economy."

Biden said he has already spoken with McConnell about his
plan and is open to other suggestions to pay for infrastructure
improvements. "I’m going to bring Republicans into the Oval Office,
listen to them, what they have to say, and be open to other ideas.
We will have a good-faith negotiation," Biden said
Wednesday.

But the chances of bipartisan cooperation are slim at
best. "There is virtually no path to getting Republican votes. It’s
too big, too expensive, and chalked full of tax increases that are
nonstarters among Republicans," Brian Riedl, a former aide to Sen.
Rob Portman (R-OH) now at the libertarian-leaning Manhattan
Institute think tank, told
The Washington Post.

Effects on the debt: Biden touted his plan as "fiscally
responsible," saying that it would reduce the debt over the long
term. Budget watchers said they were pleased that the
administration is — in principle, at least — trying to pay for its
proposed new spending. "It is both notable and admirable that the
Biden Administration supports fully paying for their infrastructure
package," said Maya MacGuineas, president of the Committee for a
Responsible Federal Budget, which seeks long-term debt
reduction.

There are already questions, though, about Biden’s proposal to
offset eight years of spending with 15 years of tax revenue. "Put
another way, roughly half of the spending will be paid for,"
tweeted Shai Akabas, director of economic policy at the Bipartisan
Policy Center. The Washington Post’s Heather Long
notes that using standard accounting, Biden’s plan
would add close to $1 trillion to the U.S. debt over a decade. And
MacGuineas said that the cost of the plan is high and that any new
spending should be paid for sooner than 15 years.

Why it matters: Biden continues to go big. "[E]ven spread
over years," The New York Times’s Jim Tankersley
writes, "the scale of the proposal underscores how
fully Mr. Biden has embraced the opportunity to use federal
spending to address longstanding social and economic challenges in
a way not seen in half a century."

And this is just the first half of a two-part plan, with the
second part of Biden’s economic overhaul, called the American
Family Plan and focused on what the administration has called
"human infrastructure," set to be released in a matter of
weeks.

What’s next: The White House is reportedly hoping to make
progress on the plan by Memorial Day, and House Speaker Nancy
Pelosi (D-CA) reportedly told her fellow Democrats that she’d like
to pass the package by July 4.

The path ahead is highly uncertain, though. The plan’s hefty
focus on climate change and other elements not directly related to
physical infrastructure are bound to face pushback. "The White
House argues these should also be viewed as critical
infrastructure, but others see them as partisan Democratic
priorities,"
writes the Post’s Long. "This second $1 trillion
in spending is where much of the debate is going to center. 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."

Given GOP objections, Democratic leaders are likely to be
spending the next couple of months trying to craft a plan that can
win the support of a majority of their members. But
intraparty divisions mean that pushing ahead on a
partisan basis won’t be easy either.

Number of the Day: $6.2 Billion

States have made
$6.2 billion in unemployment overpayments over the
first year of the coronavirus pandemic, according to a new report
by the Government Accountability Office. The report says that from
March 2020 through February 2021, sates identified more than $3.6
billion in overpayments through the Pandemic Unemployment
Assistance program created by Congress to extend help to workers
not typically eligible for jobless benefits. States also found $2.6
billion in regular unemployment insurance overpayments over the
final nine months of 2020.

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