NICK EICHER, HOST: It’s Wednesday, the 7th of April, 2021.
Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Nick Eicher.
MARY REICHARD, HOST: And I’m Mary Reichard.
Up next: spending bigger than ever in Washington.
Democrats last month approved President Biden’s near-$2 trillion dollar spending bill. Just days later, the president said he would soon unveil a plan to spend trillions more and last week, he did. Speaking in Pittsburgh, he pitched a $2.3 trillion dollar proposal.
BIDEN: It’s not a plan that tinkers around the edges. It’s a once in a generation investment in America – unlike anything we’ve seen or done since we built the interstate highway system and the space race decades ago.
EICHER: A once in a generation investment with a once in a generation tax to pay for it. According to The Wall Street Journal, the biggest corporate tax hike in 50 years.
Republicans say that’s the last thing we should do as the economy recovers from pandemic-related shutdowns. They also note that the economy is already showing signs of bouncing back, and they say the Titanic spending bill is neither responsible nor necessary.
The White House says the proposal, which it’s calling the “Build Back Better Plan” is needed to sustain the economic growth.
REICHARD: Joining us now with more insight on what’s in the bill and what it will mean for Americans is David Ditch. He studies budget and transportation policy at the Heritage Foundation. David, good morning!
DITCH: Thanks for having me.
REICHARD: Well, the White House has pitched this as an infrastructure bill, but only a portion of it would be spent on what we normally think of as infrastructure. If we use a very broad definition of that word, infrastructure, what portion of the bill fits it?
DITCH: If we’re talking about construction projects of all sorts, generally, it’s about half of the value of the program. But the first thing that comes to mind for most people, when we think about government infrastructure projects, is things like roads and bridges. And based on the numbers I’m seeing any more like 5 percent of the plan would go towards that work.
REICHARD: Is it true that the United States does have actual infrastructure problems that need to be fixed, though?
DITCH: I would say a lot of the rhetoric around roads and bridges is overblown. The people talk – constantly use the phrase crumbling to describe our infrastructure. But if you compare things, decade by decade, generation by generation, the quality of our roads and bridges is in fact improving. There is certainly not any sort of a crisis, necessitating trillions of dollars spending.
REICHARD: There are other elements in this plan. I see things like upgrading the power grid, expanding broadband access, those things are potentially beneficial. What do you think about those?
DITCH: I think that those are activities that should be investments that should be made by the private sector and not by the federal government. In the case of rural broadband, you’re essentially saying that people who live within areas with broadband, who didn’t get subsidies should subsidize people who live in remote areas. I don’t think the federal government should be in the business of subsidizing people, whether they live in rural areas, or urban areas, and this plan tries to subsidize just about everyone a little bit, but it’s going to make all of us poorer as a result.
REICHARD: Can you give us a high level picture of what’s in the rest of the bill and where the money that’s not being spent on infrastructure would go?
DITCH: The biggest single piece that has absolutely nothing whatsoever to do with infrastructure is $400 billion in spending that would be towards providing federal subsidies for home care, health care. And that’s something that should be its own discussion, packaging that with dozens of other provisions that are mostly about construction projects is, frankly, inappropriate. I mean, unfortunately, when you have a bill that spends this much money on this many different things, it’s really hard to say, oh, it does X, Y, and Z when you have to go through all the letters of the alphabet to really cover it.
REICHARD: Let’s let’s try to get a sense of scale with this. As we said, President Biden wants to pay for this in part with a corporate tax hike. If the corporate tax rate jumps from 21 to 28%, as proposed how much of that increased taxation would go to pay for this new infrastructure, plus all the other spending?
DITCH: One of the things that’s really amazing about this plan that’s been put forward by the administration is that they envision 15 years of tax increases on businesses to pay for eight years of spending. Yet there is an inevitable result when you have such huge programs where the federal government would take over responsibility for spending decisions that are normally held by businesses by state and local governments, is that in eight years from now, all those entities are going to be partially or completely dependent on these federal handouts and they’re going to come looking for more money, except we’ve already done this big tax increase and they’ll need to increase taxes on something else to pay for it.
REICHARD: And then that move would partially undo tax cuts that were passed in 2017?
DITCH: Yes, the corporate tax increase would revert business taxes to where they were before the 2017 tax cuts. And the reason why the 2017 tax cuts on businesses were necessary is that the US, because of a combination of federal and state taxes, had very uncompetitive business taxes relative to the rest of the world. It made us a worse place for businesses to invest, it made us a worse place for people to try to start businesses. And when we’re in the midst of trying to jump-start an economic recovery, this is exactly the opposite direction, because business investment is the number one thing that’s going to create jobs and get the economy back to where it was before the pandemic.
REICHARD: And for the average person, what would that look like?
DITCH: It would look more like the sluggish economic recovery that we saw after the 2008 financial crisis, unemployment took years to get down below 6%, let alone 5% and 4%, that were some of the numbers that we saw after 2017. And we have no idea how good the economy can get. If we make the right choices on taxing and spending. We do know that the long term prosperity of the country doesn’t depend on growing the federal government. It depends on growing businesses.
REICHARD: There are those who will say all of that spending must surely create at least some jobs. David, do you think that that might balance out the impact of the tax hikes?
DITCH: Absolutely not. Federal infrastructure spending is an incredibly inefficient way to create new jobs in the economy. For one thing, when you have a big surge of federal spending, for instance, we saw this in 2009. under the Obama administration, what happens is you pull skilled construction workers off of projects that are being done in the private sector, and you pull them into these government funded projects. So that just means it’s harder for private construction work to get done. And again, that’s slowing businesses down. Also, construction projects involve lots of raw materials, lots of machines. So the actual human part of the equation is lower than it would have been, say, a couple generations ago. So you end up spending a huge amount of money per worker. And that also, it takes years, in many cases, for major projects, to get through all the hoops and cut through all the red tape that the federal government imposes.
REICHARD: And you also say that this bill will harm our system of divided government. What do you mean?
DITCH: While about half of this plan is focused on construction projects, much of the work that would be done is normally handled by state and local governments. So we’re talking about school construction, we’re talking about water and sewer lines. We’re talking about things like the electrical grid that are normally handled by the private sector. And as a result, all of these areas are going to be captured by the federal rules and regulations and micromanagement. It means that rather than being able to go to elected officials in town, a city, the county or even the state, to give your input on the local infrastructure that you use on a daily basis, things are going to increasingly be run through Washington DC. The problem is that Washington doesn’t even have the ability to properly manage the government we have today, let alone piling even more power and responsibilities on top of it.
REICHARD: David, is there anything else that you want the public to know about this bill that maybe isn’t being reported?
DITCH: The thing that really worries me is that there is about $700 billion in what I would deem corporate welfare. And you’re taking from businesses as a whole and you’re giving to select, in many cases politically connected and politically favored, businesses and industries. And, again, that’s more federal micromanagement of the economy that, over the long run, is going to slow things down.
REICHARD: David Ditch is with the Heritage Foundation. He’s been our guest today. David, thank you so much for joining us.
DITCH: You’re very welcome.