(Bloomberg) -- President Joe Biden will unveil a $2.25 trillion U.S. infrastructure plan on Wednesday that the administration says will prove the most sweeping since investments in the 1960s space program and 1950s interstate-highway system.
"Like great projects of the past, the president's plan will unify and mobilize the country to meet the great challenges of our time: the climate crisis and the ambitions of an autocratic China," the White House said in a statement before Biden's afternoon speech in Pittsburgh.
The four-part, eight-year plan dedicates $620 billion for transportation -- including a doubling in federal funding for public transit -- and $650 billion for initiatives tied to improving quality of life at home, like clean water and high-speed broadband. There's $580 billion for strengthening American manufacturing -- some $180 billion of which goes to what's billed as the biggest non-defense research and development program on record -- and $400 billion to address improved care for the elderly and people with disabilities.
Tax increases will be "fully paying for the investments in this plan over the next 15 years," the White House said. The U.S. corporate income tax will go up to 28% from 21%, and a 21% minimum tax will be set on global corporate earnings.
What Biden lays out Wednesday is just the first part of his long-term economic program, with a second round of initiatives to be announced in mid-April. Those will focus on "helping families with the challenges like health care costs, child care, and education."
The program will prove far more complex to enact than the $1.9 trillion pandemic-relief bill signed earlier in March, given staunch Republican opposition to tax increases and the breadth of measures that will invite partisan and even internal Democratic battles.
As seen with the Covid-19 bill, Biden's initial plans are coming in much bigger than what economists had anticipated. The shift to a major expansion in fiscal policy has already driven up forecasts for growth this year, and sent Treasury yields climbing. While stocks have reacted with some volatility in recent weeks, the S&P 500 index hit a record high on Friday.
Biden's plan will create millions and millions of jobs, an administration official told reporters, while declining to provide a specific figure.
Pittsburgh Model
Biden will present his "American Jobs Plan" Wednesday in Pittsburgh, a city the White House views as a prime example of an old manufacturing hub revitalized by new industries from health care to technology.
The administration wants the same type of reorientation that Pittsburgh saw to provide fresh opportunities to working-class cities and towns across the country. The plan envisions an expensive political gambit carried out over the next decade to try to create well-paying jobs by both updating the country's infrastructure and preparing for the coming weather patterns wrought by climate change.
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Buildings stand illuminated in Pittsburgh, Pennsylvania, U.S., on Tuesday, April 21, 2020.
Photographer: Michael Swensen/Bloomberg
A major undercurrent through the infrastructure plan is addressing inequality and expanding help for segments of society that the administration judges have been left out in the past. For example, in addition to fixing the "ten most economically significant bridges in the country in need of reconstruction," there's $20 billion for a new program that will "reconnect" neighborhoods that were cut off by past investments, such as the I-81 highway in Syracuse, New York. And all lead pipes will be replaced, to address water-quality issues.
Another key theme is bolstering U.S. competitiveness against China. There's $50 billion earmarked for domestic semiconductor manufacturing, and $40 billion more in upgrading research capacity in laboratories across the nation.
Climate change is also a major target. The transportation funding proposed specifically directs $174 billion to electric vehicles, including sale rebates and tax incentives for consumers to buy American-made cars.
While infrastructure has traditionally been a bipartisan endeavor, Republicans have warned they're not in favor of the major tilt toward renewable energy in the administration's approach. Senate GOP leader Mitch McConnell also said his party wouldn't vote for tax increases.
Outreach to GOP
Administration officials said Biden is open to input from members of Congress of both parties on what provisions should be in a final package and how to pay for them. The White House expects to have robust outreach to GOP lawmakers and is committed to a serious discussion with them, a White House official said on the condition of anonymity to discuss the administration's plans. That effort began with inviting Republicans from relevant committees to a Tuesday briefing with Brian Deese, the National Economic Council director.
But Biden's plans don't necessarily need Republican support to become law. Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi could choose to fit many of the president's proposals into one or more budget reconciliation bills, which require only a simple majority vote in the Senate. The challenge is, as Pelosi has already indicated, that not all elements could fit into such a bill, which sets certain requirements for inclusion.
The infrastructure package doesn't include any of the proposed tax increases on individuals that Biden talked about on the campaign -- like raising the top tax rate for individuals and increasing the levy on capital gains. That was purposeful, an administration official said, because White House aides believe corporate-tax reform should pay for infrastructure and the efforts to enhance the attraction of the U.S. as a place to do business.
Potential Legacy
Tax experts and lawmakers expect the administration to try to raise taxes on the wealthy and their assets in the second package coming later this spring.
If Biden does succeed in passing the bulk of the packages he introduces, it could put him in the pantheon with Lyndon Johnson or Franklin Delano Roosevelt, presidents who instituted sweeping changes through legislation on civil rights and the social safety net.
"This really is transformational in a way we have not seen since the Great Society," said Dean Baker, senior economist at the Center for Economic and Policy Research, a left-leaning think tank. "Like a lot of people, I underestimated Joe Biden. He was always in the background -- as vice presidents are supposed to be -- always in the center of the party politically. And he was clumsy. That is what we saw, and that is why I underestimated him. But I can't quarrel with what he done since he took office."
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