AT TIMES, JOE BIDEN’S worldview seems that of a time-traveller propelled forward, then stranded: keenly aware of future threats, yet unshakably nostalgic. On March 31st he announced the first half of his massive infrastructure package—laden both with old-fashioned blue-collar building projects as well as newfangled initiatives to help propel America into a greener future. The proposal, laid out at a carpenters’ training facility near Pittsburgh, evokes a Rooseveltian past: a time when the manufacturing brawn of unionised Americans powered the economy, an assertive government steered industry and directly created jobs, and building big, expensive infrastructure made entirely in America revitalised a sagging economy. “It is 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,” the president said, giving a flavour of his monumental ambitions. Equally monumental is the challenge of passing it.
The plurality of the new package’s spending, some $621bn, will be spent on transport infrastructure. Most of this will be put towards old-fashioned, New Deal-style projects, such as roads, bridges, public transport, railroads and airports. But $174bn of it will go on electric vehicles—tax credits to help consumers afford them, to encourage states to build 500,000 public charging stations and to boost domestic supply chains (the White House laments the size of America’s electric-vehicle market, which is just one-third that of China’s).
At least $100bn will go to modernising the electric grid, which has within the past year failed dramatically in both Texas and California. Roughly the same amount will be directed into drinking-water infrastructure, including removing the lead pipes that still serve 9m homes. Another chunk of cash, $213bn, will be spent on smaller-scale construction and energy-efficient retrofitting for houses, schools, community colleges, child-care centres, veterans’ hospitals and federal buildings. The share set aside for care homes is both large ($400bn) and largely unexplained.
The administration maintains that somehow 40% of this bill’s benefits accrue to disadvantaged communities; the precise mechanism by which this would happen is unexplained. A woke calculus allocates much of the spoils. Half of the $40bn in laboratory upgrades will go to historically black colleges and universities (which do not have half of the country’s laboratories). A new national climate lab is supposed to be affiliated with a historically black college as well. There is no ambiguity about who Mr Biden hopes will wield the shovels: union workers. “It’s about time they start to get a piece of the action,” he said in Pittsburgh.
Unlike the American Rescue Plan, the $1.9trn covid-relief bill that Democrats waved through Congress, this legislation will spark fights. Conservative Democrats dislike the prospect of cutting Republicans out of the negotiations and adding to the national debt, currently 130% of GDP. Hence the decision to raise corporate taxes to pay for the building boom. The jobs plan seems designed to sway wavering moderates—chiefly Democrats who could easily torpedo the president’s ambitions, but perhaps even a tempted Republican. The bill lavishes funds on traditionally bipartisan concerns such as broadband expansion and worker retraining. (He will introduce the second half of the package, focusing on “social infrastructure”, later in April.)
To the chagrin of his party’s left flank, Mr Biden has reined in his climate ambitions. The $400bn he promised during his campaign for clean-energy research spending has dwindled to a more modest $180bn. Likewise a $400bn increase in federal procurement spending to spur clean-energy innovation has been slashed to $46bn. “This is not nearly enough,” complained Alexandria Ocasio-Cortez, a progressive Congresswoman. “Needs to be way bigger.”
He has, however, retained his ambitious pledge to make electricity generation in the country entirely carbon-free by 2035 and to achieve net-zero carbon emissions by 2050. To reach that goal his plan offers an array of carrots, including generous investment and production tax-credits for clean-energy companies. It also provides funds for pilot projects of cutting-edge technologies, such as floating offshore wind turbines, carbon capture and storage, and utility-scale energy storage (giant batteries, in essence). But his choice of a stick could ultimately prove problematic. Instead of taxing carbon, which he fears would be politically unpopular, he has proposed a national clean-energy standard to force the reduction through direct governmental regulation.
Yet the byzantine rules of the Senate might doom that mechanism. If Mr Biden cannot win ten Republican votes (enough to defeat the threat of a filibuster) he will have to resort to budgetary reconciliation—the procedure that was used to pass his covid-19 relief bill. Reconciliation, however, can only be used for budgetary measures. Thus Mr Biden would probably secure a hypothetical carbon tax with only 50 votes because it could be labelled chiefly budgetary, while his clean-energy standard, which is chiefly regulatory, may be forcibly jettisoned.
Generating sufficient crossover appeal will be difficult. While Mr Biden promised a “good-faith negotiation with any Republican who wants to help get this done”, many may doubt his sincerity after he went it alone on the covid-19 bill. Convincing ten senators will be even harder. Though much of the spending is on old-fashioned infrastructure, which Republicans sometimes seem to like, and the spending is paid for, which they also ostensibly approve of, they will not like how he raises revenue.
Mr Biden suggests raising the corporate taxation rate to 28% from its current level of 21%. This would partly roll back Donald Trump’s reduction of the corporate-tax rate in 2017 from 35% (his only major legislative achievement). Business has already begun to protest loudly over the changes—though the numerous deductions embedded in the American tax code probably mean that their effective tax rates would remain below that threshold (and well below the OECD average of 24%) even if the plan were passed as proposed .
There are other proposed changes for business to howl about, too. The taxman currently cometh for Americans’ personal foreign earnings, but is much more preferential to those of American corporations. Mr Biden aims to harmonise the pain felt by overseas labour and capital by imposing a global minimum tax of 21%. He also wants to negotiate a global agreement on minimum taxation to stall the worldwide race to ever-lower tax rates on capital. A 15% minimum tax on corporate book value would also penalise companies that plead little profit to the taxman and peacock a lot to their shareholders.
“Wall Street didn’t build this country. You, the great middle class, built this country,” Mr Biden said in Pittsburgh, offering a succinct recapitulation of his operating philosophy. Thus far, the president has managed to pull off an impressive magic trick, retaining a reputation for moderation while insisting on—and indeed passing—maximalist bills that leftists unschooled in the art of practicality might only dream of. It remains to be seen whether the trick has lost its charm.