The Next Big Thing
3/29/21
With the $1.9 trillion Covid-19 Relief bill signed and sealed, it’s time to turn attention to the next big thing: The $3+ trillion infrastructure plan.
The first point is that, as of today, calling this an infrastructure spending plan may be a bit of a stretch in that the plan extends beyond infrastructure. While everything is currently under discussion, beyond strictly infrastructure, at present it appears that coverage could include new money for educational and safety net initiatives. Moreover, if enacted as envisioned, the legislation will likely involve a significant revision of the tax laws, because a good portion of the funding for this spending is slated to come from higher taxes on corporations and higher-income taxpayers — at least, that’s the plan from the Democratic sponsors. As long as the filibuster rule remains in effect, packaging these various objectives together allows the reconciliation process to be used, which seems to be the only vehicle available to get the broader Biden agenda across the finish line.
Republicans seem likely to line up against this legislation, citing the overall cost, resistance to additional safety net provisions, and, of course, the inclusion of tax hikes — i.e., just about everything in the bill. Given that posture, it seems likely that the passage will require Democrats to maintain solidarity within their caucus. Unfortunately, that’s not exactly a foregone conclusion. The bill still has to be sold.
Here’s my take: It doesn’t take a whole lot of research to realize that the infrastructure of the US needs some attention. Look around. Prospective projects are plentiful across the country, whether in connection with roads and bridges, mass transit systems, power generation and transmission services, water treatment facilities, or broadband and telecommunication services.
The need to modernize and improve in these various areas should be obvious to all, with the expectation that such investments will directly improve both the quality of life in the US and the nation’s overall efficiency and market competitiveness. Moreover, I expect the opportunity cost of not upgrading our infrastructure to be of greater magnitude than the direct dollars that we’d likely authorize under any prospective legislation. The likely benefits of improving our infrastructure don’t seem discretionary to me. They seem necessary.
Of course, projects to be undertaken have to be chosen responsibly and equitably, minimizing pork and favoritism; and while this consideration is by no means trivial, this is the role of good government. We should demand and expect nothing less. Presumably, we can look to states and/or federal agencies or departments overseeing the projects to assure that the money would be spent responsibly, with appropriate controls being a part of the bill.
It’s widely recognized that the prospective infrastructure projects are long-term investments that would create jobs at home and accelerate the time required to return to a full-employment pace of economic activity. What may not be quite as obvious is the impact that an infrastructure spending program will have on our relationship with China.
China has been charged with “unfairly” subsidizing Chinese industries, thereby making it harder for US Companies to compete. I say we should take a lesson from the Chinese. Many may not view infrastructure spending in the US in the same light as the Chinese subsidies; but to my mind, they’re comparable. Rather than complaining about the way the Chinese government supports its domestic producers, we should respond by improving our own market efficiencies — not for specifically targeted companies or industries, but rather in a way that offers broader benefits to American industry, across the board.
While I’m on board for favoring generous infrastructure spending, I see it as important to distinguish between making investments in publicly owned infrastructure versus privately owned infrastructure. I’m very comfortable with the former, but less so with the latter. More concretely, I don’t think it’s appropriate for public funds to build or repair privately-owned infrastructure. Private companies should bear those costs for development and modernization on their own, without assistance from the federal government. On the other hand, when services of private companies are deemed to be a social necessity and private funding is unavailable, their access to public dollars should be structured as loans or else with the government securing an equity stakes in those companies.
I’m particularly sensitive to this public/private issue in connection with the expressed agenda to support new, clean energy initiatives. I’m all for the development of clean energy, but practically speaking, who owns the resulting physical plant when such new investments are made? At this point, the mechanics of exactly how these initiatives will be carried out has yet to be determined, but this is the kind of knotty problem that has to be worked out.
These concerns and open questions notwithstanding, once again, we can’t let good be the enemy of the perfect. The need to devote resources toward improving and modernizing our infrastructure is paramount. We just need to rely on people of good will to come together and make the necessary compromises to get it done. It would be nice if this could happen with bipartisan participation, but if the Democrats have to go it alone, so be it.
