From a European perspective, Joe Biden’s plans for a $2 trillion boost to spending on infrastructure is not a radical statement of intent. The money will be spread over eight years and raise the federal budget on capital projects by about 1 percentage point a year.
And the US is starting from a very low base. Congress levies federal taxes that amounted to a little more than 16% as a proportion of national income (GDP) in 2019 and the total level of taxes, taking into account state and local charges, is 24.5% of GDP. By way of comparison, the UK’s share of tax levied as a percentage of GDP is around 37% and in France it is 46%.
One reason for the disparity is set out in the White House document – the American Jobs Plan – which hammers home how “public domestic investment as a share of the economy has fallen by more than 40% since the 1960s”.
And some of the projects are so basic, so fundamental to the running of a modern economy, that it is difficult to see why anyone would protest at a little more being spent to turn something that does not function into something that does.
One example is the modernisation of US water and electricity systems, eliminating lead from water supplies and reducing power cuts, which recently brought Texas to a standstill during a winter freeze.
But according to business lobby groups this is off-the-scale radical, though their objections are not so much to Biden’s “mission upgrade” as to the way he’s planning to pay for it – through an increase in corporation tax.
In effect, Biden will unwind a large portion of Donald Trump’s legacy by increasing that tax from 21% to 28%. This is still shy of the 35% levied under Barack Obama, but will be more painful than it seems because Trump, in a quid pro quo with business, also eliminated some tax reliefs that will not be reinstated.
Biden’s officials want the legislation to go through Congress in the autumn and until then are open to hearing how else the infrastructure plan – which will