Framework for a Bipartisan Infrastructure Deal - Sasse

Framework for a Bipartisan Infrastructure Deal - Sasse

On Thursday President Biden is scheduled to meet with six Republican senators to discuss ways to get to “yes” on infrastructure legislation. It is in the nation’s interest that this dialogue leads to a mutual agreement defining infrastructure needs and a way to pay for them.

Republicans and Democrats agree on the importance of building a 21st-century infrastructure if the United States is to prosper and compete with China. President Biden’s American Jobs Act is a $2.3 trillion initiative to upgrade our infrastructure, and also fund social and economic opportunity programs. It would be financed by increasing the corporate income tax rate as well as cracking down on tax evasion schemes.

Republican critics of the plan contend that it distorts the definition of critical infrastructure by including a myriad of social programs, and the proposed tax increases on business could result in job losses.

GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST

The conservative Tax Foundation estimates that this landmark infrastructure bill will cost 159,000 jobs and reduce the wages of American workers by 0.7 percent. Senator Rob Portman (R-OH) wrote, “Multiple studies, including from the nonpartisan Congressional Budget Office, show workers will bear most of the burden of higher rates in the form of lower wages and lost jobs.” Others have noted that increasing the corporate tax rate to 28 percent will result in the United States having the highest combined federal-state corporate tax rate among the thirty-seven member nations of the Organization for Economic Cooperation and Development.

Republicans have also voiced concern that the American Jobs Act contains billions of dollars for programs that may be worthwhile, but have nothing to do with infrastructure such as home health care, and expanded access to child care. Glenn Hubbard, a professor of economics at Columbia, and former chairman of the Council of Economic Advisors has advised that an infrastructure program should focus on increasing productivity and investment, not current consumption.

So far, the GOP response to the Biden Plan has been weak. Several Senate Republicans have proposed a $568 billion infrastructure plan for both transportation and broadband internet projects. Unfortunately, Republicans have not provided specifics on how their proposal would be funded.

While hyper-partisanship grabs the media’s attention, finding common ground and reaching a bipartisan compromise on an infrastructure program is not “rocket science”.

Included in the $2.3 trillion American Jobs Plan is about $1.0 trillion for projects that are consistent with accepted definitions of infrastructure. These include transportation, broadband, electric grid, water systems, affordable housing and buildings, and school facilities projects.

A $1.0 trillion infrastructure program would appear to include most of the real capital spending the President requested, and could serve as the foundation for a bipartisan infrastructure deal.

For decades Democrats and Republicans have not been deficit hawks. Today, the gross federal debt exceeds $28 trillion. Therefore, the second tenant of reaching a compromise should be agreement on how to pay for the infrastructure program.

President Biden should be commended for proposing a way to finance much of the American Jobs Act. His plan calls for the corporate income tax to be increased from 21 percent to 28 percent; still below the pre-2017 rate of 35 percent. Senator Joe Manchin (D-WV) has spoken about a 25 percent rate, and a bipartisan group of House lawmakers has endorsed raising the gasoline tax. To achieve a bipartisan deal all funding options should be on the table, but a starting point should be tax-fairness proposals to dampen corporate tax avoidance.

 Economists at the University of California and the University of Copenhagen found that American multinational businesses stowed 40 percent of profits or more than $700 billion in foreign tax havens. Portions of the Biden tax proposal would help close these loopholes as a trade-off to address the nation’s infrastructure deficiencies. As the New York Times editorialized, “The core of the Biden plan, therefore, is not the increase in the statutory rate. Rather it’s a set of companion measures to tax the profits that American companies stash in other countries.”

A bipartisan solution to the nation’s infrastructure challenges is within reach if the Congress and President demonstrate the political will to be problem solvers and not entrenched hyper partisans.

 

Gary Sasse is the Founding Director of the Hassenfeld Institute for Public Leadership at Bryant University