Internal Improvements

Biden pulled the trigger. He shot Ronald Reagan. No, not really. But maybe he did. The New York Times’ Jim Tankersley tells the tale:

President Biden introduced a $2 trillion plan on Wednesday to overhaul and upgrade the nation’s infrastructure, calling it a transformational effort that could create the “most resilient, innovative economy in the world.”

“It is not a plan that tinkers around the edges,” Mr. Biden said in a speech outside Pittsburgh. “It is a once-in-a-generation investment in America.”

White House officials said the proposal’s combination of spending and tax credits would translate into 20,000 miles of rebuilt roads, repairs to the 10 most economically important bridges in the country, the elimination of lead pipes from the nation’s water supplies and a long list of other projects intended to create millions of jobs in the short run and strengthen American competitiveness in the long run.

They said the plan would also accelerate the fight against climate change by hastening the shift to new, cleaner energy sources, and would help promote racial equality in the economy.

The provisions would improve wages, internet service, drinking water and commute times, Mr. Biden said.

That’s it. Fix it all. Now. The nine most terrifying words in the English language are no longer I’m from the Government, and I’m here to help. Biden is from the government. He’s here to help, and in a way that would have infuriated Reagan:

The costs would be offset by increased corporate tax revenues raised over 15 years, particularly from multinationals that earn and book profits overseas. The president cast those increases as a means to prod companies into investing and producing more in the United States…

The spending in the plan would take place over eight years, the president said, and the tax increases would more than offset that spending in 15 years, leading to an eventual reduction of the budget deficit…

But even spread over years, the scale of the proposal underscores how fully Mr. Biden has embraced the opportunity to use federal spending to address longstanding social and economic challenges in a way not seen in a half-century.

And why not do this? Just make America great again:

With Republicans already signaling skepticism or outright opposition, Mr. Biden appealed for support from both parties in Congress, saying the program would be “unlike anything we have seen or done since we built the interstate highway system and the space race decades ago” and calling it “the largest American jobs investment since World War II.”

That wasn’t very nice. Now they have to say that Eisenhower’s interstate highway system was socialism and that whole space race thing was a stupid waste of money, and that we spent far too much on ships and planes and tanks and on our two atom bombs in that last world war, creating millions and millions of government jobs, not real jobs. They can’t say that. They can’t say much. Biden has the floor:

The proposal is the first half of what will be a two-step release of the president’s ambitious agenda to overhaul the economy and remake American capitalism, which could carry a total cost of as much as $4 trillion over a decade. Mr. Biden’s administration has named it the “American Jobs Plan,” echoing the $1.9 trillion pandemic relief bill that Mr. Biden signed into law this month, the “American Rescue Plan.”

On Wednesday, Mr. Biden said the next phase, which he will seek to pay for in part through tax increases on wealthy individuals, would come in a matter of weeks and be known as the “American Family Plan.”

Those are the three big American plans now. The response was small:

While spending on roads, bridges and other physical improvements to the nation’s economic foundations has always had bipartisan appeal, the plan Mr. Biden rolled out on Wednesday drew quick opposition from the right for its size and its reliance on corporate tax increases.

Republicans and business groups criticized those tax proposals, calling them nonstarters for bipartisan negotiations. Mr. Biden acknowledged the criticism, even as he defended asking companies to pay more in taxes. And he said he would continue to work on winning Republican support for his proposal.

But he’s willing to talk, and he’s willing to listen:

He said he had already spoken with Senator Mitch McConnell of Kentucky, the Republican leader, about the bill and planned to invite other Republicans to the White House as Congress turns to translating his proposal into detailed legislation.

Mr. Biden challenged critics to offer their own proposals to pay for the plan. “I’m open to other ideas,” he said, “so long as they do not impose any tax increase on people making less than $400,000.”

Mr. McConnell suggested on Wednesday he was unlikely to support the package in the form being proposed by the White House.

“If it’s going to have massive tax increases and trillions more added to the national debt, it’s not likely,” he said.

