Biden's Infrastructure Plan Does More Than Just Rebuild the Country


President Joe Biden is doing something economists and policy wonks have been begging legislators to do for years yet no party has been able to get it done: pass an infrastructure bill that actually rebuilds the country and creates thousands of jobs in the process.


For those of us who live in the DC area, we get to witness the excitement around Infrastructure Week every year, and the disappointment at the end of the week is palpable. Infrastructure Week is a week-long push to address the dire state of our nation's infrastructure—whether physical infrastructure, such as roads, dams, bridges, and the electrical grid; or cyber infrastructure, such as the investments that help keep our data systems secure and our national security infrastructure online. Yet every year, the week comes and goes with no meaningful legislation having been proposed, much less passed through Congress.


This may seem odd since both sides of the aisle support infrastructure investments, but stalemate on this issue is not surprising given the level of division seen in our country and the ramifications legislators face if they break party lines: if any Republican chooses to support the president's proposal, they do so at their own peril—it's basically like signing up to have a primary challenger next election cycle.


But today’s political environment is unique. With the Democrats holding majorities in the House and Senate, Republicans can hold their ground in opposition—pleasing the party and not risking their own political future—and President Biden can do just about anything he wants because he has enough votes within his party to get bills passed without Republican support. We saw how he pushed through Covid relief without a single Republican vote and the Vice President casting the tie-breaking vote in the Senate. If I had to bet, whatever infrastructure bill the administration does put forth—regardless of size—the outcome likely will be the same. So with this in mind, it would only make sense that President Biden swing for the fences, deficits and Republican opposition be damned.


This may sound quite different from my usual "Why can't we all just get along?" approach to the political process and my hesitancy towards large deficits when the economy is growing, but infrastructure is special; it isn't like other issues. I can argue constructively with my conservative and libertarian friends about various contentious issues, such as the role of the state in stimulating the economy during recessions, whether nationalized healthcare actually saves money in the long-run, or the virtues and shortcomings of federalism when the tides are changing on a divisive issue, but there isn’t much support for infrastructure disinvestment among our elected officials. Being opposed to infrastructure investments when we have a patchy electrical grid that seizes during inclement weather, bridges and roads that could crumble at any minute, and Chinese malware that cripples our networks on a daily basis is like defending the merits of binge drinking at an alcoholics anonymous meeting—it simply defies logic.


There are a number of reasons why. First, anyone who hasn't had their head in the sand or been living under a rock for the last thirty years knows our infrastructure system needs an upgrade. It's impossible to say with a straight face that we don't. For a local example, the average DC worker will commute to work by driving to their local train station, wearing out their tires on worn-out roads and testing the limits of their suspension on endless potholes, hop on the metro train that is habitually late due to ongoing maintenance or overweight railcars, and walk the final stretch to their office on public sidewalks that resemble something from a war zone. And this isn't just DC; it's typical of most cities in the US. In 2017, The American Society of Civil Engineers gave US infrastructure a grade of D+, estimating that an additional $2.1 trillion in infrastructure investments would be needed between 2016 and 2025, and if Congress didn't authorize that level of investment, the present state of infrastructure would cost the nation almost $4 trillion in GDP and a loss of 2.5 million jobs. This would be funny if it weren't so sad.


The second reason why it's difficult to vote against infrastructure spending is that infrastructure projects have high economic multipliers: typically around 1.5 times investment (i.e. $1 of investment brings around $1.5 in added GDP growth through increased output and higher employment). Such a high number essentially means that infrastructure spending pays for itself over the long-term. Investing in rebuilding the country not only solves the problem of persistent underinvestment in public goods, but also grows the economy and adds jobs. And with so many out of work right now, and so many having left the workforce altogether, this could do wonders to the US employment situation. This, alone, should be reason to support more infrastructure spending.


The last point I will make is that, if structured properly, such investments could reduce the high level of income inequality in the US. To see how, take the president's proposal. To pay for his infrastructure package, President Biden has called for increasing the corporate tax from 21% to 28%, increasing the top personal income tax rate for those earning more than $400,000 per year, and increasing the capital gains tax rate on those earning more than $1million per year. Each of these adjustments would make the tax system more progressive and lower income inequality. And by using the funds collected to hire less educated, lower-income individuals, the proposal will turn dormant, excess savings from those at the top into purchasing power for those at the bottom.


To sum up, it's pretty hard to defend infrastructure disinvestment in today's climate. There just isn't much evidence to support reducing or even maintaining the current level infrastructure spending. Having said this, Republicans will most certainly vote against any Biden infrastructure plan because they have a mandate from party leadership to oppose the president's agenda. This is just a political reality. They have to get re-elected, and they need large deficits and uncontrollable debt as a campaign talking point. And while the price tag of the president's proposal may be eye-popping—in fact, count on Republicans using the trillion-dollar price tag to defend their position against the bill—these investments are long overdue, given how much we have neglected our nation's infrastructure. But if the bill is designed properly, this infrastructure package could do more than just rebuild our country. If White House works with Congress to design it with jobs and inequality in mind—and spreads the costs over the 10-year budget window—this piece of legislation could be the best thing that has happened to the US economy, and the American worker, since the New Deal.