Next phase of Biden’s presidency will be more difficult, riskier
WASHINGTON — Friday’s jobs report, which showed that the economy added 916,000 jobs last month, was another dose of good news for President Joe Biden. Along with the number of vaccinations rising rapidly and a big legislative victory, it’s understandable why administration officials, despite some unresolved problems, believe they are have early momentum.
The president is about to be tested anew as he pushes forward a massive package focused on infrastructure, green energy and economic inequities. It will be a more difficult battle than the one he waged over his nearly $2 trillion American Rescue Package.
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 pandemic or to provide assistance 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 — 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 eightyear 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 years, 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 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, probably 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 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.