Mitch isn’t willing to talk or to listen. He doesn’t seem to realize that Ronald Reagan really is dead. David Sanger explains that:

It has been 40 years since President Ronald Reagan declared in his first inaugural address that “government is not the solution to our problems; government is the problem.”

The infrastructure plan that President Biden described on Wednesday – $2 trillion in federal investment in poured concrete, electric car chargers, artificial intelligence and social engineering – is a bet that government can do colossal things that the private sector cannot.

In fact, when the long-awaited “infrastructure week” finally arrived in Washington, it turned out to be about a lot more than just new highways and the replacement of old lead pipes. Urged on by the left wing of his party, and reminded by historians that Presidents Franklin D. Roosevelt and Lyndon B. Johnson went big, Mr. Biden is using the framework of rebuilding crumbling highways and bridges to try to reshape the American economy by focusing more on long-range problems like climate change and inequality that have been caught up in the culture wars.

Elections have consequences. This one killed off the last of that Reagan thing:

It will take years to know whether Mr. Biden’s initiative will have the lasting power of the New Deal or the Great Society, or whether it can “change the paradigm,” as he argued a few weeks ago.

Yet it is already clear it is based on the gamble that the country is ready to dispense with one of the main tenets of the Reagan revolution, and show that for some tasks the government can jump-start the economy more efficiently than market forces. Mr. Biden has also made a bet that the trauma of the coronavirus pandemic and the social and racial inequities it underscored have changed the political center of gravity for the nation.

But that would have happened anyway:

It is not the first time Reagan’s reliance on markets to fix the nation has been challenged, but no previous effort in recent decades was on the scale Mr. Biden presented on Wednesday.

Reagan himself pushed through a tax increase. Presidents George H. W. Bush and Bill Clinton tried a few modest experiments in what used to be called “industrial policy,” with efforts to bolster the semiconductor industry. President George W. Bush oversaw a huge expansion of the security state after Sept. 11, 2001, attacks as well as a Medicare prescription-drug plan for seniors that many in his own party objected to as interference with the market.

President Barack Obama’s health law was, depending on one’s political view, a government intervention in the distribution of medical services or a way of fixing private markets to ensure that health insurance was more widely available.

But Mr. Biden’s plan is a mammoth public investment that amounts to about one percent of gross domestic product for each of the next eight years.

Perhaps that was inevitable, and Emily Cochrane notes the price Biden will pay for doing this:

Republicans on Capitol Hill began lining up on Wednesday against President Biden’s $2 trillion infrastructure plan and the tax increases he proposed to finance it, even as some Democrats suggested that the package was insufficient to address the country’s aging infrastructure and vulnerabilities to climate change…

Republicans scoffed at the breadth of the plan – which includes traditional public-works projects as well as far-reaching initiatives to tackle climate change and racial inequities in the economy – and condemned Mr. Biden’s determination to pay for it in part with corporate tax increases.

“We cannot begin thinking of bills that spend trillions as the new normal,” said Representative Sam Graves of Missouri, the top Republican on the Transportation and Infrastructure Committee. “The president’s blueprint is a multitrillion-dollar partisan shopping list of progressive priorities, all broadly categorized as ‘infrastructure’ and paid for with massive, job-killing tax increases.”

Raising taxes to pay for projects that create millions of jobs kills jobs? Someone will have to ask him about that, but Biden has other problems:

Early concern among some Democrats suggested that the measure is likely to have a bumpier path to enactment than the nearly $1.9 trillion stimulus legislation, which moved through Congress swiftly with only Democratic votes.

Some liberal lawmakers said the package was too limited. In a statement, Representative Pramila Jayapal of Washington, the chairwoman of the Progressive Caucus, called it “a welcome first step” but said it was “imperative that we act on a once-in-a-generation opportunity to use our governing majorities.”

