The United States has been investing taxpayer money in its future for centuries. Public funds built infrastructure, from the Erie Canal to the interstate highway system. We also invest in human capital: universal education came early to the US, and the country basically invented modern public secondary education. This public spending laid the foundations of prosperity and helped us to become an economic superpower.
With the rise of the modern right, however, the US turned its back on that story. Tax cuts — basically giving money to rich people and hoping it will drain down — have become the solution to all the problems.
“Infrastructure week” became a slogan under Donald Trump in part because the Trump team’s proposals were more about capitalism among cronies than investment, in part because Trump was never willing to antagonize conservatives who opposed any major new spending. .
Now Joe Biden is trying to revive the tradition of forward-looking public spending.
The Rebuild Better legislation that passed the House last week is not a pure investment plan; in particular, it includes substantial health care expenditures that have more to do with helping Americans in the short term than in the future.
But about two-thirds of the proposed spending is actually investment in the sense that it is expected to have big payoffs in the future. And if you mix Rebuild Better with the infrastructure bill that’s already passed, you’ll see a schedule that has roughly three-quarters of investment spending.
See how I read Biden’s program as it stands today. Total new spending would be about $2.3 trillion ($12.9 trillion) in a decade. That total would include $500 billion to $600 billion (BRL 3.36 trillion) in spending on each of these three things: traditional infrastructure; restructuring the economy to face climate change; and children, with the last item consisting mainly of preschool-age children and day care centers, but also involving tax credits that would greatly reduce child poverty.
There is every reason to believe that all three types of expenditure would have a high degree of social return.
Chaotic supply chains reminded everyone that old-fashioned physical infrastructure remains highly important; we still live in a material world, and getting things where they need to go requires public and private investment.
When it comes to climate investments, the damage from a hot planet is becoming increasingly evident — and droughts, fires and extreme weather are just the front row of future disasters.
Build Better investments would not come close to eliminating the danger, but they would mitigate climate change, protect us in part from some of its consequences, and make it easier for the United States to lead the world toward a more comprehensive solution. So the money would be well spent.
Finally, there is overwhelming evidence that helping families with children is a high-return investment in the nation’s future, because children whose families are adequately resourced grow into healthier and more productive adults.
So what’s not to like about this agenda? No, it would not be inflationary. Don’t believe me, listen to the credit rating agencies who are saying the same thing.
The approved and proposed expenditures would be reasonably small as a percentage of Gross Domestic Product —which the Congressional Budget Office projects at $228 trillion (R$1.27 quadrillion) over the next decade—and mostly paid by new taxes, so they would have a very small inflationary impact.
Oh, and while some of the payments are questionable — in fact, especially in the traditional infrastructure law, Rebuild Better is more or less paid — which means that the spending would likely increase the federal debt a bit in the coming years, this increase in debt would be small in relation to GDP and, given the low interest rates, it would hardly increase debt service costs. In the long run, the reward of public investment could be enough to reduce the deficit.
But Republicans are denouncing Biden’s agenda as socialism, because, of course, it is. Now, by their standards, America has been run by socialists for most of its history — people like DeWitt Clinton, the governor of New York who built the Erie Canal, and Horace Mann, who led the Common School for Education movement. basic universal a few decades later. And don’t even get me started on Dwight Eisenhower, who presided over a huge government investment and a maximum tax rate of 91 percent.
Admittedly, the Biden plan would reduce economic disparities, because the expanded benefits would be more important for less affluent families and because its fiscal changes would be strongly progressive. But public policy that reduces inequality, as well as public investment, is totally our national tradition. The US basically invented progressive taxation and, as economist Claudia Goldin commented, the high school movement was “rooted in egalitarianism”.
So don’t believe the politicians who try to portray Biden’s investment agenda as somehow irresponsible and radical. She is highly responsible, and is an attempt to restore the very American idea that government must help create a better future.
Translated by Luiz Roberto M. Gonçalves
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