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MI Responds: President Biden's Proposed $2.2 Trillion Infrastructure Plan

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MI Responds: President Biden's Proposed $2.2 Trillion Infrastructure Plan

March 31, 2021
Urban PolicyInfrastructure & TransportationTax & BudgetRegulationHousing

Manhattan Institute fellows react to President Biden's $2 trillion infrastructure package and his broader plan to overhaul the U.S. economy

On Housing

President Biden plans to spend $40 billion doubling-down on America’s failed experiment in socialized public housing. While it is true that public units are in “disrepair,” this is not an argument for relegating millions of low-income Americans to unhealthy, unsafe, and unjust housing. Worse yet, even more of Biden’s billions may go toward expanding public housing as part of the broader $213 billion package to “produce, preserve, and retrofit” two million units.

New York City’s Housing Authority has been named the city’s worst landlord three years in a row. Rather than condemning more Americans to such landlords of last resort, those in need of a safe place to call home need more available and affordable choices in housing, and the freedom to move into neighborhoods of real opportunity. For this reason, it is encouraging that Biden’s plan proposes a “race to the top” for jurisdictions eliminating regulatory barriers to market-based housing, a plan that could be strengthened by encouraging local grant recipients to demonstrate real outcomes. 

More failed public housing is not the solution to America’s affordable housing crisis.

Michael Hendrix is the director of state and local policy at the Manhattan Institute. He recently testified before the Subcommittee on Housing, Community Development and Insurance of the U.S. House Committee on Financial Services on "Preserving a Lifeline: Examining Public Housing in a Pandemic"

The president proposes a competitive grant program to encourage localities to eliminate regulatory barriers to building new housing in high-opportunity areas. Unfortunately, local governments have long demonstrated ingenuity in crafting what appear to be pro-housing initiatives, which in the end produce very little new housing. Even where it's allowed in theory, new housing can be thwarted by environmental reviews, open-ended review processes, unworkable affordability requirements, or arcane zoning regulations that take away with one hand what is supposedly given with the other. It will be a challenge for federal bureaucrats to distinguish sincere efforts to overcome barriers from mere window dressing—the true nature of many actions will be understandable only with the passage of time, long after grants are awarded.

Eric Kober is a senior fellow at the Manhattan Institute and author of the recent issue brief Overcoming Exclusionary Zoning: What New York State Should Do

On Electric Vechicles and Transportation

Spending $174 billion to subsidize electric vehicles and the related charging infrastructure, plus another $100 million on “clean” electricity, represents a colossal waste of taxpayer money. Given the current mix of generating plants, EVs will actually increase in emissions of sulfur dioxide, oxides of nitrogen, and particulates compared to new internal combustion vehicles. And spending $100 billion on clean electricity will have no measurable impact on overall world climate. As John Kerry, Biden’s climate “czar,” remarked several months ago, even if the U.S. eliminated every last ton of greenhouse gas emissions, it would not affect the climate. And, while Biden intends to spend $100 billion on clean energy, China, which is the largest emitter of greenhouse gases and whose emissions are increasing rapidly (unlike the US, where emissions are almost 20% lower than 2010 levels) is building hundreds of new coal plants.  

Jonathan Lesser is an adjunct fellow at the Manhattan Institute and author of the report Short Circuit: The High Cost of Electric Vehicle Subsidies

Despite talk of generational transformation, the infrastructure plan largely continues what the U.S. has been doing since the Eisenhower administration: subsidize people to drive long distances. The biggest single component of the infrastructure portion of the bill is $174 billion to subsidize electric vehicles, followed by $115 billion to subsidize roads. Though limited support for programs such as congestion pricing within New York City is welcome, the overall bill does little to nothing to discourage driving.

On the positive side, $85 billion for public transit, and $20 billion to reintegrate urban highways into their surrounding landscape, will be incrementally good for existing cities. However, without cost reform, including a requirement that all construction contracts that benefit from federal funding be made available to the public, the danger is that more money simply inflates the cost of existing projects and terms of pushing up the cost of materials and labor. 

Nicole Gelinas is a senior fellow at the Manhattan Institute and contributing editor at City Journal

Infrastructure in the United States is most threatened not by any lack of funding but by infrastructure planners’ profligacy and unwillingness to control costs, which have driven American capital costs up to several multiples of the average for peer nations in Europe and East Asia. Federal infrastructure funding in the past has only enabled this massive waste, and the lack of cost control provisions in Biden’s plan give no reason for optimism that this time will be different. An infrastructure plan that respected American taxpayers would force local authorities to control costs by reducing or eliminating federal support, not increasing it, and would encourage privatized provision of infrastructure that could be funded out of user fees such as road tolls at no risk to public finances.

Connor Harris is a fellow at the Manhattan Institute and author of the report The Economics of Urban Light Rail: A Guide for Planners and Citizens

On the Caregiver Economy

Long-Term Care in America is undoubtedly overstrained, but it needs structural reform so that additional spending improves outcomes, rather than simply inflating costs and displacing private resources.

Chris Pope is a senior fellow at the Manhattan Institute and author of the report Taking the Strain Off Medicaid’s Long-Term Care Program

On Federal Spending

This proposal represents a $2 trillion grab bag of corporate subsidies, special-interest handouts, and painful tax hikes under the guise of “infrastructure.” The corporate tax increases—which are three times the size of the 2017 corporate tax cuts—would return the U.S. to the highest statutory rate in the OCED and still not pay for all of the spending. Just 5 percent of this proposal’s cost would rebuild roads, highways, and bridges. Instead, the bill is stuffed with corporate welfare in areas such as broadband, electric cars, commercial R&D, Green New Deal subsidies, and manufacturer subsidies. Washington will distribute funding to favored industries and friends. America has significant infrastructure needs, but should reject top-down Washington micromanagement, and instead empower states to allocate the more than $500 billion in extra aid they are still holding from the recent relief bill.

Brian Riedl is a senior fellow at the Manhattan Institute and author of the issue brief Ideas for the New Administration: The Federal Budget

President Biden's $2 trillion spending plan aims to remake the economy, with the government playing a much larger role. There is certainly some basis for investment in infrastructure to boost future growth. But the size and scope of this plan goes well beyond what is necessary. It not only imposes costs to future generations, but also risks distorting markets and slowing growth and innovation in more productive areas of the economy. 

Beyond that, increasing the corporate tax to 28 percent will make America's tax rate higher than most other countries; the OECD average is currently 23.59 percent. This discrepancy will encourage more American firms to incorporate abroad. 

Allison Schrager is a senior fellow at the Manhattan Institute and author of the issue brief Issues 2020: What's Wrong with a Wealth Tax

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Photo by Drew Angerer/Getty Images