Comment: $6 trillion’s a lot of money; here’s why it’s a bargain

Biden’s plans would invest in infrastructure and families, solidifying American prosperity.

By Timothy L. O’Brien and Nir Kaissar / Bloomberg Opinion

“I’ve always felt the nine most terrifying words in the English language are: I’m from the government, and I’m here to help.” — Ronald Reagan

More than 40 years have passed since Ronald Reagan ascended to the White House with a powerful and simple message: Government is the problem, not the solution. Republicans, and many Democrats, bought into that credo, and it has held enormous sway in policy discussions ever since.

President Biden — battling a pandemic that has unraveled public health and the economy — has offered policy prescriptions meant to blunt covid-19’s impact. But the White House is also seeking to remedy ills such as fraying infrastructure and growing income inequality that sideswiped the middle and working classes long before covid-19 arrived. Biden is reaffirming the idea that government can be a constructive economic and social force, and he’s offering a historic counterargument to Reagan’s orthodoxy.

Biden’s ambitions have inspired passionate critiques about the necessity of his programs and whether the federal government can fund them properly. We’ll address both of those topics in a pair of related columns. This one looks at the efficacy of Biden’s agenda.

The three pillars of Biden’s $6 trillion program are the $1.9 trillion American Rescue Plan, the $2.3 trillion American Jobs Plan and the $1.8 trillion American Families Plan. The Rescue Plan, a public health and vaccination effort introduced the day Biden was inaugurated, has already been enacted. The latter two plans face uncertain futures in a sharply divided Congress with a narrow Democratic majority.

The Jobs Plan and the Families Plan should be enacted. They would stimulate an economy that hasn’t fully regained its footing, modernize digital and traditional infrastructure and shore up the livelihoods of struggling Americans who can become more independent, productive workers. They would also expand and solidify the foundation of U.S. prosperity; an empowered and well-trained population of middle-class consumers.

Infrastructure spending is the core of the Jobs Plan. It envisions outlays on highways, bridges, the power grid, high-speed broadband, airports, renewable energy, manufacturing, mass transit, smarter commercial and residential buildings and more. China, which has built the first economic competitor to the U.S. in the modern era on the back of such spending, forks over about 8 percent of its annual gross domestic product on infrastructure. The U.S. spends only 2.4 percent of GDP on infrastructure.

“The $20 trillion U.S. economy relies on a vast network of infrastructure from roads and bridges to freight rail and ports to electrical grids and internet provision,” the Council on Foreign Relations noted in a recent report. “But the systems currently in place were built decades ago, and economists say that delays and rising maintenance costs are holding economic performance back.”

Infrastructure spending was at the heart of the post-World War II economic boom in the U.S., and a bipartisan coalition that pushed Dwight D. Eisenhower’s legislation along understood that. While it is difficult to quantify public sector returns, analysts have pointed to benefits that span generations, increase productivity, create jobs and stabilize the economy. Private-sector investments in infrastructure have also outperformed stocks and bonds since at least the mid-1970s.

In short, thoughtful federal infrastructure spending isn’t welfare. It’s a savvy, constructive use of taxpayer funds that provides a handsome long-term return. The same is true of Biden’s Families Plan.

The Families Plan relies on robust outlays for education and child care. It includes permanent and expanded child care tax credits; two free years of community college; free universal pre-K; teacher training; paid family and medical leave; lower health care costs; nutrition assistance; and greater access to high-quality child care facilities.

Education and health care spending produce job growth more effectively than some other lushly funded forms of public spending, such as military outlays. And study after study has demonstrated the positive personal, financial and economic benefits society gains from spending on community college assistance, for example.

Boosts from pre-K assistance have also been well documented. “Such an investment would boost educational achievement, improve economic growth rates, and raise standards of living across the income spectrum,” the Washington Center for Equitable Growth observed in a 2015 report. “It also would strengthen the economy’s competitiveness long into the future while simultaneously easing a host of fiscal, social and health problems.”

Paid leave, which helps reduce worker turnover without imposing significant costs on employers, is common in every developed country, but the enhanced child care tax credits and better access to more abundant child care facilities and leaves are also economic positives; particularly for women, who gain greater access to the workplace and can more easily share child-rearing responsibilities with partners.

Polling shows that there is broad support among voters for the Jobs Plan and the Families Plan, although that support also appears to fragment along partisan lines. Even then, Republican voters embrace elements of Biden’s plans when not presented as part of a broader package. Bipartisan support among voters for the Jobs Plan, for example, appears to erode around excessive spending concerns and taxation, which has been Republicans’ main argument against all of Biden’s proposals (cue Reagan here).

Voters can be commonsensical about meaty public programs that improve the economy and their lives, especially when positive results are borne out in experience and the data. The next hurdle for supporters of Biden’s agenda is how to finance that spending in a clearheaded and responsible way so critics’ arguments can be overcome. That’s the subject of our next column.

– – –

Timothy L. O’Brien is a senior columnist for Bloomberg Opinion. Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm.

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