Study Finds Biden's American Jobs Plan Would Result in Fewer American Jobs
It’s a jobs plan that isn’t about jobs, and an infrastructure plan that isn’t about infrastructure.
If you've been following recent congressional spending negotiations, you've probably heard about President Joe Biden's $2.2 trillion infrastructure plan. This is a bit of a misnomer, since the plan would spend hundreds of billions on programs that are not, strictly speaking, infrastructure, though, for the purposes of politics, the Biden administration and Democrats in Congress have decided to call infrastructure. But the Infrastructure and a Bunch of Other Unrelated Stuff That We're Going to Insist Is Actually Infrastructure Plan is a bit of a mouthful, and sadly doesn't produce a memorable acronym. So they named the proposal the American Jobs Plan instead.
Biden certainly has lofty ambitions for the Jobs Plan. A White House fact sheet on the proposal declares it will, among other things, "unify and mobilize the country to meet the great challenges of our time" (climate change and increased competition from China, the fact sheet says) and "invest in America in a way we have not invested since we built the interstate highways and won the Space Race." (Fine, sure, if you say so…although I'm not quite sure I'd call these puffy statements facts.) There are mentions of racial justice and rural communities, clean energy and caregiving, and even a few nods to roads and bridges. Biden wants his Jobs Plan to do it all—or, at the very least, to do an awful lot until the next trillion dollar plan comes around.
But here, too, there is a problem with the name. For as it turns out, there's good reason to think Biden's American Jobs Plan would result in fewer American jobs.
That's the big takeaway from a recent analysis by the center-right Tax Foundation, which found that the "the combined effects of the tax changes and spending would reduce U.S. gross domestic product (GDP) in the long run by 0.5 percent and result in 101,000 fewer U.S. jobs." So: A smaller economy and fewer domestic jobs. Take that, China!
This finding is all the more damning since the Tax Foundation analysis relies on conventional assumptions about multipliers. Per the Congressional Budget Office, that most inside-Washington of inside-Washington economic establishments, the report assumes a 5 percent return for the Jobs Plan's public investments, and a long-run increase in GDP of about 0.3 percent as a result of boosted infrastructure spending. If you build it, the economy will grow—or at least that is what this report assumes.
If you tax it, on the other hand, the results are rather different. And that's where the problems begin. According to the Tax Foundation report, the "positive economic effect is entirely offset by the increase in corporate taxation, resulting in less corporate investment which reduces GDP by 0.5 percent in the long run, reduces wages by 0.5 percent, and eliminates 101,000 full-time equivalent jobs. Gross national product (GNP), a measure of American incomes, falls by 0.3 percent in the long run—somewhat smaller than the drop in GDP—as the combination of permanent tax increases and temporary spending would in the long run reduce the deficit and payments to foreign owners of the federal debt." Ah.
Biden's Jobs Plan has many follies. It tries to do too much, at too great an expense, and it attempts to offset much of the total cost via a hike in the corporate tax rate that is counter to the plan's stated goals. Indeed, Republicans—and, more recently, some moderate Democrats—have been working up counter proposals that are funded heavily by repurposing unspent funds from the trillions in COVID relief proposals. Biden, however, has rejected plans to rely mostly on unspent funds, because they didn't include enough "new spending."
The various counter proposals have also been smaller in scope, which is not to say they were small (recent versions have hovered in the $1 trillion range). And they have also been more targeted. As The Washington Post notes, a new bipartisan proposal from moderate Republicans and Democrats in the Senate "is expected to hew largely to a more traditional definition of infrastructure—a contrast with the White House's plan." In other words, it's an infrastructure plan that's actually about infrastructure.
That's not to say it's necessarily a great piece of legislation. But unlike Biden's infrastructure and jobs plan—much of which isn't about infrastructure and which might well result in fewer jobs—at least it's an honest attempt to tell you what it's about.