As President Joe Biden unveiled his administration’s $2.3 trillion infrastructure proposal on Wednesday, he made good on a second key campaign promise: uniting the country. That is, political and private interests of all backgrounds became immediately united in wanting to change the plan.
Democrats want the plan to be bigger and greener. Republicans want less tax hikes. State and local governments want more certainty. And the private sector wants more investment opportunities.
Biden is calling his proposal the American Jobs Plan, putting infrastructure reform in lockstep with rebooting the US economy, which, by various measures, had sputtered along for years after the Great Recession until it came to a halt last year at the onset of the pandemic.
Now, the president is touting this moment as a chance to make a “historic public investment” to “rebuild the backbone of America”. His plan combines climate-friendly proposals for infrastructure improvements across transportation, energy, water and broadband. It also targets social improvements such as affordable housing and elderly care, which are not traditionally considered infrastructure, but have likely been included as a result of the pandemic.
The Congressional debate surrounding Biden’s infrastructure proposal has the potential to showcase US politics at its messiest best.
Unlike last month’s $1.9 trillion pandemic relief package – which was signed into law only a few weeks after being introduced, and without bipartisan support – Democrats have signalled they will make an earnest effort at winning over Republicans by the tentative deadline for a final vote scheduled before the 4 July weekend.
The next three months, then, are set to make Washington DC the scene of a slow-moving haggle where personal and political favours will be negotiated through high-profile statements and backroom deals. All the scrambling that’s likely to ensue will centre around making sure everyone’s wish-list items are included in the plan’s final version.
“The divisions of the moment shouldn’t stop us from doing the right things in the future,” the president said in a speech on Wednesday promoting his infrastructure plan. “It’s a once-in-a-generation investment… it’s not a plan that tinkers around the edges.”
How to spend it
The proposal’s largest funding bucket – $621 billion for transportation infrastructure – is headlined with $174 billion earmarked for federal grant and incentive programmes to encourage state and local governments to work with the private sector on building a national network of 500,000 electric vehicle charging stations over the coming decade.
Biden’s plan also reserves pools of cash of various sizes for modernising other areas of transportation, including 10 of the US’s most economically vital bridges and 20,000 miles of highway, updating and expanding transit and rail services, airport improvements and port investments. Notably, the plan mentions $25 billion would be used to “support ambitious projects” that are “too large or complex for existing programmes”, which could indicate projects requiring buy-in from the private sector.
There are also three rounds of funding of around $100 billion each that would invest in the US’s water sector, broadband internet coverage and revamping the electric transmission system. Renewables would receive a boon by the plan’s measure to extend solar and wind tax credits and favourable permitting regulations to boost offshore developments.
For investors, Biden’s plan left vague details about the private sector’s involvement in future infrastructure upgrades. While there was no specific mention of an effort to enhance the use of public-private partnerships, the proposal cited leading PPP markets in Canada, the UK and Australia as examples for how to reach “on-time and on-budget delivery of infrastructure”.
The plan added that “partnership across government, unions, and industry” will be needed for infrastructure reform to succeed and that the federal government would support state and local governments with project procurement best practices.
Who pays for it?
Republicans, many of which are backed by fossil-fuel lobbyists, have come out in opposition to the plan on the grounds that Biden’s proposal is too giving to clean energy initiatives. But what will be the party’s biggest sticking point throughout the bill’s negotiations centres on how Biden proposes to pay for his plan.
The president has made tax increases the centrepiece for how to pay for these infrastructure improvements, specifically proposing a corporate rate hike from 21 to 28 percent. Biden has said he is open to compromise but will refuse to consider tax increases on individuals earning less than $400,000. Republicans have traditionally opposed tax increases of any kind.
“We’re hearing the next few months might bring a so-called ‘infrastructure’ proposal that may actually be a Trojan horse for massive tax hikes and other job-killing left-wing policies,” Mitch McConnell, the Republican Senate minority leader, said last week.
But for many Democrats, the plan is “not nearly enough”, tweeted Representative Alexandria Ocasio-Cortez, a progressive member of the party who co-authored what became known as the Green New Deal in 2019, which envisions a dramatic overhaul of the US economy in favour of climate-friendly initiatives. She wasn’t alone, as other Democrats proposed their own $12 billion climate-friendly plan earlier this week with the support of the clean energy industry.
At the state and local level of government, where most US infrastructure is actually procured and developed, officials responded cautiously to the big ideas introduced yesterday and reminded federal lawmakers not to forget about non-negotiable funding deadlines later this year.
Jim Tymon, executive director of the American Association of State and Highway Transportation Officials, which represents transportation agencies, said Wednesday’s announcement is the “first step in a conversation” about how to revamp US infrastructure, before reminding Congress that it’s still “critical” to reauthorise key federal surface transportation programmes due for renewal in September.