US President Joe Biden has announced an eight-year infrastructure construction plan costing $2.2 trillion last week. To secure enough funds for it, and to bring down the financial deficit of the federal government, the Biden administration said it will raise corporal income tax, particularly tax on companies’ overseas revenue.
Biden also said that he will soon make another multi-trillion dollar economic proposal to increase investment in medical care, baby nursing and education, and some of the funds will come from a tax hike on the rich. Many compared the Biden administration’s ambitious bailout plans to a 21st century version of Roosevelt’s New Deal. It is clear that its Build Back Better initiative, which so far consists of the two aforementioned plans, is by no means just a whim of the administration.
Serious problems have become apparent in the economic structure and the imbalances in society have become increasingly evident since the global financial crisis in 2008. It is the great shock the COVID-19 pandemic has caused to the country, and the hyping up of competition from China by the previous administration that have prompted the Republicans and the Democrats to temporarily put aside their differences, and reach a consensus on such a grand initiative.
A glance at the spending catalogue of the infrastructure construction plan－ranging from telecommunications networks to new energy infrastructures－shows the extent to which it represents the Biden administration’s responses to the competition from China as well as the domestic structural development challenges.
Through the launch of the Build Back Better initiative, the Biden administration not only wants to maintain the United States’ advantage over China especially in core technologies, it also wants to create jobs, bridge the income gaps, and improve public services so as to refuel the world’s largest economy for sustainable development in the long run.
However, to raise the corporation tax might prompt some US companies to relocate to other countries and regions, and large-scale stimulus packages like these will inevitably boost inflation, and to put the initiative into place also means the federal government will necessarily increase its intervention in the market, which is fundamentally at cross-purposes with some interest groups, and can cause new fissures in partisan politics.
Not to mention the fact that attempts to check China’s rise and to solve the US’ long-term structural development problems are irrelevant to each other.
As such, to propose the plan is one thing, and to carry it out is another, as there will be many uncertainties arising in the implementation of it. No wonder many doubt whether the plan will be approved by the Congress.