The second most striking feature of Biden’s so-called infrastructure plan, after the eye-popping figure of $2 trillion (Washington isn’t interested in billions these days), is its relative lack of capital investment in actual, tangible infrastructure.
The American Jobs Plan is much less about “hard” infrastructure than it is about pursuing the Democratic Party’s ideals for societal change — including the Green New Deal — and centralizing control of every aspect of public life into the hands of the federal government. And, of course, it is about rewarding the political base that brought the current administration to power. The journalists at Mother Jones said it best: “It’s the closest we’ve come to a realization of the Green New Deal, an ambitious collection of progressive proposals to combat climate change, racial injustice, and gender inequality as much as one to upgrade asphalt.”
So this isn’t really about bridges and tunnels. What it does represent, on the other hand, is the most far-reaching, Leviathan-like attempt at central planning and control that this country has ever seen. It is better suited to places like Stalinist Russia or Maoist China, both of which were prepared to destroy entire industries, decimate their economies and impoverish their people in order to achieve a political and ideological objective. The Biden plan will continue to squeeze the life out of our previously thriving oil and gas industries, jeopardize our hard-won energy independence, distort capital and resources from their best and highest use and thereby cost more jobs that it will create.
To be sure, most Americans of both political parties whole-heartedly agree with the need to improve the U.S.’s aging and in some cases decrepit infrastructure. The Texas power crisis, which I wrote about recently, underscored the urgency. There is very little dispute about fixing and upgrading our roads, highways and airports and in making more resilient our electrical grid and other critical infrastructure. Most Americans also support ensuring that rural Americans have access to high-speed internet, a basic but essential utility that many of us in cities now take for granted. President Trump laid out an ambitious plan of his own, but it did not make much progress in Congress in the deeply polarized and embattled days of his administration.
The contentious elements of these types of large capital outlay plans always comes down to who pays and who benefits. This one is different, however, in that so much of the proposed spending is not about infrastructure at all, but about reshaping society into the image of the progressive wing of the Democratic Party, which clearly is in the driver’s seat of the Biden administration. The plan’s priorities are to “overcome racial, gender, and other inequalities” with a focus on climate change, gender treatment in the sciences and workplace, and “addressing long-standing and persistent racial injustice.” These objectives, along with greater control of public school education, including pre-school child care, all feature prominently, as does unionizing and raising wages for home care workers. Highways that are inherently racist will be destroyed and rebuilt on more equitable terms.
So how will all of this get paid for, by the way? The plan calls for massive corporate tax increases, eliminating portions of the Trump-era tax cuts that contributed to the U.S. economy’s private sector led acceleration in 2017-19. Specifically, the “Made in America Tax Plan” proposes to raise the corporate tax rate by one-third (from 21 percent to 28 percent) and to raise the global minimum tax rate for U.S. multinational corporations, among other items. The plan proposes eliminating tax benefits and credits for fossil fuel related industries, in order to “put the country on a path to net-zero emissions by 2050.” This of course will further damage U.S. competitiveness and increase our dependence on foreign powers. Moreover, these broad-based tax increase proposals are misguided and inefficient. Infrastructure is one area in which it is relatively easy to assign specifically targeted, use-based taxation through tolls, licensing permits, sales or usage taxes and other means. Those who most benefit from the good or services should primarily be the ones to pay for it. This is possible, but is not part of the Biden plan.
The costs of the Biden plan will almost certainly outweigh the benefits. The Congressional Budget Office has already pointed out the inconvenient truth that federal investment is grossly inefficient. It produces half the return of private sector investment, it reduces state and local government investment (making every federal dollar spent worth only $0.67), and federal borrowing and taxes crowd out private investment that otherwise would come into play.
As I wrote last year, University of Chicago economist Friedrich Hayak pointed out decades ago in The Fatal Conceit that this kind of centralized, top-driven economic policy results in several systemic distortions. One of these massive distortions is exorbitant spending on domestic investment projects with no real benefit or use, along with underinvestment elsewhere, resulting from the mismatch of central government mandated production and investment objectives disconnected from actual consumer demand or market needs. This distortion led to the creation of the infamous ghost cities of China — massive developments without inhabitants — highways to nowhere and bank balance sheets bloated with bad loans that will never be repaid. These are the conveniences of a totalitarian state, but eventually, truth will come out and there will have to be an accounting with reality.
Under Biden’s infrastructure plan, I fear we are similarly on a road to nowhere.
Michael Wilkerson is executive vice chairman of Helios Fairfax Partners, an African-focused investment firm and author of Stormwall: Observations on America in Peril.