At a training centre for carpenters in the industrial city of Pittsburgh on Wednesday, Joe Biden laid out his latest multitrillion-dollar effort to reshape the US economy – and the next big gambit of his budding presidency.
Emboldened by the legislative success last month of his $1.9 trillion fiscal stimulus Bill designed to boost the economic recovery from the coronavirus pandemic, the 78-year-old president has proposed something bolder yet: an additional $2 trillion in infrastructure investments and manufacturing subsidies, mostly funded by $2 trillion in corporate tax rises.
Biden’s goal is to address what many Democrats see as chronic underfunding of public goods in recent decades, which they argue has stymied growth, exacerbated middle-class stagnation and bred populist resentment.
The plan also reflects Biden’s belief that a more aggressive industrial policy will make it easier for the US to compete in the global economy – and face off against strategic rivals, particularly China.
“I’m convinced if we act now, people in 50 years are going to look back and say ‘This was the moment that America won the future’,” Biden said on Wednesday.
But securing approval from Congress will prove far from simple, and the high-stakes negotiations are set to dominate US politics over the coming months.
“Biden has made this [investment plan] a very significant part of what he’s about in the White House and I think it is a big and a heavy lift,” said Byron Dorgan, the former Democratic senator from North Dakota and a senior policy adviser at Arent Fox. “The difficulty is how you do it, and, more importantly, how you pay for it.”
There is every indication that Biden’s approach will be the same as for the stimulus Bill, inviting Republicans to compromise but not relying on their support to pass it. The opposition party has already panned the investment plan as a “partisan” effort to remake the US economy with “job-killing” tax rises that will hurt middle-class families.
“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,” Mitch McConnell, Senate minority leader, told reporters on Wednesday.
The Republican calculation is that, over the coming weeks, the popularity of the president’s economic agenda will wane and infighting among Democrats will sink the proposal or sharply limit its ambitions. Business groups are also likely to mount a forceful lobbying operation against the legislation if Biden sticks with the corporate tax increases.
But the White House and Democrats are counting on the popularity of the plan, as well as its importance to the economy, in their view, to maintain party unity and get it across the finish line.
According to a Morning Consult poll, 54 per cent of Americans, including 73 per cent of Democrats, support the infrastructure plan when paired with higher taxes on corporations and the wealthy – encouraging statistics for Biden and his party.
However, there have been recent warning signs for the president. Some progressive Democrats, particularly those who championed a Green New Deal, have argued that the plan is not ambitious enough.
But Biden has already flagged to the left wing of his party that the infrastructure package will be followed this month by another large investment scheme, possibly worth more than $1 trillion. Called the “American Family Plan”, the package is intended to focus on education and childcare to further bolster the country’s safety net.
The two plans could ultimately be merged into one Bill for final passage, depending on the legislative strategy Democratic leaders choose. The risk on the other side for Biden, however, is that a hefty price tag could cause moderate Democrats to balk and withhold their support.
20,000 miles of road
To thread the needle, the White House is hoping to stress the extent to which its long-term investment plan would address structural changes to the economy and the tax code that the party has long sought but never enacted, even during Barack Obama’s presidency.
The administration also hopes that Biden’s investments, including specific projects across the country, will deliver visible benefits to Americans that will help win the long-term political argument.
The US president has vowed to “modernise” 20,000 miles of roads, create a nationwide network of 500,000 electrical vehicle chargers by 2030, replace 100 per cent of the nation’s lead pipes, build at least 20 gigawatts of high-voltage capacity power lines, plug orphan oil and gas wells and clean up abandoned mines.
The plan also seeks to address racial injustice, including a $20 billion fund to reconnect neighbourhoods that were separated along racial lines by previous construction projects in cities such as New Orleans.
In his corner, Biden has a rejuvenated trade union movement, which has embraced the president even more than his recent Democratic predecessors after he backed many of their priorities, including measures to strengthen collective bargaining rights.
‘Wing and a prayer’
Many economists have also stressed that long-term investments are overdue, and could help sustain the US recovery well after the impact of the stimulus disappears.
“When we talk about the competitive position of the United States going into the next decade, the next half-century, public investment is critically important,” said Emily Blanchard, a professor at the Tuck School of Business at Dartmouth College.
“The US has basically been coasting along on a wing and a prayer, juicing every last bit of juice out of very, very old infrastructure, because there hasn’t been a serious public works investment in a long, long time,” she added.
The president knows he is in for a fight, particularly against business groups lamenting the increase in corporate taxes to pay for the plan, even though the proposed 28 per cent rate would still be lower than it was under the Obama administration, and would be phased in over 15 years.
Speaking in Pittsburgh, Biden twice singled out Amazon as he attacked blue-chip companies for not paying enough federal taxes – and argued that his plan was intended to benefit the middle class, not Wall Street.
“Here’s the truth. We all do better when we all do well. It’s time to build our economy from the bottom up, the middle out, not the top down,” he said. – Copyright The Financial Times Limited 2021