Hard on the heels of the passage of President Joe Biden’s $1.9 trillion Covid relief package — most of whose spending was for items on the progressive wish list unrelated to the pandemic — the president has introduced another whopping $2 trillion federal spending bill which he has called “The American Jobs Plan.” He is marketing it to voters as a “once in a generation investment in America” to rehabilitate our nation’s crumbling infrastructure. But in fact, only $621 billion of this measure will be devoted to classic transportation infrastructure projects, such as repairing and building new highways, fixing thousands of the nation’s dilapidated bridges and tunnels, and upgrading or building new rapid transit lines.
Instead, 70% of the money in the bill is being diverted to a grab bag of other items on the liberal wish list. Some of these projects could arguably be justified under an expanded 21st century definition of essential infrastructure, such as $300 billion to replace poisonous lead water pipes, expand Internet access for the poor and in rural areas, and upgrade the nation’s antiquated electric power grids.
Certainly, it is hard to disagree with Biden’s declared goal to make it possible for “every American, every child [to] turn on a faucet or a fountain and drink clean water.” But other major spending items in the bill can be more accurately described as government welfare programs for politically well-connected corporations and dogmatic environmentalists who want to remake the country as we know it.
ANOTHER AUTO INDUSTRY BAILOUT
For example, the US auto industry will directly benefit from $174 billion in proposed subsidies for electric vehicles. The program would create a nationwide network of 500,000 battery charging stations for electric vehicles which currently represent just 2% of the American car market. It would also extend over-generous expiring tax rebates for the purchasers of electric cars indefinitely and force all government agencies to buy electric vehicles exclusively, creating a captive market by federal fiat.
The proposal is clearly driven by the liberal environmentalist doomsday scenario which predicts a global climate change catastrophe unless the US eliminates its use of fossil fuels, while other countries which generate large amounts of greenhouse gas emissions, such as China and India, are not being required to limit their use of fossil fuels. This gives them a major economic competitive advantage over the US products and industries in the global marketplace. The systematic elimination of fossil fuels will also lead to record increases in electric utility rates, as well as more frequent blackouts, for all American consumers.
SOMETHING FOR EVERYONE
When introducing his infrastructure proposal in Pittsburgh during Chol Hamoed Pesach, Biden boasted, “It’s not a plan that tinkers around the edges,” declaring it to be, “unlike anything we’ve seen or done since we built the interstate highway system and the space race decades ago.”
Biden and his Democrat supporters have also tried to sell the proposal as a job creation plan, pointing to its allocation of $400 billion to create more and better paying jobs for low-skilled individuals to provide home and community-based care for seniors and people with disabilities, as well as $580 billion on research and development projects to reinvent the American manufacturing center and retrain its workforce.
Another $300 billion would go toward retrofitting public housing and public schools to make them more “green” and energy efficient.
TOO BIG STILL ISN’T BIG ENOUGH
Despite the unprecedented financial scale of Biden’s “infrastructure” proposal, progressive activists such as New York Congresswoman Alexandria Ocasio-Cortez have criticized it for being too small. “This is not nearly enough,” AOC tweeted. “The important context here is that it’s $2.25 trillion spread out over 10 years. [It] needs to be way bigger.”
AOC was upset that Biden’s plan fell well short of the $2 trillion in investments over four years that he called for in the 2020 presidential campaign and does not commit enough money to erase all the country’s backlog of needed road, bridge, rail and transit repairs.
However, Vermont Senator Bernie Sanders, the elder statesman of the liberal progressive movement today, was much more enthusiastic about Biden’s infrastructure plan. “I think it’s a serious proposal dealing with some of the serious crises that we face,” he said in a CNN interview, and argued that the broader scope of its plan was justified. “Roads and bridges and tunnels are infrastructure, but I think many of us see a crisis in human infrastructure. When a working-class family can’t find good-quality, affordable child care, that’s human infrastructure.”
Sanders, who is the Senate Budget Committee chairman, also predicted that Democrats would end up unified in support of the measure even if some of them would have preferred an even larger plan. “I think you are going to see the Democratic caucus coming together to pass very, very significant legislation.”
