It’s Full of Contradictions

Biden’s plan is supposed to help mitigate climate change, but the green way to fund infrastructure is through user charges that restrain consumer demand.

April 16, 2021 • Commentary
This article appeared on Desert Dispatch on April 14, 2021.

Washington is on a spending spree. President Trump approved $3 trillion in pandemic relief last year, and President Biden approved another $1.9 trillion in March. All this spending has gone on the national credit card, which has an accumulated balance of $22 trillion, or $172,000 for every household in the nation.

Biden is now proposing another $2 trillion in spending, this time for infrastructure. He apparently recognizes that we can’t borrow‐​and‐​spend forever, so his plan is financed by a massive corporate tax increase rather than debt. Nonetheless, his plan makes no sense because of three major contradictions.

The first is that Biden’s corporate tax increase would undermine America’s infrastructure because most of it is owned by the private sector, such as the broadband network and the electric grid. While Biden would subsidize broadband by $100 billion, the electric grid by $100 billion, manufacturing by $300 billion, and electric vehicles by $174 billion, corporations in those industries would slash their own investment in the face of Biden’s large tax hike. It would be a wasteful circular flow of cash from corporations to Washington in higher taxes, and then back to politically favored corporations in subsidies.

That raises the second contradiction. During the presidential campaign, Biden said “we do not reward corporations, we reward individuals,” and he complained that Trump’s “strategy is trickle‐​down economics that works for corporate executives and Wall Street investors, but not working families.” But Biden’s own plan features trickle‐​down corporate subsidies.

All the subsidies would create a third contradiction. Biden’s plan is supposed to help mitigate climate change, but the green way to fund infrastructure is through user charges that restrain consumer demand. Gas taxes restrain automobile use; water charges restrain water use; and airport charges restrain airport use. But Biden’s plan includes large new subsidies for automobiles, water systems, airports, and other facilities — all funded by income taxes, not by pro‐​environment user charges.

Biden’s infrastructure plan is a bad solution looking for a problem. The private sector is already investing billions of dollars in infrastructure favored by the president, such as electric vehicles, broadband and the electric grid. Many states have raised their own gas taxes in recent years to invest more in highways. The nation does not need a big new spending plan from Washington, especially one funded by infrastructure‐​killing corporate tax increases.

About the Author
Chris Edwards

Director of Tax Policy Studies and Editor, Down​siz​ing​Gov​ern​ment​.org