Much has been written on President Joe Biden’s $2.3 trillion American Jobs plan to rebuild and modernize the nation’s physical and digital infrastructure. The immediate goal of this massive but purposeful public investment is to “reimagine and rebuild a new economy.” However, it does much more. As Harvard economist Dani Rodrick points out, from the ideological perspective, it signals an end to the reign of the neoliberal economic thinking that “markets work best and are best left alone.” But a report by Moody predicts the new legislation could create 19 million new well-paying jobs.
Supporters are excited that, finally, the U.S. has a leader and administration addressing a problem that has been discussed but largely ignored by past administrations, both Republican and Democrat. They point to the fact that the American Society of Civil Engineers gave the nation’s crumbling infrastructure a D-plus grade. According to this professional body, thousands of bridges across the country are in a state of severe disrepair, and accidents are waiting to happen. Although, in terms of GDP, America is the wealthiest economy globally, it ranks 13th in terms of the quality of its infrastructure.
Importantly, China has invested heavily in 21st-century infrastructure, contributing substantially to their global competitive advantage. Over the next 15 years, China plans to build on average 14 new airports each year towards its goal of 415 airports by 2035. Some of these airports have a price tag of over a billion dollars. Chinese President Xi Jinping is moving full speed ahead with his “project of the century,” which is to construct the land-based “Silk Road Economic Belt.” The project will extend from China to Central and South Asia, to the Middle East and Europe. Additionally, the sea-based 21st Century Maritime Silk Road – a project called “One Belt, One Road,” or BRI, will help elevate China to become a dominant force in global commerce.
There is little doubt that President Biden’s plan is somewhat of a moonshot project, which could lead to a number of unexpected desirable externalities, including breakthroughs in the labor markets and positive social and climate changes that could eventually have a transformative impact on the trajectory of the American economy.
The detractors, mostly Republicans in Congress, say that although in principle they favor investments in infrastructure, the president’s plan is overly ambitious and wasteful. They believe only a small fraction (less than 10%) of the budget is devoted to investments in roads and bridges, the nuts and bolts of infrastructure. They are suspicious that the Biden administration is using this legislation to finance their favorite projects – social engineering and social justice (child and adult care), income and wealth redistribution (raising the corporate tax rate), and climate change issues (clean energy) – under the guise of infrastructure rebuilding and repair. Not surprisingly, the conservative PAC Citizen’s United has called it “a sweeping environmental and social justice agenda,” which they oppose.
So, what are the facts? The Biden Jobs plan differs significantly from the Green New Deal plan proposed by Representative Alexandria Ocasio-Cortez (D-NY), which included a guaranteed livable wage, affordable higher education, and universal health care. None of these are part of the Biden Jobs plan. Instead, his plan proposes investing in both the traditional brick-and-mortar infrastructure projects — roads ($327 billion), and some non-traditional projects such as housing ($247 billion), broadband ($100 billion), water supply ($111 billion), clean energy ($208 billion), support for caregivers for seniors and the disabled ($400 billion), and investments to boost manufacturing, research and development ($480 billion). The logic is that we have to take a holistic approach to empower the labor force to work for increased productivity. Developing the digital infrastructure is the modern-day equivalent of the global arms race.
When we unpack the Biden Jobs plan, and parse away the partisan rhetoric, we get a better view of the big picture. The overarching goal is improving American competitiveness and resetting productivity at a higher level. The plan proposes investment in building and modernizing productivity tools to encourage the economy’s capacity, its bandwidth.
Economists define roads and highways a “public good,” assets that millions of citizens can simultaneously enjoy. The beauty of a public good (education is another example) is its many “positive externalities” or benefits that accrue to society at large for generations to come. A new or repaired road, bridge or school will produce a stream of benefits to be enjoyed by millions over many decades to come.
Small government conservatives who oppose most public spending are reflexively horrified by the Biden Jobs plan. However, the proposal comes with new ideas on financing. It does not depend on borrowing or deficit financing. Taxes on the poor and middle class will not increase. Only corporations will pay higher taxes from a moderate increase in rates, still below the tax rates before President Donald Trump’s $2 trillion cuts in corporate taxes.
So far, the “sky is falling” arguments are not getting much traction. Many big businesses understand that America has fallen behind, as the infrastructure has been ignored by successive administrations. They are not upset, even though the plan calls for higher corporate taxes. A large section of voters across the political divide also agree that it is time to upgrade and modernize the nation’s crumbling infrastructure to keep up with other countries, and for increased productivity.
Nothing captures the state of America’s declining infrastructure than the case of high-speed trains. These super-fast trains have been a fixture of public transportation in nations such as Japan and China for decades. Yet, in 2021, there are no “true high-speed” trains in America. Since 2011, residents in China have enjoyed train rides from Beijing to Shanghai, a distance of 819 miles, in only 4 hours and 18 minutes, traveling at speeds of up to 217 miles per hour. In Texas, there is general agreement that the Houston-Austin-Dallas region should be ideally connected with bullet trains. Still, discussions and plans have dragged for decades without any meaningful progress. President Barack Obama included $8 billion in his 2009 stimulus package to jump-start the high-speed rail program, but Republican governors rejected the money and the plan. Only recently, the 90-minute high-speed train between Dallas and Houston has been approved by the Federal Railroad Administration.
Munir Quddus, Ph.D.
The Biden infrastructure plan, or a version of it, is long overdue. It is an expensive proposition, but serious problems call for serious investments. There will be some waste, but the return on investments will be high. The nation will more than recoup greater prosperity – millions of new high-paying jobs, new start-ups, higher GDP growth, higher tax revenues, and more substantial exports and foreign direct investments.
It is high time for Congress to give President Biden the support he needs to rebuild America. This is the patriotic thing to do. If we miss this opportunity, it may be decades before we get another chance.
Munir Quddus, Ph.D., currently serves as a professor of economics and the dean of the College of Business at Prairie View A&M University.