Editorial: Is Biden’s big bet on infrastructure a bridge too far?
President Joe Biden unveiled the most ambitious piece of his presidential agenda in late March, a $2 trillion infrastructure plan that aims to address climate change while providing modern jobs for workforces that would be phasing out of favor.
For the last several presidential administrations, infrastructure spending to repair aging highways, bridges, water treatment systems and more has seemed to be the one thing most politicians are in favor of but can never seem to pass.
Biden tackled the issue head-on, seeing it as a middle-ground issue that could result in a dramatic victory that sets the tone for the remainder of his term. After seeing the details, however, I worry that he’s bitten off more than he can chew.
“It’s not a plan that tinkers around the edges. It’s a once-in-a generation investment in America, unlike anything we’ve seen or done since we built the Interstate Highway System and the Space Race decades ago,” Biden said in a speech before union workers in Pittsburgh on March 31. “Is it big? Yes. Is it bold? Yes. And we can get it done.”
The president is certainly right on the first points, but he faces a steep hill to climb on the third.
To start, this historic jobs bill, the largest since World War II, isn’t supported by just revving up the Mint’s printing presses. It’s underpinned by an increase in the corporate tax from 21% to 28% for 15 years, covering just eight years of spending – an obvious mark that Democrats intend to hold the White House in 2024.
Corporations were cut a break in 2017 when President Donald Trump’s tax bill cut the corporate tax rate from 35% to 21%. The impact of that dramatic cut has been harder to ascertain in the wake of the COVID pandemic, as gross domestic product grew in the initial year after the cut, fell in 2019 and fell sharply in 2020 amid the public health crisis.
National unemployment was at its lowest point in 20 years just before the pandemic struck but had been trending continuously downward for nearly a decade following the recovery from the Great Recession. The S&P 500 index rose about 700 points over the course of the first years after the Trump tax cut, but currently sits even higher today at a record 4,000-plus.
I paint this picture, because the public debate will soon turn toward well-worn beliefs about how best to create economic expansion: top-down or bottom-up.
Congressional Republicans are already lining up in virtual lockstep to oppose the spending bill, which is in part a repudiation of the tax cut they passed four years ago. Business groups, including the Business Roundtable, the U.S. Chamber of Commerce, and the National Association of Manufacturers, expressed support for the plan’s intent, but criticized balancing it on the backs of businesses.
“By significantly increasing taxes on corporations, the proposal would be counterproductive to the goal of increasing economic growth and job creation. Such tax increases would make the United States uncompetitive as a place to do business and make U.S. companies uncompetitive globally, slowing recovery and hurting American job creators and employees,” said the Roundtable, a collection of the nation’s top CEOs, while suggesting that users should help foot the bill of infrastructure investment.
Biden argued that the better way to invest in growth is to create jobs at the bottom of the pyramid through projects, which when completed will help attract new economic development. The president is right that one of the first concerns for companies looking to locate new operations is their access to highways, railroads, airports or waterways. Having a modern infrastructure, especially one that reaches areas that has been economically depressed through the loss of industry over the decades, could lead to a transformational change for many.
I question whether the president may be too optimistic in his beliefs that the unionized steelworkers of Pittsburgh or autoworkers of Detroit will so easily slot into newly created jobs to build windmills and electric cars instead. For one, there just aren’t enough of those jobs.
One estimate is that 130,000 oil, gas and coal workers would be left out of jobs following the transition to green energy, many of them unionized labor earning more than $75,000 a year with benefits. On average, production of an electric car takes one-third fewer workers than one with an internal combustion engine, as well.
The workers on the ground recognize that the employment transition is a heavy lift.
“They keep saying, ‘We’re going to transition you into solar jobs.’ That’s not how it works. We build power plants, petrochemical plants and maintain steel mills,” Shawn Steffee, a leader of the Boilermakers Local 154 in Pittsburgh told the New York Times. “Would you ask Tom Brady to play middle linebacker just because he’s a football player?”
The climate-change-focused pieces of Biden’s American Jobs Plan will undoubtedly lead to job losses unless the country can dramatically retrain the workforce and invest in bringing more of the operation statewide from overseas, including production of electric batteries that often happens in Asia.
And as is typically the case with federal spending bills, there are pieces that just don’t jive. A part of the American Jobs Plan is $400 billion to support in-home care for the elderly and disabled, $30 billion for pandemic preparedness, and $174 billion to incentivize the manufacturing and purchase of electric vehicles – initiatives that too many probably don’t align with visions of roads, bridges, railyards and ports.
I suspect that as the American Jobs Plan works its way through Congress, we’ll end up with a smaller version of what Biden has first proposed – one more tailored to boots-on-the-ground projects that lawmakers can visit for photo ops. Perhaps that’s a bit cynical, but we’ve seen this infrastructure show before, haven’t we?