DESTROYING AMERICA’S COMPETITIVE ADVANTAGE
But even at “only” $2 trillion, the financing of this massive project is perhaps its most serious political liability. Unlike Biden’s Covid relief bill, which was of a similar financial scale, even the Democrats realized that they could not justify adding the cost of infrastructure bill to the federal deficit as an emergency response to a national crisis.
Infrastructure investments are supposed to be able to pay for themselves eventually in terms of their long-term benefits to the nation’s economy, and financed accordingly. Hence, Biden has chosen to use the need to raise much of the money to pay for the program by rolling back Donald Trump’s 2017 business tax cut. Trump reduced federal corporate tax rates from 35%, the highest of any economically developed country in the world at the time, to 21%, triggering the next two years of booming economic growth which was suddenly cut short by the perceived need for pandemic lockdowns.
Biden proposes to pay for his infrastructure bill primarily by rolling back Trump’s corporate tax cut half way by raising the rate to 28%. He is also proposing to increase US pressure and enforcement efforts against foreign tax havens and to eliminate long-standing federal tax breaks for fossil fuel companies, as part of his anti-climate change strategy, and to increase taxes on capital gains.
SMOKE AND MIRRORS
But Biden’s accounting is an exercise in smoke and mirrors. First of all, while Biden proposes to spend the money over the next eight years (coinciding with a projected two-term presidency), the corporate tax increase and the other tax-the-rich proposals in the financing plan would take 15 years to raise all that money. In addition, the other new Biden tax increases aimed at wealthy investors would increase the effective tax rate far higher than it was before the Trump tax cut, making the American economy once again uncompetitive in the global marketplace.
Biden pledged that as a result of his proposal, “no one making under $400,000 will see their federal taxes go up. Period.” This ignored the fact that if excessively high corporate taxes make the US economy unproductive and businesses unprofitable, everyone will suffer due to a combination of joblessness and stagnant wages.
Biden has promised the American people the most grandiose benefits from this huge investment. If the US adopts his plan and acts now, Biden said, the world will look back in 15 years and say “this was the moment that America won the future. . . Imagine knowing that you’re handing your children and grandchildren a country that will lead the world in producing clean energy technology and will need to address one of the biggest threats of our time [climate change].”
LESSONS FROM THE 2009 STIMULUS
But the American people have heard such promises before. They were the justification offered by President Barack Obama to spend $831 billion on a liberal economic recovery program in response to the global 2008 economic meltdown which sparked the Great Recession. Obama and his vice president, Joe Biden also promised that the “shovel-ready” infrastructure projects would put millions of idled workers back on the job, that the returns on investments in developing “green energy” projects would revive the middle class, and that millions of Americans families facing bankruptcy and foreclosure on their homes would be saved. But it didn’t work out that way.
Most of those new federal infrastructure projects never got off the ground.
The Obama-Biden administration’s American Recovery and Reinvestment Act of 2009 provided $48 billion in new federal transportation money for “shovel-ready,” job-creating infrastructure projects. When it was over, President Obama’s Transportation Department claimed that the money improved 42,000 miles of road and repaired 2,700 bridges. It also bought 12,000 buses and 700 rail cars, and funded 800 airport projects across the country.
But a 2011 review of the program by the non-partisan Government Accountability Office (GAO) said the Transportation Department hadn’t done enough to track its benefits, and that it was all but impossible to separate the impact of the recovery funds from transportation dollars being spent from other sources.
The 2009 recovery money was offered to states essentially for free, unlike typical federal road funds in which states are required to put up a significant percentage of the cost of the project. The 2009 recovery act did require states to promise that they would not cut their own transportation spending, and substitute federal funds. However, according to the GAO report, 21 states did not keep that promise.
As a result, according to Bill Dupor, an economist at the Federal Reserve Bank of St. Louis, the new federal highway money provided in 2009 resulted in “no significant improvement” in the condition of the nation’s main roads. The new federal money “crowded out” state spending, so as a result, each additional federal dollar provided by the recovery program increased overall road repair spending by only 19 cents.
