Thinking big: the $2trn Jobs Plan addresses domestic problems, China, and the climate crisis
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G E T T Y
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$2.7trn. But the grand total matters less than the timing. Unlike the Coronavirus Aid, Relief and Economic Security (Cares) Act – the first $2.2trn Covid-19 relief stimulus, unleashed at the end of March 2020 – and Biden’s $1.9trn Relief Act, both of which were designed to be disbursed in a matter of months, this infrastructure programme is spread over eight years.
At a generous estimate, half of the $2trn to $2.7trn is devoted to tackling the climate crisis. Spreading $1trn to $1.3trn over eight years comes to around 0.5 per cent of current GDP annually. That is far short of any reasonable estimate of the investment needed for decarbonisation. The Bernie Sanders camp, backed by the writer and activist Bill McKibben’s 350.org campaign, wanted $16.3trn. The Thrive Act proposal supported by groups associated with the Green New Deal is asking for $10trn, with 80 per cent focused on the climate.
The size of those proposed schemes reflects the unprecedented scale of the challenge. But unlike the US’s fiscal response to Covid-19, which delivered trillions of dollars in stimulus cheques and pay-cheque protection schemes to households in the face of a historic shock, the Biden infrastructure programme, for all its clever politics, dispenses its funding in dribs and drabs. When you break down the items included in the package, its true modesty becomes clear. On passenger railway transport – an area in which the US lags far behind China and other advanced economies – the Jobs Plan proposes $10bn per annum over eight years. That, as the fine print states, should allow America to “address Amtrak’s repair backlog; modernise the high-traffic Northeast Corridor; improve existing corridors and connect new city pairs”. It will no doubt create good jobs. What it will not do is catapult the US into an age of high-speed rail travel to match that pioneered by Japan and China. The latter currently has 19,000 miles of high-speed track; America boasts 500 miles.
It is indicative of the lack of transformative ambition that the proposed spending on electric cars is larger than that targeted at public transport. Car culture, one of the symbolic essentials of the American way of life, is clearly non-negotiable. A total of $174bn is allocated to the electric vehicle sector, including spending on the motor industry, purchase subsidies and car-charging infrastructure.
China has 19,000 miles of high-speed rail track;
the US boasts 500
The programme expects to build 500,000 charging ports by 2030. By the same date, Germany aims for one million and China at least three million. The last time the numbers were compared, Americans completed five times as many vehicle miles per annum as Germans. There will be tax incentives for the purchases of new electric vehicles, but there is nothing in the plan for getting the internal combustion fleet off the road. In 2020 there were around 287 million registered vehicles in the US, practically all of which need to be retired as soon as possible,
which is why the Sanders-McKibben plan allocated $2trn of its $17trn to a giant “cash for clunkers” programme.
Every day a wheezing fleet of dieselpowered yellow school buses carries 25 million children to school. It is one of the rites of passage of American childhood. Collectively, these pupils travel four billion miles every year, belching diesel fumes all the way. The Biden administration proudly announces it will electrify 20 per cent of them by 2030. What of the rest?
The American Jobs Plan is not a paradigm-busting vision. That impression is confirmed when we consider the funding side. It is significant, in fact, that the Jobs Plan has a funding component at all – the Relief and Cares Acts did not, other than to simply borrow the money. By contrast, the Jobs Plan is tied directly to revenue raising. It is covered by what Washington jargon refers to as “pay-fors” – offsets or savings from other government programmes.
Viewed within the narrative of Bidenomics, which supposedly marks the dawn of a new era, this is puzzling. On the basis of America’s fiscal track record in recent decades of running up a succession of huge deficits with no adverse consequences, it is hard to see how anyone can argue for the need to balance taxes and spending. If there is such a thing as Bidenomics, it is an outlook founded precisely on the rejection of that equation: spend what is necessary to get the US economy to full speed, worry about finances later.
But you don’t need to be any kind of radical to think financing an investment programme with debt makes sense. That’s how any business or household with good credit does it. Borrow now and pay later, as the investment pays off. But that’s not how the Biden administration is selling the investment programme. After the initial surge of unfunded relief spending, it is now linking investment to revenue, and the logic is not economic but political.
The centrist Democrat Joe Manchin, elected incongruously in the Trump country of West Virginia, is digging his heels in. He demands “pay-fors”, so the social justice technocrats of the Biden administration have come up with a plan: link the longterm investments of the infrastructure programme to the right kind of tax increases; restore America’s corporate tax rates to their pre-Trump levels. One can see the progressive logic in this: taxes are clearly a key tool for influencing income and wealth distribution. But given the furious lobby fight that such tax increases will entail, the effect has been to limit the overall size of t
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