As we are nearing the six-month mark of Pres. Joe Biden’s presidency, his administration is still struggling to make milestone climate and infrastructure plan a reality.
Titled the American Jobs Plan, this $2.3 trillion climate and infrastructure bill that Democrats claim will create millions of jobs, was passed by the House earlier this year but hasn’t cleared the Senate so Biden can sign it into law. The Democrats hold a Senate majority but can’t pass the bill without bipartisan support. The two parties have had negotiations related to the bill, but to no success passing the American Jobs Plan.
With almost all pieces of legislation that call for spending, the American Jobs Plan has received significant criticism from opponents. The American Jobs Plan was introduced at the end of March, and met with staunch GOP opposition. Sen. Minority Leader Mitch McConnell said after the bill was introduced that he wouldn’t support any legislation that calls for “massive tax increased and adding trillions to the national debt.”
In addition to the spending, Republicans also criticized how the Biden Administration defined infrastructure in the American Jobs Plan, including things like subsidized child care, giving $10 billion to Historically Black Colleges and Universities (HBCU) for Research & Development education and raising the federal corporate tax rate from 21 percent to 28 percent. The Biden Administration’s full description of the American Jobs Plan can be found here.
Raising the corporate tax rate is the other major hurdle Democrats must cross if they want to turn the legislation into law with bipartisan support. Lowering the rate to 21 percent was part of a keystone tax reform victory for the GOP and the Donald Trump Administration. Democrats vowed to undo the “Trump tax cuts” as the law has been called, and raising the corporate tax rate would be the first step toward ending them.
Republicans are not the only ones finding fault with Biden’s climate and infrastructure plan. The Tax Foundation, an independent nonprofit committed to researching government spending, said after its own analysis that the bill would reduce gross domestic product (GDP) by a half-percent and result in 101,000 fewer jobs. The Tax Foundation claims to use mathematical models similar to those used by the Congressional Budget Office (CBO). Also according to the Tax Foundation:
“We estimate the infrastructure spending would increase long-run GDP by 0.3 percent, but this positive economic effect is entirely offset by the increase in corporate taxation, resulting in less corporate investment which reduces GDP by 0.5 percent in the long run, reduces wages by 0.5 percent, and eliminates 101,000 full-time equivalent jobs. Gross national product (GNP), a measure of American incomes, falls by 0.3 percent in the long run—somewhat smaller than the drop in GDP—as the combination of permanent tax increases and temporary spending would in the long run reduce the deficit and payments to foreign owners of the federal debt.“The Tax Foundation
The Tax Foundation also claimed through its own research that long-run GDP would be reduced by 0.9 percent, while wages would be lowered by 0.7 percent and 162,000 jobs would be eliminated. Most of that effect is due to the increase in the corporate tax rate, the nonprofit said. In addition, raising corporate taxes would discourage corporate investment, the Tax Foundation claimed. It expects the American Jobs Plan to ultimately create less jobs, not more.
What’s in the bill?
The American Jobs Plan calls for:
- $650 billion to upgrade public schools, commercial buildings and houses
- $621 billion for transportation, including repairing bridges and roads
- $400 billion to caregivers of the elderly and people with disabilities
- $300 billion for manufacturing
- $180 billion for research and development
- $11 billion to improve water systems nationwide
The legislation also proposes guaranteed union jobs in underserved communities, pimaril in communities of color. One promise Biden made during his campaign was ensuring “climate and economic justice” for underserved communities.
So what if Democrats can’t pass it?
Democrats remain optimistic that they can pass legislation while finding common ground with Republicans. The two parties have made attempts to move closer to a deal, but nothing has yet been reached.
Senate Democrats could move on and pass the American Jobs Plan wihout GOP support, through a process called budget reconciliation. To pass a bipartisan bill, the Senate would need a minimum of 60 “yea” votes. This is a rule for legislation that significantly impacts spending.
But the majority party holds a metaphorical trick up its sleeve, called budget reconciliation. Instead of meeting the 60-vote threshold, Democrats would need only a simple majority to pass the bill. The rule was put in place so the budget can’t be stalled in the Senate. The rule extends to bills that change spending or revenues, with all other legislation excluded as a measure to protect the minority party. You can read more about budget reconciliation here.
It’s not clear if this route could work. A 50-50 tie, which coincidentally happens to be the number of Republicans and Democrats in the Senate, would be broken by Vice President Kamala Harris’s vote. But it is difficult to tell if all 50 Democrats would be on board with using this rare power.
Biden and Senate Democrats could be hindered by two of their own – Joe Manchin, D-West Virgina and Kyrsten Sinema, D-Arizona. According to news reports, both senators want Democrats to find a bipartisan solution. If Senate Democrats were to go forward with budget reconciliation, it is unclear if either senator would get on board. Multiple news outlets reported in recent weeks that Biden has met with both lawmakers to find common ground and get them to align with the rest of the party.
What happens next?
Biden and the Democrats have more legislation they want to pass as they continue to epnact their agenda while they hold the supermajority. House Speaker Nancy Pelosi, D-California, said earlier this year that she wanted the legislation signed into law by Independence Day. As the calendar nears mid-July, and the 2022 midterms inch closer, Democrats could begin feeling pressure from their constituents, which could prompt them to take drastic measures to pass spending bills. At the same time, Republicans will no doubt use the lack of results and any action related to budget reconciliation as political fodder.
As for the Biden Administration, members of Biden’s Cabinet have traveled the country to promote his infrastructure plan. Democratic legislators have returned to their respective states and congressional districts to do the same. Republicans have countered with infrastructure spending proposals of their own, but the two sides have not yet reached a deal.
What would this bill do if passed?
The elephant in the room with any spending bill will always be taxes. The Democrats have not been shy about their intention to raise taxes. They focus heavily on taxing the wealthiest Americans when they propose how to pay for new programs. But this bill, if passed as is, would raise corporate taxes, compelling corporations to pass off the difference from the higher tax rate to their consumers.
The federal government is promising more jobs with better pay and an overall better quality of life for every American. Their methods to get people there will come at a cost, and many more than just the “once percent” will find themselves paying more in taxes in some capacity. This is despite Democrats telling these same people they won’t pay more.
Republicans are often accused of ignoring the national debt when they are in power, and returning to it when they are in the minority. While evidence supports this claim, McConnell is correct (this time) when he says this bill will add to the debt.