Infrastructure bill shows US system can still work


US politics & policy updates

An art that had seemed almost lost in Washington is being relearned. The $1tn infrastructure bill, passed by the Senate on Tuesday, is a rare piece of bipartisan compromise. By winning the support of a few moderate Republicans, it has shown that at least some in the party think there are political gains from breaking with Donald Trump. By getting the bill through, Joe Biden has also shown he is a serious president, whose 36 years on the Hill count for something in dealmaking.

Any evidence of bipartisanship in what has been the most partisan era since post-civil war reconstruction is to be applauded. It is also a vindication of Biden’s strategy of proving that the system can still work, in spite of everything. Ironically, Trump could have passed an infrastructure bill — both popular and desperately needed — at any time in his presidency had he been ready to do the hard work required.

Yet getting this bill through the Senate is only one stage in a complex series of parliamentary manoeuvres. It also has to pass the House of Representatives. Nancy Pelosi, the Speaker, has said she will not vote on the infrastructure bill until both the House and the Senate have passed the much larger $3.5tn “human infrastructure” budget bill that would be entirely along partisan lines. She would lose progressive votes on infrastructure if she did not insist on this precondition — and, with a majority of just eight, cannot afford to lose anyone on her left flank.

As a result, the US is going to get both bills — which would be preferable — or neither. The infrastructure package has limitations; only $550bn of its headline figure is new money, and it would be spread out over the next decade. That is far better than nothing, however. Money for broadband, electric vehicle charging stations, road and mass transit maintenance is all badly needed — even if still way below the $2.6tn the American Society of Civil Engineers estimates is needed to maintain existing US infrastructure over the next decade.

The larger bill has its flaws and there are concerns about its inflationary impact. But its good points outweigh the bad. Among these are the child tax credit, which would sharply reduce US poverty levels, and universal free pre-K learning for three and four-year-olds which would narrow educational disparities. The bill also includes comprehensive family and medical leave, which would bring US employee rights into line with other advanced countries, and significant investments in clean energy — a help in meeting Biden’s goal of halving US carbon emissions from 2005 levels by 2030.

The planned $80bn investment in the Internal Revenue Service would pay for itself many times over in higher tax collection. The bill would also raise the corporate tax rate from 21 per cent to 28 per cent, needed to help fund the spending provisions. There is no evidence the higher rate would reduce domestic investment. More than doubling capital gains tax to over 40 per cent is, by contrast, an unnecessary risk. It would be preferable for Biden to break his pledge not to raise taxes on the middle class by lifting the gasoline tax for the first time since 1994.

If both these bills pass, Biden will have shown that Washington can work. The president will also have made a break with the prevailing fiscal orthodoxy since Ronald Reagan, demonstrating that the US can enact big spending and investment bills without crowding out the private sector. He will have shown, too, that democracies can still deliver ambitious investment plans — rebuffing claims by China and other autocracies that these are beyond the sclerotic systems of the west.


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