Democrats confident they can pass $3tn infrastructure bill

Democrats in Congress and White House officials are confident that they can pass a more than $3tn economic recovery package funded by tax increases on businesses and the wealthy, even in the absence of Republican support.

Joe Biden, the US president, this week said that his next “major initiative” after enacting this month’s $1.9tn fiscal stimulus bill would be a multibillion-dollar plan to fund long-term infrastructure, education and childcare spending — partially funded by tax increases.

He is expected to lay out more details of the package in a visit to Pittsburgh, Pennsylvania on Wednesday, ahead of negotiations with Capitol Hill that are expected to dominate the political agenda in the next few months.

While the talks on Capitol Hill are expected to take longer than they did in the case of the stimulus bill, Biden administration officials and congressional Democrats believe that sufficient support is emerging within their party to pass the recovery plan without the need for Republican votes, according to people familiar with the matter.

“I feel 90 per cent certainty that come the fall, we will have passed a major infrastructure bill or bills,” said Don Beyer, the chair of the Joint Economic Committee and a Democratic congressman from Virginia.

“Everybody would love for it to be bipartisan — and that’s sincere. But we’re not going to say in the efforts of bipartisanship we’re going to do nothing, or do way too little.”

If successful, Biden’s new $3tn plan would add a massive new layer of fiscal support to the US economy at a time when global investors, executives and policymakers are still digesting the implications of the existing expansion in US government spending to fight the pandemic-induced downturn.

The Biden administration has been exploring an increase in the corporate tax rate from 21 per cent to 28 per cent, and a minimum tax on foreign income for US multinationals. It is also considering a series of individual tax increases as long as they do not apply to households earning less than $400,000 per year. Among those proposals are hikes in payroll taxes, an increase in the top income tax rate, and a rise in capital gains taxes for the ultra-wealthy earning more than $1m per year.

Administration officials have been considering whether to split the economic recovery package in two, with the corporate tax increases offsetting the infrastructure and green energy investments, and the individual tax increases offsetting the rest of the measures. But ultimately, the two sections may end up being folded into one single piece of legislation. 

Passage relying solely on Democratic backing would reprise the political strategy used successfully by the White House and party leaders early this year to pass the $1.9tn stimulus bill with razor thin majorities in both houses of Congress.

In the Senate, it would involve again adopting a parliamentary manoeuvre known as “reconciliation” that is reserved for budgetary measures, to elude the supermajority 60-vote threshold to advance ordinary legislation in the upper chamber.

Biden has already met some Republican lawmakers to discuss infrastructure spending. But he is not counting on their backing after many have already lashed out at the tax increases on companies and the wealthy that would partially unwind Donald Trump’s tax cuts to pay for the plan.

Meanwhile, hopes of circumventing Republican opposition with unanimous support among Democrats on Capitol Hill have been growing. Joe Manchin, the centrist West Virginia Democratic senator, this week told NBC he would support an “enormous” infrastructure package funded partially with tax increases.

Biden hopes to build political momentum for the package because of the popularity of the plan’s contents, given that measures such as infrastructure spending, universal pre-school education, and even taxes on the wealthy have been polling well. Moreover, Democrats feel this is their biggest opportunity to correct the chronic under-investment in public goods in America that has in their view been dragging down the US economy for decades, contributing to sluggish growth and rising inequality.

“I think we fear that it will be a long time again before we have this perfect storm of not just the votes but the political will to act,” Beyer said.

Lindsay Owens, acting executive director at Groundwork Collaborative, a liberal think-tank, said Democrats were “excited to do more” on top of the stimulus plan. “There’s a lot of enthusiasm and the raw politics on a lot of this stuff are really good.”

Many political analysts say the outlook is looking good for the White House now.

“Biden still has wind at his back, he’s got high poll numbers, the policies have high approval numbers, and I think they are going to get $3tn and it’s going to be done by the August recess,” said Chris Krueger, a managing director at Cowen Washington Research Group.

The biggest obstacle on Capitol Hill may come if Republicans and business groups are successful at delivering their message that the tax increases would damage the recovery just as the economy was starting to bounce back strongly. But many Democrats and left-leaning economists say those arguments are less effective now amid scepticism about the benefits of trickle-down economics.

“You could argue that the only policy that Republicans passed [during Trump’s presidency] was a quite substantial tax cut,” said Steph Sterling, a vice-president at the Roosevelt Institute, a progressive think-tank.

“And it was by and large unpopular because Democrats made . . . a very successful and accurate case that the benefits that accrued to the wealthy were far greater than the benefits that accrued to regular folks.”


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