No one is happy, but Biden will keep plugging away:

With slim House and Senate majorities that leave little room for defections, Democratic leaders now must begin drafting a large and complicated bill including individual proposals for infrastructure projects and other domestic programs as well as changes to the tax code.

Mr. Biden insisted that he wanted the package to be bipartisan, but Republicans have already signaled that they would insist on curtailing it substantially, a step that there is no indication he is willing to take.

“I’m going to bring Republicans into the Oval Office, listen to what they have to say and be open to their ideas,” Mr. Biden said on Wednesday. “We will have a good-faith negotiation.”

But of course that won’t work:

Senator Mitch McConnell of Kentucky, the minority leader, said Mr. Biden had called him on Tuesday to discuss the broad contours of the package. But he warned that the proposal “is like a Trojan horse” – a comparison he has deployed repeatedly in both Washington and his home state, where he attended a series of events this week.

“It’s called infrastructure, but inside the Trojan horse is more borrowed money and massive tax increases on all of the productive parts of our economy,” Mr. McConnell said.

The only productive parts of our economy are the fabulously wealthy? Someone will have to ask him about that too, but the fight has begun:

Republicans are already gearing up to fight the plan. Marc Short, a longtime aide to former Vice President Mike Pence, has started a new group, the Coalition to Protect American Workers, that aims to raise $25 million to $50 million from conservative donors to defeat the infrastructure initiative.

“When you are talking about tax hikes of this magnitude, I don’t see there being any Republican support on the Hill,” he said.

So, the Coalition to Protect American Workers will do everything it can to shut down any and all infrastructure initiatives, which create jobs. Go figure.

The economics reporter Patricia Cohen tries to straighten this out:

President Biden’s ambitious plan to increase corporate taxes does more than just reverse much of the overhaul pushed through by his predecessor. It also offers a profoundly different vision of how to make the United States more competitive and how to foot the bill.

When President Donald J. Trump and a Republican Congress rewrote the tax code in 2017, most of the benefits went to the wealthiest Americans, with lower rates on businesses and on profits from investments. The guiding principle, proponents argued, was that cutting taxes on corporations and investors would encourage businesses to expand, creating more jobs and generating more wealth for everyone.

By contrast, the animating idea behind the tax plan put forward by the Biden administration on Wednesday is that the best way to increase America’s competitiveness and foster economic growth is to raise corporate taxes to finance huge investments in transportation, broadband, utilities and more.

So there really are two theories here, but there is data too, data that supports Biden:

Supporters argues that the changes would do much more to promote growth and go a long way in curbing excesses of the 2017 tax legislation. Democrats have argued that the low-tax approach has failed to deliver broad economic gains, with only those at the very top benefiting. Targeted government spending on workers, students and infrastructure, they argue, would offer much more bang for the buck. What’s more, businesses base their decisions on a range of factors besides tax rates.

Even economists favoring low rates on business acknowledge that the 2017 tax cuts did not produce much of an increase in investment. Gross domestic product grew at a rate of 2.4 percent in the two years leading up to the law and 2.4 percent in the two years after it passed.

“There’s essentially no evidence that the tax change boosted investment,” said William Gale, co-director of the Urban-Brookings Tax Policy Center. He argued that investment went up in 2018 only because oil prices rose. And while the tax law favored investments in equipment and structures, it turned out that the biggest investments were not in those areas but in intellectual capital.

And that leads to issues of fairness:

Debates about the tax code are really debates about who should bear the burden of paying for what society deems important – highways and bridges, clean water and high-speed broadband, basic research and development.

By shifting the tax burden, the Biden administration is saying corporations – among the biggest winners the last time around – should pick up more of the tab this time.

“We have pressing infrastructure needs, and the fairest way to fund those is to claw back some of the giveaways” to corporations and shareholders contained in the 2017 law, said Steve Rosenthal, a senior fellow at the Tax Policy Center.

Mr. Rosenthal also pointed out that a large chunk of the increased tax payments would fall on foreigners, who own 40 percent of stocks.

