(Bloomberg) – President Joe Biden will unveil a $ 2.25 trillion U.S. infrastructure plan on Wednesday, funded by steep corporate tax hikes. His administration said it would prove to be the most comprehensive since investing in the 1960s space program.
The four-part eight-year plan provides $ 620 billion for transportation, including a doubling of federal funding for local public transportation. It would allocate $ 650 billion to initiatives to improve the quality of life at home, such as clean water and high-speed broadband. There’s $ 580 billion to strengthen American manufacturing – about $ 180 billion of that goes into the largest non-defense research and development program currently billed – and $ 400 billion to improve the care of the elderly and people with disabilities.
Biden’s plan would increase corporate tax from 21% to 28% and set a minimum tax of 21% on global corporate profits. The White House said tax increases would “pay off in full” investment in this plan over the next 15 years.
But the plan faces a difficult road in Congress. It will be difficult, if not impossible, to get Republican support in either the House of Representatives or the Senate, both of which are tightly controlled by the Democrats. It will also be a challenge to bring together moderate and progressive Democrats.
“Like great projects of the past, the president’s plan will unify and mobilize the country to meet the great challenges of our time: the climate crisis and the ambitions of an autocratic China,” the White House said in a statement before Biden’s afternoon speech in Pittsburgh.
What Biden presented on Wednesday is only the first part of his long-term economic program. A second round of initiatives will be announced in mid-April. These will focus on “helping families with challenges such as healthcare costs, childcare and education”.
The program will prove to be far more complex than the $ 1.9 trillion Pandemic Relief Act signed in early March. Republicans are strongly against tax increases, and the breadth of the measures will lead to partisan and even internal democratic struggles. Republican Senate Chairman Mitch McConnell has warned that infrastructure improvement efforts should not become a “Trojan horse for massive tax hikes and other job-killing leftist politics.”
The story goes on
As the Covid-19 bill shows, Biden’s initial plans are much bigger than economists expected. The switch to a significant expansion of financial policy has already boosted growth forecasts for this year and raised government bond yields. While stocks have reacted with some volatility in recent weeks, the S&P 500 index hit a record high on Friday.
Biden’s plan will create millions upon millions of jobs, a administration official told reporters while refusing to give a specific number.
Biden will unveil his American Jobs Plan on Wednesday in Pittsburgh, a city that sees the White House as a prime example of an old manufacturing hub being revitalized by new industries from healthcare to technology.
The government wants the same kind of reorientation that Pittsburgh has seen to bring new opportunities to working class cities across the country. The plan calls for an expensive political chess game to be played out over the next decade to try to create well-paying jobs by both updating the country’s infrastructure and preparing for the coming weather conditions brought about by climate change .
A major undercurrent in the infrastructure plan is eliminating inequality and expanding aid to parts of society that administrative judges have left out in the past. In addition to repairing the “ten most economically important bridges in the country to be rebuilt,” $ 20 billion is available for a new program that will bring neighborhoods cut off by previous investments such as I-81 back together will be connected to freeway in Syracuse, New York. All lead pipes are being replaced to resolve water quality issues.
Another important topic is strengthening the US’s competitiveness vis-à-vis China. US $ 50 billion is earmarked for semiconductor manufacturing at home and an additional US $ 40 billion to improve research capacity in laboratories across the country.
Climate change is also an important goal. The proposed transportation finance specifically provides $ 174 billion for electric vehicles, including sales discounts and tax incentives for consumers to buy American-made cars.
While infrastructure has traditionally been a bipartisan endeavor, Republicans have warned that they are not advocating the large renewable energy bias in the government’s approach. Senate GOP Chairman Mitch McConnell also said his party would not vote for tax increases.
Contact to the GOP
Administration officials said Biden is open to input from members of both parties’ Congress on what provisions should be in a final package and how to pay for them. The White House expects solid liaison with GOP lawmakers and is committed to serious discussion with them, a White House official said on condition of anonymity to discuss the government’s plans. These efforts began by inviting Republicans from relevant committees to a briefing Tuesday with Brian Deese, director of the National Economic Council.
But Biden’s plans don’t necessarily need Republican support to become law. Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi could choose to include many of the President’s proposals in one or more budget-voting bills that require a simple Senate majority. The challenge, as Pelosi has already indicated, is that not all elements could fit into such a bill, which sets certain requirements for inclusion.
The infrastructure package doesn’t include any of the proposed individual tax increases that Biden talked about in the campaign – like increasing the top tax rate for individuals and increasing the tax on capital gains. This is expedient, said a government official, as White House staff believe that corporate tax reform should fund infrastructure and efforts to increase the attractiveness of the US as a business location.
Tax experts and lawmakers expect the government to try to raise taxes on the rich and their wealth in the second package, due out this spring.
If Biden manages to get the bulk of the packages he has launched, it could bring him to the Pantheon with Lyndon Johnson or Franklin Delano Roosevelt, presidents who have made sweeping changes through civil rights legislation and the social safety net.
“This is really a transformation in ways we have not seen since the Great Society,” said Dean Baker, senior economist at the Center for Economic and Policy Research, a left-wing think tank. “How many people have I underestimated Joe Biden. He was always in the background – as Vice-Presidents should be – always politically at the center of the party. And he was clumsy. We saw that, and that’s why I underestimated him. But I can’t argue with what he’s done since he took office. “
(Updates with McConnell quote in the seventh paragraph)
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