President Biden’s Tax-and-Spend Plan Expands Federal Power, Not Jobs

On March 31, the Biden Administration released details on its “American Jobs Plan.” Containing $2.25 trillion in new spending, $400 billion in tax credits, and $2.75 trillion in tax increases, if passed as proposed, the plan would be among the largest pieces of legislation in American history. The sprawling nature of the proposal, which includes taxes, transportation infrastructure, schools, health benefits, economic incentives, and more, makes the package difficult to analyze and summarize for public debate.

This has become standard practice in Washington: Leading Members of Congress bundle disparate policy measures into a handful of bloated legislative vehicles per session, and deem them “must pass” in order to pressure rank-and-file Members to vote in favor of them regardless of their specific policy concerns.

However, this proposal contains an additional element of duplicity. In order to create a favorable impression for the plan upon release, the Administration and its allies in Congress have leaned heavily on the word “infrastructure” to make it seem moderate and non-controversial. This is an opportunistic attempt to mask the true nature of the plan by taking advantage of a term that has a long-standing meaning in the context of federal policy.

Understanding why the Biden plan is a dramatic departure from traditional federal infrastructure policy, and the startling implications of its many provisions, makes it clear that the proposal would be a deeply radical and dangerous path to take.

“Infrastructure” and Bipartisanship

Reauthorization of federal activity on surface transportation and aviation typically passes with near unanimous support in both chambers. These two areas cover a majority of federal infrastructure activity and are focused on transportation systems that connect the entire nation. In addition, federal spending on highways and airports is primarily funded by taxes levied on people who use the infrastructure, which follows the “user pays” principle.

The existence of a bipartisan status quo should not distract policymakers from the many areas in dire need of reform, including wasteful spending, burdensome regulations, and unnecessary federal micromanagement of activity that should be the domain of the private sector and state and local government.

Yet the status quo does provide a baseline for what infrastructure means in the context of federal policy to both legislators and the general public. Regrettably, the Biden Administration and congressional leaders have chosen to warp the concept of “infrastructure” for the sake of attaching many provisions to the plan that would be easier to criticize in their proper context. This includes spending on physical assets that are not in the federal domain, such as school buildings and local water systems, and spending on economic and benefit programs that are far outside any reasonable definition of “infrastructure.”

Only about two-fifths of the plan’s spending would go toward building or upgrading physical assets; a smaller portion of that would go toward transportation infrastructure. A mere 5 percent to 6 percent of spending would be dedicated to the roads, bridges, and airports. Lawmakers used a similar approach when promoting the $1.9 trillion American Rescue Plan Act (ARPA) of 2021, which they typically referenced as “COVID-19 relief” despite allocating far more to a variety of special interest handouts than to public health.

In addition, the Biden spending plan completely divorces infrastructure spending from taxes and fees on infrastructure use. The “user pays” principle, while not perfectly adhered to at the federal level, is meant to ensure both fairness and accountability. Those who do not use a road, harbor, or train should not pay the same (or more) for its construction and upkeep than those who use it regularly. In the same vein, people who use infrastructure regularly and pay user fees have a stronger incentive to demand proper maintenance. By paying for a wide range of infrastructure with business taxes, the plan would shift responsibility away from users, creating a web of unfair cross-subsidies and reducing accountability.

While many Democrats have cited bipartisanship as a desirable goal of an infrastructure-focused spending package, congressional leaders have made it clear that they will likely use the powerful legislative tool of budgetary reconciliation to pass as much of the proposal as possible without Republican support. Democrats rejected an effort by moderate Republicans to produce an infrastructure plan of less than $1 trillion before it was even released.

The Administration’s choice to load the package with a multitude of progressive tax-and-spending provisions rather than producing something that remotely approaches the centrist status quo demonstrates that it also anticipates a partisan reconciliation process rather than building cross-aisle support.

Examining the policy and political implications of the Biden plan shows that it would move American governance far to the left on a variety of issues. In the process, it would create a larger and more powerful federal government, depress the private sector at a crucial time for the post-pandemic economy, and cause widespread damage and waste in the process.

A Radical Economic Ideology

Underlying the American Jobs Plan is a radical ideology. This Administration believes that innovation, economic growth, and prosperity stem first and foremost from government spending. The private sector—the American people, businesses, institutions, and civil society—are incapable of knowing what is good for them, or of making correct decisions about their own resources. Only the elites and government experts make wise and worthwhile investments.

Treasury Secretary Janet Yellen said in a recent speech that governments around the world “can use a global minimum tax to make sure the global economy thrives,” which, she claims, “spurs innovation, growth, and prosperity.”

Under this ideology, private-sector resources must be taxed, especially from businesses, and reallocated to the government to make “critical investments.” The Treasury Department’s report outlining the more than $2 trillion tax increase on American job creators explicitly states: “The President’s Made in America tax plan is guided by the following principles:… Collecting sufficient revenue to fund critical investments. A primary objective of the Made in America tax plan is to promote competitiveness by funding critical new investments.”

According to two analysts writing in The Wall Street Journal, the President’s plan “marks a major turning point for economic policy. The gamble underlying the agenda is a belief that government can be a primary driver for growth.”

Quite simply, the plan is a rejection of the American system of free enterprise and basic economics.

Top-down central planning does not work, no matter where it is tried. No one person, or even group of people, can effectively dictate outcomes and take into account the unseen and second-order consequences. In reality, it is the decentralization of economic decision-making that “leads to more information being taken into account,” leading to better outcomes. Economic freedom is the key to human progress. Higher levels of economic freedom lead to more prosperity, higher levels of health and education, and more upward mobility and social progress.

Moreover, economic liberty is the moral and human option. The “soul crushing dependence” that the intrusion of the state in peoples’ lives causes is “incompatible with the pursuit of happiness.”

Yet instead of removing barriers to innovation and economic growth—barriers often caused by government regulation—the big government “experts” simply recommend even bigger government.

In promoting more government direction over the economy and investment decisions, the Administration has cited the challenge of China. President Joe Biden proclaimed that his plan “will grow the economy, make us more competitive around the world, promote our national security interests, and put us in a position to win the global competition with China in the upcoming years.” Brian Deese, Director of the National Economic Council, says, “There’s not a market-based solution to try to address some of the big weaknesses that we’re seeing open up in our economy when we’re dealing with competitors like China that are not operating on market-based terms.”

But the way to outcompete China is not to become more like China, with its state-directed economy. The United States is engaged in an ideological competition with the Chinese Communist Party. As noted by The Heritage Foundation’s Dean Cheng and Olivia Enos, “China’s ideology, rooted in Marxism–Leninism, Maoism, Chinese history, and now Xi Jinping Thought, is fundamentally incompatible with the United States and its ideology of rule of law, democracy, free-market capitalism, and freedom of religion.”

Instead of abandoning America’s fundamental principles and centralizing more economic power in the federal government, American politicians should champion the power of free markets, which has allowed the U.S. to be the greatest economic power in the history of the world.