The Biden administration’s effort to create a better future for the United States, called Rebuild Better, rests on the edge of a political knife. Nobody knows when it will become law. What we do know is that in order to pass Congress, he will have to weather a perfect storm of bad faith, bad logic, and bad arithmetic.
Starting at the beginning: Rebuild Better is basically an investment plan for the future of the United States. Approximately one-third of the proposed spending is on children: preschools, day care centers and tax credits that would greatly reduce poverty. Another third is spent to help restructure the economy to limit climate change. If you include the infrastructure law that has already been passed, Biden’s agenda is largely forward-looking.
And we have every reason to believe that these investments would be highly productive. This is clearly true of helping children. There is overwhelming evidence that helping disadvantaged children makes them much healthier and more productive when they reach adulthood; the benefits are so great that even in a strict fiscal sense child support may well pay for itself in the long run.
The same goes for environmental investment. Most of the discussion about this investment focuses on the long-term mitigation of climate change, and rightly so: the prospect of civilization’s collapse tends to focus the mind.
It is important to note, however, that reducing our dependence on fossil fuels would not only reduce greenhouse gas emissions. It would also reduce other forms of pollution, notably nitrogen and sulfur oxides, which have negative effects on death rates, disease and agricultural productivity. And the benefits of reduced pollution would come quickly.
A recent NASA study suggested that the health gains from climate mitigation policy would not only be worth trillions of dollars, but would also materialize quickly enough to outweigh any cost of the energy transition in a decade or less.
So how can anyone be against these investments?
I think reporting conventions require journalists to pretend to believe that Republicans have bona fide objections to Biden’s plan — that they’re concerned about debt, or the effect on incentives, or something. But we all know that their main objection is simply the fact that it is a Democrats’ initiative, which means that it must fail.
And it would also tax the rich and help the poor.
In fact, can anyone remember the last time top Republican Party figures got seriously involved in real political concerns? The most important recent example I can remember was the passage of the children’s health insurance program in 1997. It has been bad faith ever since.
While the most important source of opposition to Rebuild Better is simply the desire to see Biden fail while keeping the rich as rich as possible, there may be some sincere concern that the law will widen budget deficits.
In fact, it would not have a significant impact on debt — the Congressional Budget Office says spending is almost fully paid, and attempts to claim otherwise are not credible. However, even if the deficit widened, why would it be so bad?
I was shocked the other day by Elon Musk’s declaration that Rebuild Better should not be passed because it would increase the budget deficit.
Interesting fact: Tesla was founded in 2003 and had its first profitable year in 2020. That is, it spent 17 years spending more than it earned because it was investing in the future. If, as many executives like to say, government is to be run like a business, why shouldn’t it be willing to do the same thing?
Again, most of the proposed expenditures would consist of highly productive investments.
Finally, there’s a lot of talk about how Rebuild Better could make inflation worse — talk that seems mostly to involve a failure to do the math, for example, mistaking decades for individual years and failing to divide by Gross Domestic Product.
It’s true that the price of the bill, $1.75 trillion (BRL 9.87 trillion), is, on the surface, a lot of money. But they are spent over ten years, which means the annual expenditures would be much less than the $1.9 trillion (BRL 10.72 trillion) rescue plan approved earlier this year, or even the law of annual defense of US$768 billion (R$4.33 trillion) that the Chamber approved last week.
Also, a large part of the expenses would be paid with new taxes. Also, one should never quote an impressive budget number without putting it into context. Remember, the US economy is huge. The Budget Office estimates that in its first year, Rebuild Better would widen the deficit by 0.6 percent of GDP, a number that would shrink over time.
I don’t know of any economic model that indicates that spending on this scale would make much of a difference to inflation. And since much of the spending would expand the economy’s productive capacity, it would likely reduce inflation over time.
Is Rebuild Better perfect? Of course not. But it’s the best legislation we’re likely to have in years to come. And claims that we should let this opportunity pass by concerns about fiscal responsibility or inflation are uninformed at best, dishonest at worst.
Translated by Luiz Roberto M. Gonçalves
.
