Monday, April 5, 2021

Biden's "Infrastructure" Plan: A Bridge too Far


Last week President Biden offered up his $2.3 trillion “infrastructure” plan, but only $115 billion goes to highways and bridges and only $111 billion goes for improving the nation’s water systems. There is also $85 billion for public transit, $80 billion for rail, mostly AMTRAK; $100 billion for building out broadband, and $100 billion for extending and hardening the electrical grid. All to the good, except maybe AMTRAK. In terms of intangible capital, Biden’s program calls for a $180 billion increase in R&D spending. Indeed, with real interest rates below zero, now is the time to finance much needed infrastructure.


What is questionable is the $174 billion allocated for electric charging stations. It seems to me that the administration is making a huge bet on electric vehicles. That bet may pay off, but with fast moving fuel cell technology, the future may not all be in electrification. What is even more questionable is the $213 billion allocated to affordable housing and the $400 billion allocated to home care. Although arguably necessary affordable housing and home care are a stretch to being called infrastructure. Further if such programs are enacted they would likely be continued beyond the plan’s eight-year budget window making it far more costly than advertised.


Make matters worse is that the plan does not waive environmental permitting and the prevailing wage requirements of the notorious Davis-Bacon Act. By avoiding the waivers, the plan all but guarantees exorbitant costs and delays. Indeed, by failing to waive environmental reviews we can look forward to years of delays in siting power lines from wind and solar farms to our urban centers. In fact, the Biden Plan requires project labor agreements that would put the Davis-Bacon Act on steroids.


We also learned that the Biden Administration is not really serious about climate change. If it were, it would have offered to pay for at least part of the plan with a carbon tax, a tax that Treasury Secretary Janet Yellen spoke highly of as a private citizen. A carbon tax would be a far more efficient way of financing infrastructure than an increase in the corporate income tax. Moreover, there is no mention of investments in carbon capture/sequestration technology which most experts believe to be essential in reaching our climate goals. Thus, there is much to like in Biden’s program, but quite a bit to dislike as well.

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