The Biden American Jobs Act

Biden's infrastructure plan puts new taxes on the wealthiest Americans.  It's popular.

No surprise.

In this year of COVID, the rich have gotten richer. 

It has been a year now, and we seem to be coming out of the COVID shutdowns, ready or not. People with investments had a very good year.  Real estate prices are up. Good for people who owned a home; bad for young buyers hoping to buy, but ultra-low interest rates make mortgage costs low. Win-win, thanks to an aggressive Fed. 

Forbes list

Assuming an investor in stocks did not sell out in mid-March a year ago, investors are richer today than they were a year ago. Stocks went up. Investors apparently are looking past the recession, but directly at the giant infusions of cash paid businesses by Trump's COVID relief bill, then to the poor and middle income folks benefitting in Biden's COVID bill. That money is going somewhere; poor and middle-income people spend it, and richer people own businesses where it is getting spent. The headlines are that the richest Americans and biggest tech companies got much, much richer. 

Biden's proposed $2 trillion infrastructure bill, called the American Jobs Plan, raises taxes. This is the part that focuses GOP opposition. They call it job-killing. It reverses the 2017 Trump tax cut on corporate taxes. Trump's bill cut them from 35% to 21%; Biden proposes raising them back to 28%. Biden also proposes raising taxes on Americans earning more than $400,000 a year, which is approximately 1% of earners. Over a fifteen year period the increased taxes will pay back the $2 trillion, and then start paying down the deficit, according to the White House. If Modern Monetary Theory stays in vogue, the deficit won't be paid down. Americans will only deal with the deficit when we are absolutely forced to do so by catastrophic consequences if we don't. 

[Note: I think Modern Monetary Theory (spend all you want; deficits don't matter) is crazy and dangerous, but Republicans ignored deficits when Trump was in office, and they sold it as a job booster. It is a pleasant idea and a bi-partisan one, since Democrats like to spend in general and Republicans like to spend when there is a Republican in the White House. The idea has taken root, and will persist until circumstances force a change.]

A big segment of the new money in the pockets of American consumers from the first round of COVID relief ended up buying goods made in China. A rice importer from China tells me that shipping containers are so in demand in China that they are shipped back empty from the U.S. rather than sit around on American docks awaiting goods to ship back to China in return. Infrastructure spending will be very different. Construction crews working on bridges, roads, power lines, and broadband are American workers working in America. Republicans on Fox scoff at "green energy" infrastructure, saying that solar panels are made in China, but most of Biden's proposal, including home weatherization and community college training, criticized as not really being infrastructure, is spent on Americans in America. 

The Biden plan has good things going for it. 

Rich got richer.

*****Most of the money is targeted to be an "investment" rather than "spending" and it is being spent in America on things that will make America more competitive once it is spent. Investments pay back more than they cost. The money circulates. It doesn't disappear.

*****They are taxing the richest to pay for it. The wealthiest Americans and largest businesses have the best opportunities to do tax avoidance, but some of it will be captured and some of it will address the wealth and income disparity in America. This is not a new trend. It has been a persistent one for 50 years and has come to a head. Populist nihilism on both left and right are a symptom. 

The U.S. now has less social mobility than does Europe, and the cohort of people born since 1980 now are unlikely to do as well as their parents--which is a fundamental change in the "American Dream" story of progress. Downward mobility creates a self-reinforcing feeling of decline and despair. It feeds the notion that the game is rigged against you, so why not destroy the game? GOP voters willing to overthrow an election are a symptom. 

*****Biden is branding it correctly. He is calling it the American Jobs Act. It is another iteration of federal intervention in the economy for the purpose of spreading wealth down to the bottom half of Americans, as was the Biden COVID relief plan a month ago. It could be described as social welfare democracy. It is income re-distribution. It attempts to do what the economy is not doing--spreading wealth downward. Biden is not attempting to brand this as the "Green New Deal" or as a big win for Sanders-style economics. It's a jobs bill. Sanders went to the traditional manufacturing city of Pittsburgh to announce it. Infrastructure jobs are done largely by men, men in hard hats, working outdoors. It is the demographic that Democrats appeared to have ignored--or scorned--as the party's base constituency moved from working men to college-educated women. Biden relates to them and wants them back in the Democratic coalition.

https://equitablegrowth.org

*****The politics are good. Let Republicans argue that Jeff Bezos deserves more money, and that his attempts to block a union in Alabama are reasonable. Let Republicans argue that we cannot afford to build roads and bridges and extend broadband into rural areas. Republican Senators and Representatives are listening to the lobbyists and to the past. Trump changed the GOP, but its officeholders are stuck in old-style thinking. Trump trained his base to love Fox and to hate Democrats, but he also trained them to dislike swampy corporations and hate elites. He brought out the populists. They resent the rich--people like Jeff Bezos--almost as much as they hate Democrats. The base will be OK with taxing the rich more. They realize the rich got richer and most of them did not.