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U.S. President Joe Biden on Wednesday proposed USD2.25 trillion of infrastructure spending matched by higher taxes including higher corporate rates, measures that could reshape the economic recovery and how much stimulus the Fed needs to provide.
The package would spread project costs over eight years and aims to pay for it all over 15 years. Coming just weeks after Congress passed a USD1.9 trillion fiscal stimulus plan, Biden's investment proposal will set the stage for months of delicate negotiations on Capitol Hill.
"Now it's time to rebuild," Biden said in his remarks. "What I'm proposing is a one-time capital investment of roughly USD2 trillion in America's future, spread largely over eight years that will generate historic job growth, historic economic growth, and help businesses to compete internationally, and create more revenue as well."
Georgetown University's Center on Education and the Workforce estimates even a USD1.5 trillion package could create 15 million jobs. That's more than the 10 million idle workers Fed Chair Jerome Powell has cited as one reason the economy is far from "substantial progress" that would open a debate on scaling back bond purchases by the central bank.
Goldman Sachs said in a note to clients Biden's plan could boost federal spending by a little over USD100 billion (0.5% of GDP) next year, and perhaps USD150-200 billion (0.7% of GDP) in 2023.
Senate Minority Leader Mitch McConnell said earlier Wednesday he is not likely to support the plan due to "massive tax increases" and potential effects on the national debt, suggesting to many in Washington and on Wall Street that the package would go through Congress using reconciliation, meaning it would need a simple majority to pass the Senate.
House Speaker Nancy Pelosi has signaled that she hopes to pass President Biden's big infrastructure bill as early as July 4. Biden wants to raise the corporate tax rate from 21% to 28%, and sees additional revenue through a 21% global minimum tax, while rejecting a hike in the top marginal tax rate, the capital gains tax or a wealth tax that some influential Democrats sought.
The White House will introduce a second package likely to be well over USD1 trillion, expected to include expanded health insurance coverage, child tax benefits, and paid family and medical leave. In his remarks Biden said the American Families Plan will be introduced within weeks.
Highlights of the plan:
|Transportation infrastructure and electric vehicles: USD621 billion||Corporate tax increase: USD695 billion|
|Green housing, schools, power and water improvements: USD561 billion||Global minimum tax increase: USD495 billion|
|Manufacturing subsidies, R&D: USD480 billion||Repeal tax loophole for intangible income: USD217 billion|
|Elder and disability care: USD400 billion||End fossil fuel tax breaks and anti-inversion: USD54 billion|
|Broadband and job training: USD200 billion|
Source: White House