Biden’s infrastructure plan is big, but should be even bigger

Last week, United States President Joe Biden travelled to Pittsburgh, Pa. — "Steel City,” where he launched his campaign two years ago — to unveil his infrastructure plan. Dubbed the American Jobs Plan, the proposed legislation follows the $1.9-trillion American Rescue Plan recently enacted by Congress. The jobs plan would invest well over $2 trillion over the next eight years to create millions of jobs, modernize infrastructure, advance racial justice, compete with a rising China and combat climate change.

As outlined, the president’s infrastructure proposal is nearly three times the size of the American Recovery and Reinvestment Act (ARRA), the fiscal stimulus enacted during the Great Recession by former president Barack Obama. Obama’s fiscal efforts have, in the decade since his first term, been widely criticized by liberal economists and wonks for being insufficiently ambitious, leading to a sluggish economic recovery and a series of underwhelming elections that saw Democrats lose majorities in the House and Senate, culminating, in part, in Donald Trump’s unlikely electoral college victory in 2016.

To put into perspective just how much the Democrats have distanced themselves from Obama and Clinton-era economic thinking, often called “neoliberalism,” the climate spending in the American Jobs Plan, which totals over $1 trillion, would be more than the entire price tag of Obama’s stimulus.

And here’s the thing: It should be even bigger to move the economy to full employment, which wouldn’t just create jobs but would also empower workers and their unions — rebalancing the relationship between the owners of capital and labourers in an era of historically high inequality. Democrats should also not be afraid to raise taxes on the wealthy and corporations by amounts higher than those already proposed — not necessarily to generate revenue to pay for it all, but to promote a more dynamic, equitable and sustainable economy.

But first, let’s start with the good news for the president and climate activists like me. In terms of the problems identified and the breadth of policies proposed to address them, the American Jobs Plan includes many of the government interventions we need. To address the domestic sources of climate change, the United States must transform five sectors of its economy: transportation, which accounted for 28 per cent of emissions in 2018, according to the Environmental Protection Agency; electricity, which accounted for 27 per cent; industry, which accounted for 22 per cent; buildings, which accounted for 12 per cent; and agriculture, which accounted for 10 per cent. The American Jobs Plan has especially robust proposals for the power, industrial and transportation sectors, which together account for more than three-quarters of domestic emissions.

In the power sector, the proposal calls for $100 billion in appropriations from Congress to promote clean energy as well as the extension of about $300 billion in tax incentives to do the same. These investments and incentives are paired with a clean electricity standard that would require utilities to produce 100 per cent clean power by 2035 — a policy supported and co-developed by Data for Progress, the think tank where I work. Similar state-level policies have been among the country’s most effective actions to promote renewable power. The outline also includes a Clean Energy and Sustainability Accelerator, a public financial institution sometimes also called a “green bank,” capitalized at $27 billion, that would lend to clean businesses.

Industry is perhaps the hardest sector to decarbonize due to a number of technical challenges that make it difficult to produce essential materials such as steel and cement without emissions. Steel production, for example, requires the removal of oxygen from iron ore through a series of chemical reactions that occur at high heat with a form of coal called coke. Cement, similarly tricky from a climate standpoint, is made when calcium carbonate, more commonly called limestone, is mixed with clay in a kiln to produce “clinker,” which can then be ground into a paste and mixed with water to make the grey matter you see pretty much everywhere in the built environment.

Each of these essential industrial processes accounts for about eight per cent of global emissions. For these processes and others like fertilizer production and plastic manufacturing, we need to invest in the research, development and deployment of clean and innovative alternatives as well as in technologies that can capture the greenhouse gases released from industrial facilities.

According to the United Nations, humanity also likely needs new and mostly still unproven technologies to remove carbon from the atmosphere to limit warming to 1.5 C. The American Jobs Plan includes $35 billion in investments as well as numerous incentives to promote this essential climate-oriented industrial innovation.

The American Jobs Plan would also invest $621 billion to modernize transportation infrastructure, prioritizing rail and transit infrastructure over roads by about 1.43 to one, according to Urban Institute researcher Yonah Freemark — signalling a major shift in the way the nation will move goods and people. Perhaps most significantly, this total includes $174 billion to grow and onshore the electric vehicle supply chain, transitioning America’s famed car culture from internal combustion engines to batteries.

On the demand side of the electric vehicle market, Biden intends to use rebates and tax credits to encourage consumers to buy American-made cars, as well as new procurement rules that would leverage the purchasing power of the federal government to replace federal vehicle fleets, like the postal service, with zero-emission vehicles.

The elements of the plan focused on buildings and agriculture appear to be the least developed. To address the affordable housing crisis as well as emissions from buildings, the president intends to invest $40 billion into public housing — just enough to meet the needs of the nation’s largest public housing provider, the New York City Housing Authority. The rest of the plan relies on Community Development Block Grants and tax credits to build, preserve and retrofit two million affordable and sustainable homes.

The devil here will likely be in the details. Two million housing units sounds like a lot, but it’s actually only about 1.5 per cent of the nation’s housing stock. Moreover, block grants and tax credits have a mixed record for reaching the households most in need. Block grant formulas written in 1974 have become less effective at identifying low-income jurisdictions over time. Tax credits, on the other hand, benefit the owners and developers of real estate, rather than the tenants, by design.

But while these levers alone might fall short, the American Jobs Plan also references the creation of a new competitive grant program that would reward states and cities that revise zoning laws to promote housing density and integration — shortening commutes and the emissions they create and addressing enduring patterns of racial segregation in communities across the country.

