At the end of March, Biden unveiled a $2.25 trillion proposal called the “American Jobs Plan” focused on infrastructure. This bill would include updating roads, bridges, and public transit and having items outside of classic infrastructure, including semiconductor manufacturing and funding to fight climate change, as well as additional relief for American families.
What is the Issue?
The infrastructure bill is moving forward in both the House of Representatives and the Senate. Both the Democrats and the Republicans are moving forward with their accounts, with Republicans claiming that the Biden Administration is overstepping its boundaries by adding non-conventional infrastructure to the Bill.
The Bill plans to put $621 billion into transportation infrastructures such as bridges, roads, public transit, ports, airports, and electric vehicle development. The White House wants to inject more than $300 billion into improving drinking-water infrastructure, expanding broadband access, and upgrading electric grids.
These dollars are what many republicans believe is classic infrastructure. The Biden Administration also wants to add $400 billion to care for elderly and disabled Americans. It also wants more than $300 billion to build and retrofit affordable housing and construct and upgrade schools. The White House also said it intends to invest $580 billion in American manufacturing, research and development, and job training efforts.
How Will the Infrastructure Bill be Paid?
In 2020, the Trump Administration pushed through 3 COVID relief bills, and the American public did not seem to care much how the borrowed money be returned. Since the outlays were for relief, the overwhelming popularity of the measures made officials focus less on a plan to pay for the stimulus — the stimulus required to fight the recession that occurred in the wake of the pandemic was understandably a top priority.
The Biden Administration also pushed through a relief bill, but this received pushback from Republicans concerned that additional stimulus would be challenging to pay back and wanted to wait and see how the economy faired before voting on a new bill. The Democrats moved on their own and pushed through the Bill.
In mid-April, the Commerce Department reported Retail Sales that were much better than expected, primarily based on the most recent stimulus bill’s passing. Advance retail sales rose 9.8% for the month, according to the U.S. Commerce Department. That compared to a forecast of a 6.1% gain. What is clear is that Americans are spending their stimulus checks and that the need to expand the U.S. economy is working.
The White House is now trying to keep the economy growing and accelerate this growth. To do this, they propose a $1.9-trillion infrastructure bill. To pay for the bill, the president proposed raising the corporate tax , a measure that both Republicans and moderate Democrats regard with concern.
Biden plans to fund the spending by raising the corporate tax rate to 28%, which would not be unprecedented — the corporate tax used to be even bigger, but Republicans slashed the corporate rate to 21% from 35% as part of their 2017 tax law.
If the corporate tax rate was moved up to 28% from 21%, it would make the U.S. country with the highest corporate tax in the developed world, according to CNBC. Even a 25% rate would place it at the high end of the OECD spectrum. There could also be changes to the income tax rate, but for now, the administration also wants to boost the global minimum tax for multinational corporations and ensure they pay at least 21% in taxes in any country.
Republicans were working on their own infrastructure proposal and said there could be bipartisan support for a package of $600 billion to $800 billion, far smaller than what Biden has in mind. Republicans say the Administration plan is dominated by spending unrelated to traditional infrastructure, and they reject a proposal to finance the initiative by raising taxes on U.S. corporations.
How Will The Infrastructure Plan Impact the U.S. Economy
An Infrasture Bill will help the U.S. economy over the long-term but raising the corporate tax rate to pay for it will hurt it but only mildly. Fiscal policy will help generate economic growth and increase jobs, which will offset by higher taxes that will impact online trading of stocks and the bottom line. The effective tax rate will not be as high as the corporate tax rate as companies are very adept at sheltering their taxable income. In the long run, a infrastuture bill will help the U.S. economy gain traction and accelerate to the poin that it can be self sustaining.
