Joe Biden’s superplan to revive the country

Sometimes Joe Biden’s worldview feels like that of a time traveler who has seen the future but has remained anchored in the past, aware of the threats to come but unshakably nostalgic. On March 31, the president unveiled the first half of his massive $ 2 trillion infrastructure package, which does not lack the classic building projects but not even the initiatives to facilitate the country’s transition towards a greener future. The proposal, illustrated at a carpentry training center near Pittsburgh, evokes a Rooseveltian past in which the manufacturing force of unionized Americans supported the economy, where a resolute government led the industry and directly created jobs and where large and expensive infrastructure built entirely in the United States revitalized a struggling economy. “It’s an investment in America like no one has seen in decades, ever since we built the interstate highway network and launched the space race,” Biden said giving a glimpse of his monumental ambitions. But the challenge to get the proposed measures approved by the congress will also be monumental.

The largest share of the funds foreseen in the new package, about 621 billion dollars, is destined for transport infrastructures, mainly through classic New Deal-style projects such as roads, bridges, public transport, railways and airports. $ 174 billion would be used for electric vehicles in the form of tax breaks: to help consumers buy them, to encourage states to set up 500,000 public charging stations, and to power internal distribution chains. that the US electric vehicle market is just a third of the Chinese market).

At least $ 100 billion would go towards modernizing the power grid, which in the past year has proved patently inadequate in both Texas and California. About the same amount would be earmarked for drinking water infrastructure, including the removal of lead pipes that still supply nine million homes. Another substantial chunk of the funds, 213 billion, would be spent on minor construction projects and on improving the energy yield of homes, schools, training centers, kindergartens, veteran hospitals and federal buildings. The theoretically allocated figure for retirement homes is very substantial (400 billion dollars) and it has not yet been specified how it will be used.

The administration claims that 40 percent of the profits generated by the package will go to disadvantaged communities, but the precise mechanism by which this should happen has not been made clear. Half of the $ 40 billion devoted to improving labs will go to universities attended mostly by blacks. And there is no ambiguity about the category that in Biden’s plans should go to work: unionized workers. “The time has come for action,” he said in Pittsburgh.

Unlike the American Rescue Plan, the $ 1.9 trillion post-Covid aid package approved by Congress, the new plan will spark a political struggle. Conservative Democrats, in fact, do not like the prospect of cutting Republicans out of the negotiations and increasing public debt, currently at 130 percent of GDP.

From this concern comes the decision to increase corporate taxes to finance the construction boom. The employment stimulus plan appears designed to convince undecided moderates, especially Democrats who might torpedo Biden’s ambitions, but also some hesitant Republicans. The package also abounds with funds for traditionally bipartisan projects such as broadband expansion and vocational training for workers (the second part of the measures will be introduced before the end of April and will focus on “social infrastructure”).

Much to the chagrin of the Democratic left wing, Biden dampened his climate ambitions. The 400 billion pledged during the election campaign for clean energy research has increased to 180. Similarly, the 400 billion increase in federal procurement, intended to encourage innovation based on clean energy, has been reduced to just 46 billion . “It’s not nearly enough,” attacked progressive lawmaker Alexandria Ocasio-Cortez. “The figures have to be much more consistent”.

The stick and the carrot
Biden nevertheless confirmed the promise to eliminate CO2 emissions in electricity production in the country by 2035 and to eliminate net emissions by 2050. To achieve these objectives, the plan offers a series of “carrots”, such as generous investments and tax relief. for companies working in the field of clean energy. The package also includes funding for pilot projects in cutting-edge technologies, such as floating offshore wind turbines, carbon capture and storage tools, and large-scale energy conservation systems (essentially huge batteries). But the choice of the “stick” could prove problematic. Instead of taxing emissions, fearing that they will pay the political consequences, Biden has proposed a national standard for clean energy, in order to force the reduction of emissions through direct state regulation.

The problem is that the complex rules of the Senate could condemn this mechanism. If Biden does not get the ten Republican votes he needs to avert the obstructionist threat, he will have to resort to reconciliation, a shortcut that allows some measures to be approved with a simple majority (it was also used to push through the economic aid package). But the reconciliation it can only be used for budget-related measures. This means that Biden could pass an emissions tax with just 50 votes (as a largely budget-related measure) while the mostly regulatory clean energy standard would have to be shelved.

Generating adequate bipartisan support for these measures will be very complicated. Biden has promised “a good faith negotiation with all Republicans who want to help the country”, but many question his sincerity, especially after the decision to proceed unilaterally on the first aid package. Convincing ten senators will be even more difficult. While much of the spending would go to traditional projects that often seem to be favored by Republicans (and despite the fact that it is already covered), the opposition will not like the way Biden increases state revenues.

The president would like to bring corporate taxation from the current 21 percent to 28 percent, reversing the drastic reduction made in 2017 by Donald Trump (at the time the tax was at 35 percent and that was the the only major legislative achievement of the former president). Businesses have already begun to protest the change, even if the numerous deductions provided for by US tax legislation will allow taxation to be kept below the threshold (and well below the OECD average of 24 percent).

However, there are other elements in the plan proposed by Biden that displease the business sector. At the moment the taxman is relentless on individual earnings generated abroad, but reserves a favorable treatment for companies. Biden would like to balance the tax burden on individuals and capital abroad by imposing a minimum global tax of 21 percent. The president would also like to negotiate a global agreement to introduce minimum taxation in an attempt to stop the rush to cut taxes on capital. A minimum tax of 15 percent on the book value of companies would affect companies that claim to generate poor profits in front of the tax authorities but reward their shareholders.

“Wall street didn’t build this country. It was you, the middle class, ”Biden said in Pittsburgh summarizing his operating philosophy. So far the president has managed to perform a magician’s trick while maintaining a reputation as a moderate while passing laws that the left, little familiar with the art of practicality, could only dream of. Whether the trick will work for a long time remains to be seen.

(Translation by Andrea Sparacino)