This was not an isolated occurrence. The politically well-connected investors who owned the “green energy” ventures got rich on federal subsidies and guaranteed loans before their companies went bankrupt. The giant Wall Street banks which created the 2008 economic meltdown got bailed out by the federal government because they were “too big to fail,” while millions of American middle-class families who were persuaded to take out mortgages they couldn’t afford lost their homes and their hopes for a better future.
The result of the 2009 stimulus effort, which was overseen by then-vice president Joe Biden, was the slowest recovery of the US economy from a major recession since World War II, ended only by President Trump’s combination of corporate tax cuts and the elimination of excess federal regulations.
But Joe Biden never learned the lessons from that historic failure. He believes that the reason that stimulus effort didn’t work was because he and Obama did not throw enough money at the problem. Now he proposes to do it all over again, by investing more taxpayer and borrowed money in the same failed approaches.
MCCONNELL PROMISES TO FIGHT BACK
In response to the Biden infrastructure proposal, Senate Minority Leader Mitch McConnell said, “I think that package they’re putting together now, as much as we would like to address infrastructure, is not going to get support from our side.”
He called Biden’s plan a “big mistake,” and warned that Congress could not afford to “whack the economy with major tax increases or run up the national debt even more.”
“It’s like a Trojan horse,” McConnell said, referring to the ancient Greek legend. “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.
“I’m going to fight them every step of the way,” the Republican leader declared, “because I think this is the wrong prescription for America.”
Another Republican senatorial leader, Roy Blunt of Missouri, urged the Biden administration to cut back the $2 trillion infrastructure plan to roughly $615 billion and keep its focus on rebuilding the country’s existing physical infrastructure, which everyone agrees badly needs it.
Blunt and his fellow Republicans in the Senate also insist that the scaled-back infrastructure plan could accomplish its goals without requiring drastic tax hikes that would hinder the economic recovery.
In an interview with Fox News, Blunt said that if Biden agreed to reduce the infrastructure plan to a more reasonable price, he could easily pass the bill through both chambers of Congress with broad bipartisan support.
“My advice to the White House has been: take that bipartisan win. Do this in a more traditional infrastructure way. . . If we’d go back and look at roads and bridges and ports and airports, and maybe even underground water systems and broadband, you’d still be talking about less than 30% of this entire package … about 615 or so billion dollars,” Blunt said. “I think you can do that and with some innovative things like looking at how we’re going to deal with the electric vehicle use of the highway system, [and] what we can do with public-private partnerships.”
Congressman Kevin Brady of Texas, the senior Republican on the House Ways and Means Committee, called Biden’s infrastructure proposals, “The biggest economic blunder of our lifetime. As you’re trying to rebuild the economy from the biggest hit we’ve had in 90 years, why would you impose a massive tax hike on the very Americans businesses you want to rehire workers?”
Brady predicted that the corporate tax hikes Biden seeks to impose would reverse the gains from the Trump tax cut while putting the US near the top of the list of the world’s highest-taxing countries.
BIDEN’S QUESTIONABLE ELECTRIC VEHICLE INITIATIVE
Mississippi’s Republican Governor Tate Reeves said that Biden’s infrastructure plan was deliberately mislabeled. “That is a political statement. It’s not a statement trying to improve our infrastructure in America. It looks more like the Green New Deal than an infrastructure plan,” Reeves said in a CNN interview.
Reeves’ observation is backed up by the provision in Biden’s infrastructure plan to devote $174 billion to make electric vehicle charging stations readily available nationwide, something auto industry and environmental groups agree is essential to get more consumers to switch to battery-powered vehicles.
But Tom Pyle, a former Trump adviser and the president of the American Energy Alliance, doesn’t think that adding 500,000 new charging stations would be nearly enough to cover all the major roads and highways in the country. He also said, “The [Biden] notion [that the charging equipment] would be built in the US with union paying jobs is also a fantasy when you consider the entire supply chain is based in China. It’s a pipe dream built on a foundation of lies.”
Other critics of Biden’s charging initiative claim that the idea is already obsolete. They point to the trend in China and other countries where electric cars with quickly interchangeable batteries are becoming more popular. They allow their owners to quickly swap out their discharged battery with a new one that is pre-charged, rather than having to wait for their current battery to be recharged.
