President Joe Biden unveiled his latest $2 trillion infrastructure and economic recovery proposal – the American Jobs Plan – that he calls “a once-in-a-generation investment in America.” What is inside the multi-trillion-dollar boondoggle-in-the-making? Tens of billions of dollars here, hundreds of billions of dollars there.
Phase One: The American Jobs Plan
Speaking at a union hall in Pittsburgh, PA, President Biden outlined his next post-pandemic vision for producing "the strongest, most resilient, innovative economy in the world." The plan would consist of spending $2.3 trillion over eight years, with a goal of covering the cost in 15 years – seven years of a budget gap.
Here are some of the fine details:
$174 billion in financial assistance to the U.S. electric vehicle industry.
$115 billion to modernize the bridges, highways, roads, and main streets that are in most critical need of repair.
$300 billion for expanding broadband internet access, improving drinking-water infrastructure, and upgrading electric grids.
$85 billion to enhance current public transit and assist agencies in expanding their systems.
$400 billion for medical care for disabled and senior Americans.
$580 billion to invest in U.S. manufacturing, research and development, and job training.
$100 billion to construct and upgrade government schools.
$25 billion to boost the supply of child care and create or upgrade facilities.
President Biden is just getting started. This is the first phase of his two-part infrastructure plan. He is expected to announce the second stage next month – the American Families Plan – which is forecast to have another hefty price-tag of around $2 trillion.
The new administration suggests it will pay for all this incredible spending by raising the corporate tax rate to 28%, preventing offshoring corporate profits, and increasing the global minimum tax for multinational corporations.
"These are investments we have to make. We can afford to make them. To put it another way – we can’t afford not to," he said. "It’s big, yes. It’s bold, yes, and we can get it done."
Biden Off More Than He Can Chew?
The key question is: Can President Biden garner legislative support to pass the "largest American jobs investment since World War II"?
Senate Minority Leader Mitch McConnell (R-KY) has already confirmed that he is "not likely" to support the sweeping measures because of the tax increases. The president already invited McConnell to the White House to brief him on the plan. Senate Majority Leader Chuck Schumer (D-NY) said in a statement following the announcement that he is excited "working with President Biden to pass a big, bold plan that will drive America forward for decades to come.”
The president pledged to "bring Republicans into the Oval Office" and "listen to them." But it might not only be GOP lawmakers he needs to convince. Many moderate Democrats have promised to reject an infrastructure bill if the state and local tax (SALT) deduction is not restored.
Rep. Josh Gottheimer (D-NJ), Rep. Bill Pascrell (D-NJ), and Rep. Tom Suozzi (D-NY) wrote in a joint statement:
"We say ‘No SALT, no deal.' The GOP passed an unfair cap of $10,000 on state and local tax deductions to pay for their 2017 tax giveaway. Due to the GOP cap, our home states of New York and New Jersey have been crushed and residents have been leaving for other states."
Progressives are perturbed, too, griping that Biden did not include more measures to address climate change and is not spending more in a shorter period. Rep. Alexandria Ocasio-Cortez (D-NY) complained on Twitter that "this is not nearly enough," tweeting that it "needs to be way bigger."
The Path of Fiscal Doom
Before the official announcement from the White House, the Cato Institute published a report titled "Federal Budget Deficits: Path of Fiscal Doom." A leading libertarian think tank, it called "this gusher of spending greatly damaging," adding that "this is not monopoly money, but rather it represents real resources that will be confiscated from people when the bills come due." Fitch Ratings is already projecting that this year's federal deficit is likely to reach 15% of GDP, and the national debt will hit 109% of GDP in the current fiscal year. While President Biden might believe money grows on trees, the U.S. is heading toward a fiscal cliff, much like Wile E. Coyote attempting to capture the Road Runner only to fall victim to gravity. In this case, the U.S. may plunge to its financial reckoning by basic economics.
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