Overview of Biden’s Infrastructure Plan

As part of its pledge to “Build Back Better,” the Biden Administration unveiled a $2.3 trillion spending proposal on March 31, 2021, which is formally referred to as the American Jobs Plan, to modernize the nation’s infrastructure. President Joe Biden (D) stated that the plan aims to make a “once-in-a-generation investment to create the strongest, most resilient, innovative economy in the world,” adding that it would be the most significant effort to create jobs in the U.S. since World War II. Alongside the jobs plan, Biden outlined his Made in America Tax Plan, which includes federal revenue-generating provisions that would help pay for the infrastructure spending. 

Through its broad definition of infrastructure, the American Jobs Plan attempts to address a longtime divestment of public goods in the U.S. economy by prioritizing issues relating to climate change, social justice, domestic manufacturing, broadband, and national security. Efforts to re-envision public investments beyond constructing roads and bridges come as the overall infrastructure in the United States ranks 13th in quality, according to the World Economic Forum. The ranking indicates that domestic systems have struggled to keep pace with demand in today’s globalized economy. The COVID-19 pandemic has further exposed many of the existing problems confronting the country’s infrastructure, including access to the internet and clean air, as well as the need for stronger supply chains. Seeking to address these and other issues, Biden has included an emphasis on equity in his jobs plan. 

The infrastructure framework represents one of two components in Biden’s agenda to transform the economy. A second component, the American Families Plan, focuses on welfare provisions, and the White House expects to announce it later in April. These spending proposals pose a test for Washington, as Democrats will have to consider the political risks that come with major spending measures, and Republicans will look to calibrate their messaging in the post-Trump era. 

What’s in it?  

Below is a summary of key policies proposed in part one of Biden’s agenda to rebuild the economy, which are outlined by the White House “fact sheet.” This will dominate legislative activity in the months ahead, as House Democrats have reportedly voiced their desire to pass an infrastructure measure by the Fourth of July. 

American Jobs Plan - Infrastructure 

• Transportation: Modernize all modes of transportation, including roads, highways, bridges, airports, and railroads and build a network of electric vehicle (EV) chargers to mitigate the effects of climate change. The plan aims to ensure greater transportation safety and a more equitable transit system between rural and urban areas.
• Clean Energy: Develop a stronger electric transmission system by increasing competition and accelerating the deployment of decarbonizing technologies through block grants, tax credits, and other investments. These policies seek to improve disaster preparedness, champion environmental justice, and revitalize distressed communities. 
• Clean Water: Support clean water infrastructure by upgrading pipes, treatment plants, and service lines to reduce lead exposure and other contaminants impacting public health outcomes for disadvantaged communities. 
• Manufacturing: Strengthen the domestic manufacturing sector and its workforce through investments in research and development (R&D) and training programs that would enhance U.S. competitiveness globally, national security, and access to high-innovation sectors of the economy. 
• Broadband: Expand access to reliable and high-speed internet services, especially for rural and tribal lands, by encouraging price transparency, competition, lower prices, and widespread adoption. This would help close the “digital divide” impacting underserved communities with inadequate access to the internet.

Made in America Tax Plan - Finance 

• Corporate Tax Rate: Raise the federal corporate tax rate from 21% to 28% to ensure more equity in the economy. 
• Global Minimum Tax: Raise minimum tax on foreign earnings made by U.S. multinational corporations to 21% to dissuade the offshoring of jobs and exploitation of tax havens.
• Minimum Tax on Corporate Book Income: Impose a 15% minimum tax on corporate book income, which is publicly disclosed on financial reports to shareholders, to close tax code loopholes. 

Political Implications

Infrastructure presents an obvious choice for a policy area that would attract wide-ranging bipartisan support among lawmakers. Elected officials have historically achieved political success with infrastructure spending, and public opinion conveys the American population’s current approval for more federal investments in the nation’s infrastructure. As a legislative vehicle, the jobs plan provides the White House with its best opportunity to prioritize issues not included in what is considered standard infrastructure spending, such as addressing racial and economic disparities. However, Biden’s proposal has already raised objections from multiple angles, including Republicans, Democrats, and industry. 

• Republicans: Senate Minority Leader Mitch McConnell (R-KY) rejected the American Jobs Plan, expressing disapproval for the proposed changes to the corporate tax system. This reflects the conventional Republican position in the case against higher taxes and more federal spending. It also reveals that the party largely shares the Tax Foundation’s view that more taxes are an inefficient way to pay for $2.3 trillion in infrastructure spending, as it could hinder the nation’s economic recovery from COVID-19 and stifle American competitiveness abroad. 

