Biden should stress the value of infrastructure

President Joe Biden is hearing from the usual critics on his ambitious infrastructure plan. Business Roundtable likes the idea of getting all those roads and bridges, but does not want to raise corporate taxes to pay for it. In a statement released Tuesday, the megacorporations’ organization concedes:

“Repairing and modernizing these systems, including U.S. highways, water systems and broadband, would create a stronger and more equitable economic foundation for all Americans, generate long-term growth for our country and yield vital environmental benefits. Business Roundtable estimates that an investment of approximately $1 trillion to $1.5 trillion is necessary to return U.S. physical infrastructure to a state of good repair, expand capacity to meet expected demand, and invest in new green infrastructure.”

Still, the group said, it “strongly opposes corporate tax increases as a payfor for infrastructure investment.” Considering how adept its giant corporate members are at legally avoiding taxes, it is a wonder they care what the plan’s proposed tax rate is. Moreover, considering the benefit they will derive from the infrastructure, it is churlish to demand someone else pay for it. That long-term growth means more profits for them. They benefit from a public good; they should be willing to chip in to pay for it.

Corporate tax revenue makes up a small portion – about 7 percent – of federal revenue. If companies contributed, say, 9 percent but got new ports, roads, high-speed transit, better Internet service and protection from power-grid interruption, wouldn’t their shareholders over time still come out ahead? (One can see why short-termism in business creates perverse incentives.)

Expect more harping on costs of this plan. Whether it is corporations whining about having to theoretically pay more in taxes or supply-siders screeching that an increase in the corporate tax rate to 28% – still less than the 35% rate in place less than five years ago (as well as during the boom years of the 1990s) – will destroy economic growth, Biden will face a drumbeat of criticism about how to pay for it.

He would do well to respond by noting the expected value generated by this plan - jobs created, gross domestic product increased, productivity raised, carbon removed from the atmosphere and new revenue generated from employed workers and more profitable businesses.

Moreover, we will be reaping rewards for decades to come. The Hoover Dam, one of the showiest projects from the New Deal reports an average annual net generation of more than 4 billion kilowatt-hours. The dam cost about $49 million (some $850 million in today’s dollars) when it was built. Over decades, the return on that investment has been enormous. Our federal budget is short-term, but the returns go on for decades, a fact lost on the critics of infrastructure investment.

It is the nature of our governmental budgeting process and our politics to treat the cost of the proposed plan (reportedly $2 trillion) as if that money were somehow lost. This is misguided. We are not burning $2 trillion; we are using it to generate far more benefits, both tangible (jobs) and intangible (e.g., improved aesthetics and quality of life in terms of shorter commutes and the like).

Is it better to give corporations, as the previous administration did, billions of dollars in tax relief (reducing corporate taxes by more than 20 percent in the first year and increasing the number of corporations paying zero taxes) to be used in substantial part for stock buybacks ($579 billion in just the first three quarters of 2018), or to use that money for infrastructure, with all its attendant benefits? It is no contest, which is precisely why Biden should talk about the mammoth benefits over a significant period of time that his plan will generate.