"This Is a Spending Plan, Not an Infrastructure Plan:"

Analyzing Bipartisan Concerns over Biden's

American Jobs Plan

Brian Carpenter | June 2021

Damage to a road caused by flood water in Stockton, MN (2007)

W

ithin his first 100 days in office, President Biden unveiled his two-trillion-dollar American Jobs Plan. For many young Americans, this type of investment in American infrastructure has been something only found in textbooks, offering a large-scale investment not seen since the Space Race and the development of the interstate highway system.

As the Biden administration noted,  “public domestic investment has fallen more than 40 percent since the 1960s.” Unlike the large-scale spending plans of the past, the American Jobs Plan aims to go beyond the objectives of stimulating economic growth and outcompeting foreign powers. While the administration’s plan notes that it hopes to meet the challenge of “Autocratic China,” it also outlines its aim to address the climate crisis and rising socioeconomic inequalities. 

 

Economic Concerns

 

Despite the past economic successes of infrastructure projects including the interstate highway system, which has returned $6 for every $1 put into the project in today’s dollars, the plan has drawn criticism from both Democrats and Republicans for differing reasons. As a result, it is not guaranteed to pass—at least in its current form. Senate Minority leader Mitch McConnell decried the infrastructure plan as “a trojan horse for massive tax increases and a whole lot of more debt and a whole lot of spending” that is “unrelated to infrastructure.” 

 

U.S. Chamber of Commerce Executive Vice President Neil Bradley also derided the tax increase, despite the Chamber’s support of more infrastructure spending. Bradley claimed the general tax increase will “slow the economic recovery and make the U.S. less competitive globally—the exact opposite of the goals of the infrastructure plan.” 

 

Scott Hodge, the president of The Tax Foundation, a nonpartisan think tank, echoed a similar sentiment in his analysis of Biden’s infrastructure plan, concluding that in order to optimize spending in the infrastructure plan, Biden should fund the plan by cutting “$2 trillion in other (wasteful) government spending” elsewhere. 

 

As the US recovers from the pandemic and moves closer to full employment, the level of short-term economic benefit yielded from infrastructure spending is unclear, as analyzed in a 2017 Cato Institute report. Douglas Holtz-Eakin, a former George Bush economic advisor, also expressed his doubts over the economic benefits of the American Jobs Plan, doubting that the plan is “on balance, a pro-growth package.” He went even further to say that “this is a spending plan, not an infrastructure plan.” 

 

The other end of the political spectrum is not without its qualms about the economic impact of the American Jobs Plan, albeit for different reasons. Representative Alexandria Ocasio-Cortez (D-NY) claimed that the spending of the infrastructure plan “was not nearly enough” and needed “to be way bigger.” The Sunrise Movement, a progressive youth climate change movement, also spoke out against the size of the plan, saying that it “lacks a commitment to the full scale of transformation that is needed of our economy.” Elise Gould of the left-leaning Economic Policy Institute questioned the plan’s potential for leaving women behind. 

 

Reason for Optimism

 

Despite dissatisfaction on both sides of the aisle, the infrastructure plan presents upsides from both an economic standpoint and in its attempts to address societal issues. From an economic standpoint, there is strong empirical evidence in favor of large-scale infrastructure projects. Past infrastructure programs such as the Interstate Highway System, the Space Race, and the Works Progress Administration all yielded positive economic benefits. 

 

Even though some might argue that the spending in this plan is too broad and that the corporate tax hike potentially dampens the plan’s economic upside, this does not rule out the plan’s potential to stimulate economic growth through a Keynesian lens. Analysis from Moody’s Analytics, a financial services company, concludes that the “economic benefits of the plan substantially outweigh these negatives.” The Moody’s analysis also shows that “passage of the American Jobs Plan would ensure that the economy quickly returns to full employment, and the plan would provide a meaningful boost to long-term growth.” 

 

Karen Dynan, an Obama-era treasury official, also expressed optimism regarding Biden’s plan, stating that it “could accelerate job growth over the coming year. Offering a precise prediction on the impact of Biden’s infrastructure plan is a difficult task, given the degree of economic success of past infrastructure projects has been dependent on era-specific economic factors. 

 

While the tax hike to pay for the infrastructure plan has come under scrutiny, most analysis indicates a positive impact stemming from the infrastructure spending. While there will always be arguments over the plan’s economic merits and drawbacks, it is important to analyze what sets the plan apart from its predecessors: its potential non-economic impacts.

 

American Infrastructure and Beyond

 

At the most basic level, the American Jobs Plan provides spending to make necessary improvements to the country’s infrastructure, including roads, airports, railways, water systems, and more. 

 

The American Society of Civil Engineers recently gave the US an overall grade of C regarding the quality and integrity of our infrastructure. Their report indicates that the United States is particularly struggling in infrastructure areas including transit, levees, stormwater, and roads; the US did not receive a grade higher than D in these categories. These are all areas in which Biden plans to make necessary improvements. 

 

Yet the American Jobs Plan does more than just address areas in which American infrastructure is floundering. The plan also invests in cleaner and more efficient energy, targeting “40 percent of the benefits of climate and clean infrastructure investments to disadvantaged communities.” The plan also contains public health benefits such as the reduction of lead exposure in 400,000 schools. It additionally will attempt to direct money towards mitigating historic inequities, “including $20 billion for a new program that will reconnect neighborhoods cut off by historic investments and ensure new projects increase opportunity, advance racial equity and environmental justice, and promote affordable access.”

 

The American Jobs Plan’s potential to improve much needed facets of American life, particularly for the most disadvantaged Americans, highlights the important benefits passage of the plan may yield. While the plan may not hold universal appeal across the aisle, that is to be expected for any bill with such a broad scope. 

 

In Conclusion

 

The potential improvements in infrastructure and advancement of climate initiatives are benefits that we as Americans cannot afford to leave on the table, a fact that highlights the necessity of passing some version of Biden’s plan. Because the quality of our roads, bridges, water systems, and, perhaps most importantly, our environment, has never been a one-sided, partisan goal. While the means of achieving such a goal have been disagreed upon, our legislators, on both sides of the aisle, might do well to display some civility and offer concessions during negotiations, uniting behind a common American objective.

Brian Carpenter is a rising senior at the University of Michigan majoring in Philosophy, Politics, and Economics. His writing interests include international trade, monetary policy, and domestic politics. Outside of MC, Brian enjoys skiing, watching basketball, and playing Euchre with his friends.