Another problem with Biden’s plan to force US consumers to switch to battery-driven vehicles is that American battery makers must import minerals such as lithium, cobalt and nickel, which make up about half the cost of their product. Many of these raw material supply chains are dominated by China. For example, China owns 40% of the world’s cobalt, and more than 90% of all cobalt ore is sent to China for processing.
There is also a looming worldwide shortage of lithium, the main ingredient in high energy lithium-ion car batteries, as well as the huge battery backup systems being developed for wind and solar electric energy farms around the world.
It takes years to start up a new lithium facility capable of producing it in commercial quantities. As the number of lithium battery powered cars increases over the next four years, the worldwide demand for lithium is expected to triple, far outstripping the ability of current sources to keep pace.
While environmentalists are pushing for the elimination of all fossil fuels for energy generation, replacing all gas-powered cars with electric vehicles may not be as simple as the Biden administration has led us to believe.
There are more schemes to do away with gas-powered vehicles in the Democrats’ legislative pipeline. One is a proposal by Senate Majority Leader Chuck Schumer to allocate $454 billion to remove all gas-powered vehicles on the road by 2040, as well as the expansion of an existing $7,500 consumer income tax credit for the purchase of electric vehicles, which currently phases out after a car manufacturer has sold 200,000 electric vehicles.
The fact that such a credit is still needed to sell electric vehicles to many consumers is proof that they are still not competitive with their gasoline-powered equivalents.
BIDEN’S ATTACK ON TRUMP’S ECONOMIC LEGACY
Mississippi’s Republican Senator Roger Wicker says that Biden’s claim to want a bipartisanship agreement on the infrastructure package was insincere because he proposed to finance it by undoing one of the main achievements of the Trump administration.
“How could the president expect to have bipartisanship when his proposal is a repeal of one of our signature issues in 2017, where we cut the tax rate and made the United States finally more competitive when it comes to the way we treat job creators?” Wicker said on NBC.
Many Democrats disagree with that analysis and claim that Trump’s 2017 tax cut was not as successful in reviving the economy as Republicans claim it was. Even though it reduced unemployment for low wage workers and minority groups to an all-time low and resulted in significant wage increases for that segment of the labor market, Democrats call the Trump tax cuts a failure because they failed to pay for themselves by generating enough new economic activity to make up for the lost corporate tax revenues before the pandemic hit and crippled the entire economy.
But Republicans vigorously defend the economic legacy of the Trump tax cuts which they credit for producing robust economic growth, lower unemployment and a surging stock market in the months before the pandemic precipitated the worst economic crisis since the Great Depression.
WILL THE BIDEN PLAN WORK?
Supporters of Biden’s infrastructure plan point to two studies of its likely effects: one from Moody’s Analytics and the other from Georgetown University. The Moody’s study predicts that despite its higher corporate taxes and larger government deficits, “the plan provides a meaningful boost to the nation’s long-term economic growth.”
The Georgetown study predicts that, “The infrastructure plan would create or save 15 million jobs over 10 years and would increase the share of infrastructure jobs from 11% to 14% of all jobs in this country, temporarily reviving the blue-collar economy.”
It also predicts that a majority of the new jobs will go to “workers with a high school diploma or less, and that overall, most of those jobs will go to men who dominate the labor force in the unionized construction industry.”
The Biden plan has also been criticized for a lack of details that would explain how it intends to achieve it stated goals. For example, the Washington Post reports: “Biden’s plan says it would use $400 billion to ‘expand access’ to home care in a way that would also support ‘well-paying caregiving jobs.’ It does not specify exactly how to do either, although a substantial investment could both expand the supply of care-taking services and, potentially, drive down costs overall.”
Another problem spotted by the Moody’s study is the likelihood of reduced economic growth in 2022 “as the higher corporate taxes take effect right away while the increased infrastructure spending does not get going in earnest until later in the year.”
Finally, Republicans will be able to argue that the economy is already recovering quickly, as demonstrated by the creation of 916,000 new jobs in March, and that a $2 trillion infrastructure bill is not needed at this time, especially if accompanied by higher corporate taxes which will discourage investment and slow the recovery down.