And the rest is just nonsense:

The advertised tax rate – whether on corporations or individuals – is often much higher than what many actually pay.

The Institute on Taxation and Economic Policy, which has long criticized American businesses for managing to avoid paying what they owe, conducted a study of Fortune 500 companies that were profitable and that provided enough information to calculate effective tax rates. The institute found that those companies on average paid 11.3 percent on their 2018 income.

And 91 of those companies, including Amazon, Chevron, Halliburton and IBM, paid no federal income tax that year.

Existing exemptions and deductions are not evenly distributed. Industrial machinery, gas, oil, electric and chemical companies tend to have the lowest effective rates, often less than 5 percent.

All corporations are overtaxed. Few if any of them pay those taxes. Lower those taxes. Raise those taxes. It doesn’t matter. No one pays them. And now Biden wants to enforce payment of those corporate taxes. That’s the real issue, not any wholly ornamental tax rate. Republicans should worry about that.

And they should worry about the Reagan Revolution. It’s over. E. J. Dionne sees that:

Although he may not have planned it, President Biden picked an auspicious date for unveiling his big infrastructure program. Exactly 34 years ago Wednesday – March 31, 1987 – the House voted overwhelmingly across party lines to override President Ronald Reagan’s veto of an $87.5 billion highway and mass transit bill.

It wasn’t even close. The final vote tally was 350 to 73, with 102 Republicans, including most of the House GOP leadership, joining all but one Democrat to defy their party’s president and push the bill forward. The Senate joined in overriding the veto two days later.

Reagan just didn’t get it, and there’s a lesson there:

Rep. David E. Price (D-N.C.), who now chairs the Appropriations Subcommittee on Transportation, Housing and Urban Development, recalled the vote as one of the first he cast as a newly elected member of Congress. It underscored, Price said, what was once true: “Two spending programs reliably enjoyed broad, bipartisan support: Transportation reauthorizations and medical research.”

Biden’s big new infrastructure program involves far more than roads, bridges and mass transit, but he hopes to remind Republicans that once upon a time, in a Washington of long ago, the two parties were capable of coming together to build stuff.

This is what Biden is up to here:

“There is something old-fashioned and decidedly nonradical about Biden’s invitation to see enhanced infrastructure as a vital national interest and to mobilize government to get it done,” Price said in an interview. “The same goes for thinking of nationwide broadband as today’s rural electrification,” the latter a reference to Franklin D. Roosevelt’s popular initiative to bring electricity to a previously unlit countryside.

As a result, said Molly Murphy, a Democratic pollster, “Republicans will face a tough challenge in trying to make something like infrastructure into something radical.” Which is why, she added, the GOP will try to focus their attacks on other aspects of the plan. “Polling,” she said, “has consistently shown broad support for the idea that rebuilding infrastructure is the best way to create jobs and get the economy moving.”

And that’s the trap here:

Making an argument against the plan will be challenging for Republicans because its structure means they cannot claim he didn’t try to pay for it – but they cannot abide the way he chose to do so.

In particular, Biden would partially (but not fully) roll back the Republican’s 2017 corporate tax cut. The GOP reduced the corporate rate from 35 percent to 21 percent; Biden would raise it, but only to 28 percent. By confining all his tax increases to the upper reaches of the economy, Biden has put his conservative critics in a position of opposing spending designed to broaden prosperity in order to defend tax benefits that flow to corporations and the very few at the top.

But they’ll have no other choice, and eventually Americans will rebuild America:

Biden’s plan will certainly not sail through Congress as is. Differences among Democrats will have to be ironed out. It’s far from clear how many, if any, Republicans are willing to go back to the old days of working in tandem with Democrats on behalf of what the great 19th-century Whig politician Henry Clay called “internal improvements.”

But we have, at least, moved from “infrastructure week” as a standing joke into a months-long effort that will test whether our government is still capable of doing big things.

That might be possible. A few internal improvements would be nice. And let Ronald Regan rest in peace now.

About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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