By Ed Rendell
April 7, 2021
For 30 years, infrastructure has been my passion. I chaired the “Rebuild America Coalition” during my time as Philadelphia mayor, and have co-chaired “Building America’s Future” since my time as Pennsylvania governor. I co-founded the bipartisan Building America’s Future in 2008 with former New York Mayor Michael Bloomberg and former California Gov. Arnold Schwarzenegger, who came up with the best definition of infrastructure for his young son: “[It’s] what daddy blows up in the movies!”
As a mayor and governor, I learned the important role that infrastructure plays on quality of life and public safety, as well as economic competitiveness. It is perhaps the best creator of well-paying blue-collar jobs. Although former President Trump often talked about his infrastructure plan, he never submitted a proposal to Congress for repairing America’s crumbling infrastructure. So of course I looked forward to President Biden’s infrastructure plan, and I’m generally pleased with his proposal as part of the “American Jobs Plan.”
But I am concerned about several aspects of it, especially how it would be funded and some of what would be included in it, as well as some of the opposition voiced by Republicans.
It’s a good blueprint for the balancing act Biden will need to perform to get congressional approval. He will have to negotiate with not only Republicans but also some moderate and progressive Democrats. Key issues will be the plan’s size, what it covers, who pays for it, and the administration’s eventual strategy to get the plan passed into law.
The plan’s size will be the first battle Biden will encounter within his own party. His description as “big and bold” is accurate, considering that America hasn’t had a comprehensive infrastructure program since President Eisenhower proposed the interstate highway system. But this investment will be made over eight years, so it breaks down to around $200 billion each year — the amount that the American Society of Civil Engineers has said is needed to bring our infrastructure to fair condition after years of neglect.
Progressives such as Reps. Alexandria Ocasio-Cortez (D-N.Y.) and Pramila Jayapal (D-Wash.) have said the White House plan isn’t big enough, and is even smaller than what Biden talked about while campaigning. The Progressive Congressional Caucus has endorsed spending $10 trillion over the same period. Jayapal supports including tax hikes in the package, but does not worry about paying the bill, saying, “Democrats should not constrain ourselves or lower our ambitions because of manufactured concerns about the deficit.”
When I read that quote I was stunned. We Democrats have attacked Trump for adding $4.7 trillion to our national debt in his first three years. This year we will spend $300 billion on interest payments on the debt, and that will almost triple over the next decade. This is money that comes from discretionary spending and could make it difficult to fund necessary programs for vulnerable citizens. If we add massive new debt, we will drown in our interest payment obligations. President Biden is right to lay out a plan to pay for these programs. We all agree on the need for infrastructure repair, but it is irresponsible and unfair to put the task of paying for it on our children and grandchildren.
Progressives are not entirely wrong, however, when they say that the plan should do more. There are some important components that it does not encompass, such as the need for high-speed rail in America. In Asia and Europe, trains traveling 220 mph are commonplace. In fact, Japan has developed a Maglev train capable of traveling 375 mph. The fastest train in America — the Acela — averages less than 100 mph between Washington and Boston.
So if Biden’s plan could be bigger, how much so and what should be in the bill? More importantly, how can we ensure it goes from the drawing board to legislation that is sent to the president’s desk? Knowing Joe Biden well, I believe he will make a sincere effort to garner Republican votes for infrastructure. The best shot at achieving this would be to trim the $2.2 trillion price tag so that the corporate tax rate would increase to 25 or 26 percent, rather than 28 percent.
Republicans have decried Biden’s tax plan in many ways, but particularly by claiming that a significant chunk of spending in the plan is not for what could be fairly considered infrastructure. They cite $400 billion designed to enhance the “care economy,” money to provide health care services for people with disabilities and the elderly and access to home and community-based services. They also point to $25 billion to help Historically Black Colleges and Universities, and $5 billion for community violence prevention programs. It is difficult to argue that these items should appear in a bill to revitalize American infrastructure.