Garrett Watson, a senior policy analyst at the conservative Tax Foundation, said Biden’s plan could have the added effects of making the country “less competitive.” He predicted that the proposed increase in the corporate rate meant that, “across-the-board incomes would decline” as companies passed off the costs to their workers in the form of slower wage growth or other changes such as a reduction in benefits. Watson estimated that the bottom 20 percent of earners could, over the long term, see their income roughly “fall by 1.5 percent” on average.
BUSINESSES ORGANIZING TO BLOCK HIGHER TAXES
Powerful business lobbyists are already organizing to avoid being forced to pay for the infrastructure improvements which most agree are necessary out of their corporate and investment profits. They include the RATE Coalition, a Washington advocacy organization representing major companies including AT&T, FedEx, Kimberly-Clark, Home Depot, Toyota and UPS, which blasted Biden’s tax plan.
“This [corporate tax] increase would undercut our country’s capacity to compete, shift domestic jobs and headquarters overseas, threaten key infrastructure investments proven to be essential during the pandemic, and reduce worker income,” said Blanche Lincoln, a former Democratic senator from Arkansas who now advises the group.
The US Chamber of Commerce has also criticized the business tax raises included in the president’s infrastructure proposal, saying that Biden’s call for corporate tax increases threatened to undermine their support for the added infrastructure spending they have sought in Washington for years.
“The way (he has) proposed to pay for it is misguided,” said Neil Bradley, executive vice president of the Chamber. “It will actually obviate all the economic gains we could possibly gain in infrastructure.”
As a substitute for tax increases, the Chamber has suggested other ways to pay for infrastructure improvements, including a “user-base model,” such as imposing fees on electric vehicles to supplement the existing gas taxes that drivers pay to fund the highways they use, and a public education program explaining the importance of getting those who reap the most benefits from the infrastructure improvements to pay for them, instead of imposing tax increases on employers.
BIDEN’S LEGISLATIVE OPTIONS
Biden publicly recognized the problem even as he unveiled his infrastructure plan in Pittsburgh. “Everybody’s for doing something on infrastructure. Why haven’t we done it? Well, no one wants to pay for it,” the president said.
Acknowledging the stiff opposition his plan will face from Republicans and many business leaders, Biden stressed that he is still open to compromise on how to pay for the package, provided that it is consistent with his 2020 campaign pledge “not [to] impose any tax increase on people making less than $400,000.”
If Biden can’t get 10 Republican senators to support his plan, the 50 Senate Democrats would need to use the budget reconciliation process to avoid a filibuster and pass the bill with Vice President Kamala Harris’ tie-breaking vote. That is how they passed Biden’s $1.9 trillion pandemic relief package in March without a single Republican vote.
Energy Secretary Jennifer Granholm said in a CNN interview Sunday that she hopes the proposal passes with bipartisan support, but added that Biden is prepared to use reconciliation without Republicans. “As he [Biden] has said, he was sent to the presidency to do a job for America. And if the vast majority of Americans, Democrats and Republicans, across the country support spending on our country and not allowing us to lose the race globally, then he’s going to do that,” Granholm declared.
But using the reconciliation process to pass the bill would require the support of all Senate Democrats, including moderates like West Virginia’s Joe Manchin, who has said he would like to see a bipartisan agreement on passing an infrastructure measure — and he has shown his willingness to use his swing vote to force his fellow Democrats to compromise.
WILL DEMOCRATS KEEP STICKING TOGETHER?
When it comes to the House, Democrats can pass the Biden infrastructure measure without resorting to extraordinary procedures if Speaker Nancy Pelosi can get her very thin majority to stick together in supporting it. However, there are some House Democrats who would prefer to reach a bipartisan agreement with the Republicans.
The Problem Solvers Caucus, a group of more than 50 House Democrats and Republicans who seek to forge bipartisan compromise, said that it is working on some potential proposals to help both sides agree on how to pay for infrastructure reform. The group played a similar role in the months before Congress adopted a $908 billion coronavirus aid package in December, helping to end a protracted standoff over the stimulus.