The plan is lightest on details for the agricultural sector, where the major sources of emissions are livestock and soil. Cows can be fed and managed differently — or ideally, just decreased in our diet — and soils can also be fertilized and tilled in ways that produce fewer greenhouse gases. Where these efforts to abate emissions fall short in the agricultural sector, as in others, pollution can be offset through the preservation and regeneration of natural carbon sinks, such as kelp forests, as well as through the deployment of new technologies to suck carbon from the air.

Throughout the plan, Biden and his team endeavour to empower workers and people of colour in the fight against climate change. Some policies, like manufacturing and deploying electric buses that reduce emissions, create jobs and promote cleaner air in low-income communities of colour, address all of these objectives at once. In other areas, however, the administration had to choose how to prioritize these goals.

The decision to promote more domestic electric vehicle manufacturing, for example, will likely take more time than simply importing cars from China, which, at this point, holds a comparative advantage over the United States in the market for clean cars, selling more than three times as many as the United States in 2018. By competing with China in the next generation of autos, however, the United States can protect and create more jobs — many of them union. And it certainly doesn’t hurt that a lot of those jobs will be in political battleground states like Wisconsin, Michigan and Ohio.

Other policies, like the commitment to target 40 per cent of benefits to disadvantaged communities, will in some instances complement and in others compete with climate goals. Replacing every lead pipe in the country, for example, will help ensure everyone has clean water to drink, but it won’t put a dent in emissions.

Each policy has the potential to unite or divide the Democrat’s coalition of labour unions, people of colour, environmentalists and youth activists. Some policies, like the creation of a new Civilian Climate Corps that would put people to work protecting the natural environment and retrofitting the built environment, are directly adopted from demands pushed by activists like the youth-led Sunrise Movement.

Others, like investments in existing nuclear power plants and carbon capture retrofits for gas-fired power plants, will pit labour unions against environmental justice activists from the communities those industries often imperil. Uniting the environmental activists who oppose the development of fossil fuel pipelines with the workers who build them will be among the Democrats’ greatest challenges.

Biden has said he aspires to lead an FDR- or LBJ-sized presidency. Both Roosevelt and Johnson aimed for full employment, an economic situation where everyone who wants a job can find a job — including (and especially) workers who are stigmatized and discriminated against in the labour force, like Black people and women. A recent study led by Robert Pollin and the Political Economy Research Institute suggests the United States would need to invest about $10 trillion over 10 years to achieve full employment.

Such an economic situation, according to theorists like Michael Kalecki, a contemporary of John Maynard Keynes who shared many of the British scholar’s ideas, would increase profits as well as labourers’ share of them. Moreover, increasing spending on the right priorities, like the deployment of clean technology as well as research and development to make that technology as cheap as possible for the rest of the world, can only help our society limit and adapt to global warming.

But while progressives like me would like to see Biden invest even more than $2 trillion, moderates will likely balk at higher price tags, citing concerns about the deficit and inflation. The former anxiety is likely unfounded and the latter is likely exaggerated. Absent action, models show that climate change could cost the United States as much as 11 per cent of its GDP by the end of the century. Larry Summers, a prominent moderate economist and critic of Biden’s stimulus, has previously argued that well-designed infrastructure investments pay for themselves by increasing economic capacity and productivity while decreasing the burden crumbling roads and bridges place on future generations.

Another option might be to raise taxes to create more government revenue. The Biden plan proposes a number of tax increases over 15 years to help offset infrastructure spending, including raising the corporate tax rate from 21 per cent to 28 per cent. While this is a step in the right direction, the corporate tax rate was 35 per cent just four years ago, when Trump and the Republicans passed a number of major tax cuts for big businesses and the wealthy. Among other things, raising corporate taxes would actually increase demand for many of the tax credits used to build clean energy, sustainable industry and affordable housing. (When taxes are low, corporations have less need to pursue tax credits that lower their bills.)

Controlling inflation, like limiting the deficit, has also long been a priority for moderates, who argue that a hot economy runs the risk of raising the price of goods and services. Historically, the Federal Reserve has responded to those booms by increasing interest rates, making it more expensive to borrow and decreasing the amount of money flowing through the economy. But such a move would also slow economic growth, counteracting the intention of the American Jobs Plan. With a new report showing the United States added over 900,000 jobs in March, concerns about inflation are growing among moderates and conservatives.

Now, if you’ve made it this far, you might be detecting a pattern: Biden and his party are going to have to balance a lot of competing interests, including coalition partners with divergent policy preferences and ideological camps with conflicting views on the right amount to invest and tax. Further research on the American Jobs Plan can help policy-makers better understand how many jobs it would create as well as the emissions and pollution it might reduce, while ensuring that households don’t have to spend greater shares of their earnings on goods and services. It’s not too late to make some adjustments where they’re needed.

But ultimately, all of these questions will be settled the old-fashioned way: Through politics. To get the American Jobs Plan signed into law and give Democrats the best opportunity to hold the House of Representatives and the Senate in the 2022 midterms, Biden will have to get that part just right. And here, time is neither the president's nor the Democrats’ friend. As shots get into arms, the economy opens up and members of Congress in battleground states and districts start focusing on their re-election campaigns, the appetite for a big, partisan and potentially politically risky infrastructure vote will likely dissipate. Though Biden has much to consider if he wants to go down as one of the greats, this window of opportunity won’t last long.