Thinking big – Biden’s spending programme signals shift in thinking about role of the state in the economy

Here’s a Think Big project of which even Rob Muldoon would have been proud.  US President Joe Biden has launched a $US2.3 trillion infrastructure plan designed to fix roads and bridges, replace pipes, expand broadband internet access and boost funding for research and development.

Might we need something similar here rather than tinkering with light rail and broadcasting?

The infrastructure plans would water the eyes of an old Minister of Works. There’s $US621 billion to modernise transportation infrastructure, for starters.  But then there’s $US400 billion to help care for the aging and those with disabilities, $US300 billion to boost the manufacturing industry, $US213 billion on retrofitting and building affordable housing and $US100 billion to expand broadband access, among other investments

There are plans to modernise 20,000 miles of roadway, build 500,000 electric-vehicle charging stations, replace the country’s existing lead pipes and service lines, repair aging schools, fix the ten most economically significant bridges in the country in need of reconstruction, repair the worst 10,000 smaller bridges, and provide critical linkages to communities.  And plans to replace thousands of buses and rail cars, repair hundreds of stations, renew airports, and expand transit and rail into new communities.

Home care for the elderly and disabled will be expanded. Billions of dollars will go into semi-conductor manufacturing. More of the country’s electricity will be generated from low-carbon sources, with a goal of eliminating carbon emissions from the power grid by 2035.

The White House says hundreds of thousands of people will be put to work laying thousands of miles of transmission lines and capping hundreds of thousands of orphan oil and gas wells and abandoned mines. And affordable, reliable, high-speed broadband will be brought to every American, including the more than 35 per cent of rural Americans who lack access to broadband at minimally acceptable speeds.

Biden reckons it is not a plan that tinkers around the edge, rather a once-in-a-generation investment in America.  He has overturned 40 years of standard US political theology by departing from the small government, tax-cutting approach launched by Republican Ronald Reagan.

“Here’s the truth: We all will do better when we all do well,” he said.

He justified this fundamental shift in economic policy by explaining the Covid-19 pandemic had exposed longstanding inequalities in the country. It was time to build the economy from the bottom up and from the middle up, not the top down.

His economic advisers believe the pandemic is responsible for a shift in US attitudes to the role of government.

Two weeks ago Biden signed a wildly-popular (according to the polls) $US1.9 trillion coronavirus relief bill plan. The next will focus on child care, healthcare and education.

In total, his economic proposals are expected to cost up to $US4 trillion over a decade.

Biden has mollified his left wing by stressing equity in access to jobs and transportation options, including $20 billion for a new programme that would reconnect neighbourhoods cut off by past transportation investments as well as research funding for historically Black colleges and universities. There will be a national climate-focused laboratory.

Did anyone mention taxes? Yes, the plan would cost $US2.3 trillion over eight years and be paid for over 15 years by raising the corporate tax rate from 21% to 28% and increasing taxes on companies’ foreign earnings. The tax changes will reverse much of President Donald Trump’s international tax structure.

Justifying the planned tax rises, Biden said the plan was not an attack on wealthy Americans. It was not to target those who’ve become wealthy, not to seek retribution, but about opening opportunities for everybody else.

Biden’s infrastructure proposal faces hurdles, including GOP opposition to significant tax increases, disagreements among Democrats about how to pay for the package and concerns among the progressive in the Democrats’ caucus (think Senators Bernie Sanders and Elizabeth Warren) that it isn’t ambitious enough.

The plan faces strong opposition in Congress. The Democrats have a small lead in the lower House while the Senate is split 50-50 with Vice President Kamala Harris holding a casting vote.  Only one Democrat needs to vote nay and the plan could crumble.

Democrats who approve of the bold programme are planning a sleight-of-hand manoeuvre known as budgetary reconciliation.  This could be used as a vehicle to pass each part of the infrastructure and jobs plan. Senate Majority Leader Chuck Schumer reckons it might just do the trick.