That stimulus package was designed primarily to have the government send money to individuals, businesses, and state and local governments, most of it either to deal with aspects of the coronavirus or to provide assistance to those in need. In other words, it was mostly free money (if you care nothing about debt and deficits), in the same way as the earlier measures dealing with the pandemic and economy.
The president’s new proposal is different. It is an attempt to address America’s aging infrastructure, along with other measures that include money for research and development, upgrading water systems, rebuilding housing stock and schools, and even expanding the availability of long-term and at-home health-care services.
The administration is also promising a second and related initiative in the coming weeks that could be nearly as large as the proposal unveiled last week. It won’t be an infrastructure plan in the classic sense but rather investments in human beings, particularly those least advantaged.
The price tag for the infrastructure package Biden announced in Pittsburgh comes in at about $2.25 trillion in new spending plus $400 billion in proposed clean energy tax credits. The administration promises to pay for it with an increase in the corporate tax rate plus a series of other changes, including encouraging other countries to change their taxation of corporations.
The spending timetable in the infrastructure package is an eight-year path. But it will take 15 years of the proposed tax increases to cover the cost of the eight years of spending. The package would increase the deficit approximately $900 billion over 10 years, according to the Committee for a Responsible Federal Budget.
Over a 15-year time period, it would be deficit neutral and after that, because the taxes are proposed as permanent and the spending will have run its course, the proposal as a whole will begin to reduce the deficit. Revenue projections that far into the future, however, are not terribly reliable.
The structure of the spending and taxes is an implicit acknowledgment that the scale of the spending outstrips the administration’s willingness to raise taxes enough to offset the cost over the same time period. This is political ambition colliding with political reality. Other tax increases will be needed to pay for the second piece of this two-part initiative, likely higher income tax rates for top earners.
The kinds of measures in the new package that deal directly with infrastructure have been advocated for many years by both Republican and Democratic elected officials. But the package is far more expansive than that. Biden is looking to combat the larger threats posed by climate change with proposals that would wean the country off fossil fuels and move toward a carbon neutral economy. He is also attacking economic, racial and health inequities that have long existed in society but which have been exposed more glaringly by the pandemic.
The scale of Biden’s agenda has been compared to Franklin D. Roosevelt’s New Deal, which created Social Security and helped to shape the modern central government. Biden’s ambitions also rival those of Lyndon B. Johnson’s Great Society, which brought the country Medicare, Medicaid, the War on Poverty and a significant expansion in federal aid to education. Those are the lasting records of the New Deal and the Great Society, and part of the legacies of FDR and LBJ. Biden has yet to truly set his legacy.
“I think the infrastructure plan is much more important for the economy [than the stimulus package], both in terms of long-term growth and because it has a very substantial labor and racial equity component,” said Jason Furman, who chaired the Council of Economic Advisers under President Barack Obama and is now a professor at Harvard University. “Not just growth but how that growth is shared. . . . So it’s much more important and much more ambitious and for those reasons much harder to get done.”
Biden has seen much change in his half-century of public service, the ebb and flow of ideologies and ideas and the shifting power balance between the two major parties. The early months of his presidency may appear to represent a departure from what his past posture and record might have foreshadowed, but the confluence of need and opportunity met him at the door of the Oval Office and he has decided to take advantage, moving as swiftly and expansively as he can.
To get this done, Biden again seems ready to try without Republican votes. The prospects for Republican support in Congress for the new package are minimal, given Senate Minority Leader Mitch McConnell’s vow to oppose the plan “every step of the way” and the party-line votes by which the stimulus package reached Biden’s desk.
When confronted with criticism that he is breaking his vow to work in a bipartisan fashion, Biden has tried to flip the script to define bipartisanship as reflecting public opinion, not the votes of lawmakers. So far public opinion is with him. The American Rescue Plan is broadly popular, though fewer than half of rank-and-file Republicans say they support it. Still, that is better than the unified opposition of congressional Republicans.
The infrastructure package is new enough that there’s not much reliable survey data, though parts of what Biden is proposing have enjoyed public support in the past, even if not always seen as the highest of priorities. Raising taxes on corporations is also generally supported, as long as they don’t appear to constrain the economy.
Republican pollster Whit Ayres said Republicans ought not to reflexively oppose the package, given that many Americans see the need to upgrade the country’s infrastructure. However, he said that though tax hikes on corporations are popular, Republicans still can find legitimate grounds to oppose them. “There is an economic argument to be made here, a serious argument about U.S. competitiveness,” he said.
Raising taxes on the wealthiest taxpayers also has long been popular. Biden has promised that people with incomes below $400,000 will not have their taxes raised, though the full details of his forthcoming tax proposals affecting individuals aren’t yet known and he could face stiff debate generally on the revenue side of his initiatives.
Democratic strategists acknowledge that the size of Biden’s proposals leave Democrats open to the familiar charge that they are the party of tax-and-spend and wasteful government, though they say Republicans will attach that label to anything Biden proposes, so why not go big. “The Republicans can say tax-and-spend all you want,” Democratic strategist Jeffrey Pollock said. “If the voters feel the Democrats have taken the economy in the right direction, that’s a win for us.”
That’s the message Democrats hope to be able to take into the midterm elections, that Biden’s initiatives have paid off economically for individuals and the country. But before Democrats can make that case, Biden must turn this enormous proposal into law. However well he has navigated the opening months of his presidency, the next phase will be even more challenging.