The GOP also decries the $100 billion for workforce development and $137 billion to bolster the capital budgets of schools, community colleges and child care facilities. They also contend that money to retrofit and build more affordable housing and rehabilitate homes for low- and middle-income homebuyers is not “infrastructure.” They are dead wrong about these three items. Housing stock, especially subsidized housing, is an essential part of America’s infrastructure, and the state of our public schools, community colleges and child care facilities also qualifies. Additionally, workforce development is key if we are to learn a new way to do infrastructure using innovative techniques.
So, let’s assume we could reduce the price tag to $1.7 trillion — that would meet some of the GOP’s objectives and allow for a less severe corporate tax increase. Would it work? I doubt it. First, we would need to give progressives a heavy dose of tranquilizers, or perhaps even smelling salts. Biden would have to promise to include items removed from the bill in a second phase, but I’m not sure that would mollify progressives. In the end, they might have to bite their lips and vote for it because it would be hard for any Democrat to torpedo a $1.7 trillion plan that would produce millions of jobs.
Harder still would be getting Republican votes, even after trying to meet some of their objections. The key is to secure yes votes from at least 10 Republican senators. Republicans cling to the false narrative that increasing taxes will result in the loss of jobs. The facts simply don’t support that claim. For example, in his first year in office, Bill Clinton raised taxes on the top 2 percent of wage earners and the following seven years were probably the greatest years of growth in the past half-century. Conversely, following George W. Bush’s significant tax cut, our economy experienced one of its slowest-growth periods.
The top corporate tax rate has been falling since the early 1950s. In 2013, the Economic Policy Institute pointed out that this rate was 52 percent throughout the Eisenhower administration — 17 percentage points higher than the 2013 rate of 35 percent. The U.S. GDP grew by almost 4 percent annually in the 1950s, compared with a 1.8 percent growth rate in the 2000s. The Trump tax cuts that lowered the rate to 21 percent also make the case that economic growth is not linked to severe cuts in business taxes. After the 2017 Tax Cuts and Jobs Act, only 4 percent of businesses increased hiring, according to a survey by the National Association for Business and the Economy. The Tax Policy Center found that the U.S. economy grew more slowly during the two years after the tax cuts than the two years before they took effect, and that business fixed investment was “slightly negative for the year, a sharp contrast to the nearly 5 percent real growth rate in 2017” before the tax cuts.
It is worth making an effort to gain Republican compromise on infrastructure. But assuming this fails, Biden should combine his proposal with a second $2 trillion proposal, designed to lift millions of working Americans out of poverty; this undoubtedly would mean raising taxes on the wealthy. Then he could try to get this through using reconciliation. Recent polling finds that Americans are on board with doing this, as long as paying for it is limited to a tax increase on corporations (particularly those that pay no tax at all) and individuals who make more than $400,000.
The problem that Biden would have with this strategy is holding all of the Democrats. For example, Rep. Josh Gottenheimer (D-N.J.) has expressed misgivings about the amount of spending — and he is not alone. In the Senate, could Democrats persuade Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema(D-Ariz.) to vote yes? Manchin was quoted in late March as saying he favors an infrastructure bill that might be categorized as “enormous,” as long as it is paid for by tax increases on corporations or wealthy Americans.
If you combine the two parts of the legislation that Biden hopes to get passed into one bill, it would call for more than $4 trillion in new spending. His plan to rely on taxes would cover most of the cost. Progressives would love it and, in the end, most Democrats would vote yes. Moderate Democrats might reduce the spending somewhat, but the plan still would address many decades-old infrastructure needs and permanently lift many Americans out of poverty.
Odds are, it also would produce a Republican-controlled Congress in 2023, but it would be well worth it. President Biden would have achieved a historic restructuring of American priorities. With control of the House, Senate and presidency, Democrats must get things done now that our country vitally needs. We could finally seize the opportunity to do something about our decades-long problem of income inequality, which is draining the life out of American democracy. Some things are so important that they’re even worth losing politically to achieve.