 

• Democrats: Driven by the notion that it “pays for itself over time,” progressives have called for both more spending and a wider scope in the Biden jobs plan, especially for policies relating to climate change and public housing. Other more moderate Democrats have been reluctant to support the corporate tax hikes. Senator Joe Manchin (D-WV) suggested increasing it to 25%, a level that is closer to the average in the Organisation for Economic Co-operation and Development (OECD) than the proposed 28%. 

 

• Industry: Investments in infrastructure are attractive to the business community, so it is still unclear how corporations will eventually treat Biden’s proposal. But initial reactions by key industry groups reveal concerns over the impact of more taxes on economic growth. The U.S. Chamber of Commerce dismissed the idea of raising the corporate rate as a viable option to pay for infrastructure. 

In a news segment, Senator Roy Blunt (R-MO) stated that infrastructure would be “an easy win” for the White House if it pursues a more targeted approach to the issue, showing that Republicans could support a measure different than its current form. He argued that about 70% of the plan is unrelated to infrastructure and that it would likely result in another partisan bill. If the American Jobs Plan is to win support from Republicans and/or industry, Biden will almost certainly have to reduce the price tag and scope, which does not seem probable at the moment. 

Paving a Road Ahead 

While the potential for a bipartisan infrastructure package exists, Democrats intend to act on Biden’s $2.3 trillion and recognize the challenges of turning such spending into a reality. Their razor-thin majorities in both chambers of Congress and indifference toward the Republican opposition may prompt them to pass it in a partisan fashion if negotiations falter. 

On April 5, the Senate parliamentarian signaled approval for Democrats to pass additional measures through reconciliation, a special legislative process they used to enact $1.9 trillion in COVID relief spending along party lines. The ruling permits Senate Democrats to amend the budget resolution for the fiscal year 2021, meaning they can clear legislation via simple majority instead of obtaining the usual 60-vote threshold. It could also pave a clearer road ahead to advance Biden’s infrastructure plan, but reconciliation restricts policymakers from enacting policies unrelated to the budget, which would exclude several key provisions. 

Given the Democratic setback to raise the minimum wage to $15 through reconciliation in their COVID relief bill, the party may tread lightly with this procedural tool to avoid potential division within the caucus. Some Democrats appear to be cognizant of the political risks that come with using reconciliation “to do business” too often, while others seem bolder in their approach. Of note, Democratic Senators Joe Manchin (WV) and Kyrsten Sinema (AZ) both rejected the $15 minimum wage effort, leaving the party with little room for error on fiscal measures if it pursues reconciliation, especially as Biden promotes his corporate tax agenda. 

On April 7, the Treasury Department released a report outlining the case for the administration’s Made in America Tax Plan. The report asserts that the Republican-led Tax Cuts and Jobs Act (TCJA) of 2017, which lowered the corporate rate from 37.5% to the current 21%, did not do enough to create economic growth. It also notes that increasing corporate taxes would generate about $2 trillion in revenue over the next 10 years and address equity concerns. The reversal of policies enacted in TCJA to finance infrastructure spending will set the stage for the looming political discourse in Washington. 

To get any infrastructure overhaul across the finish line, the White House will have to work to ensure that it does not alienate the backing of business-friendly Democrats while maintaining a price and broad aim that still appeal to the more progressive wing of the party. It must also consider the risk in using special procedures to move legislation along party lines to minimize any possible damage to Democrats’ slim majorities going into the 2022 midterm elections. 

The popularity of infrastructure investment coupled with the proposed tax increases makes it a tricky situation for Republicans. In addition to any attempts made at winning the support of centrist Democrats, they will have to tailor their messaging strategy in a way that revitalizes the party’s political identity and maximizes its capabilities to win future elections. 

The way lawmakers choose to handle this typically bipartisan issue ultimately presents a critical moment in American politics and for how various political factions interact with corporations that are becoming more invested in public policy outcomes. 

Camillo Morales

Originally from Glenview, IL, Camillo Morales earned his B.A. in International Affairs at the George Washington University in 2018. His experience includes interning in the U.S. House of Representatives and working as a Public Policy Specialist at Akin Gump Strauss Hauer & Feld LLP. After spending six years in Washington, DC, he moved to Charlottesville, where he is a first year pursuing a Master of Public Policy at the University of Virginia.

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