Democrat Congressman Josh Gottheimer of New Jersey, a co-chair of the caucus, said he still believes there is a “very big opportunity for bipartisanship,” citing the fact that many districts are like his — in need of federal cash to fix long-stalled road and bridge repairs.
“If the Republicans refuse to engage, we’ll have to have a different conversation. Based on my conversations, there’s a real desire to have a bipartisan path here,” Gottheimer said.
But Gottheimer, along with two other three House Democrats, New York’s Thomas Suozzi and New Jersey’s Bill Pascrell Jr., have announced their opposition to the Biden infrastructure package because it doesn’t remove the cap on state and local tax itemized deductions which a Republican Congress used to help pay for the 2017 Trump tax cuts. “Simply put,” Gottheimer told Axios, “no SALT, no dice.” Suozzi also vowed to oppose Biden’s infrastructure proposal “unless we reinstate SALT as part of the deal.”
Their demand for re-institution of the tax break is somewhat embarrassing for Biden and Democrats who support having the wealthy pay for the cost of the infrastructure bill, because the so-called SALT (State and Local Tax) deductions are worth billions of dollars in tax breaks for the top 1% of earners.
FOREIGN STEELMAKERS THE BIG WINNERS
One of the greatest ironies in the infrastructure portion of Biden’s proposal is that much of the $621 billion being spent on classic infrastructure projects, such as the repair and construction of bridges, roads, transit, ports and rail, will be the steelmakers, and almost all of that steel will come from foreign manufacturers.
The reason is simple. American steel companies are no longer competitive with steel imported from mills in Brazil, Korea, Vietnam and Taiwan. The price of a short ton of US-made hot-rolled coil steel is more than $1,300, whereas the cost to import it, including tariffs and transportation fees, is about $1,000 a ton. For that reason, it is not clear just how effective Joe Biden’s plan will be in helping to create new jobs for unemployed former steel workers in America’s Rust Belt. Roughly 110,000 steelworkers have lost their livelihoods since 1990, and there has been another nearly 7% drop in steel jobs since the pandemic started.
The United Steelworkers union said after Biden announced his plan that large-scale investment in infrastructure has been “long overdue.” But America’s largest steel companies have no immediate plans for expansion, or even to bring back the workers they recently fired to start up their furnaces which were idled over the past year.
Meanwhile, American industries which use steel for construction and manufacturing are now buying more foreign steel because they say that the domestic steel mills are not producing enough to meet their current needs.
US industrial steel consumption is expected to be about 104 million tons this year and about 108 million tons in 2022, whereas domestic steel makers expect to produce only 87 million and 91 million tons over the next two years.
Thus, even if Biden does manage to get his giant infrastructure plan through Congress intact, it is an open question as to how many of America’s army of laid off steel workers will benefit as a result.
BIDEN’S BAIT AND SWITCH
Joe Biden was elected by American voters based upon his image and reputation for being a moderate-left Democrat, but since his inauguration, he has not governed as one. Instead of honoring his pledge to voters to work across party lines to reach consensus with moderate Republicans like Susan Collins, he has alienated and disappointed them by ramming through the biggest, most expensive progressive agenda in American history.
Americans who have been paying attention since Biden took office are now realizing that they got a very different president from the one they thought they had voted for in November. The question going forward is how they will react to this new reality.
Biden’s pledge of bipartisanship and work to restore national unity turned out to be a cynical trick, known by crooks throughout the world as “bait and switch.” Now that the election is over, the real Joe Biden has emerged, and despite the thinnest legislative majorities in modern American political history, he is pressing his advantage while effectively shutting the elected Republicans out of the governing process.
Biden and the Democrats are now racing against time, understanding that they are likely to lose their narrow House majority in the 2022 midterms, and thus their ability to dictate national policy without any input from the Republicans. Their margin of control in the 50-50 Senate is so thin that they cannot afford to lose even one vote in that chamber.
Thus, they must act quickly and ruthlessly before their legislative house of cards collapses, hoping to make their liberal policies irreversible before the voters run out of patience with their deceptions and their political power implodes.