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Thursday, December 2, 2021

Infrastructure Act begins Joe Biden’s counterattack

The shock of the election in Virginia last week lifted the deadlock within the Democratic Party. The $1.2 trillion infrastructure bill passed by the two parties on Friday night painted a very optimistic ending for Joe Biden’s worst week in the presidency. The prospect of passing a $175 million “Rebuild Better” bill before Thanksgiving will provide more good news for the troubled president. As the saying goes, nothing is more successful than success.

A few hours after the most encouraging employment report in months, a smaller bill was passed—the number of jobs increased by more than 500,000 in October. If the recent reduction in delta infections continues, the US economy may be in a strong state before next year’s congressional elections. Although history and recent polls are not on Biden’s side, there is no iron law that states that the incumbent party must lose control in the president’s first midterm elections. George W. Bush bucked the trend in 2002.

Political relief aside, changing the president’s fate requires more than one infrastructure bill. From some perspectives, this is the largest public infrastructure upgrade since Dwight D Eisenhower became president in the early days of the Cold War. The bill includes new expenditures of $550 billion in 10 years, which makes it less compelling than the headline numbers.

Nevertheless, the impact of the new funds on the construction of US roads, railroads, ports, rural broadband, water supply and electric vehicle charging networks will begin to appear early next year. Although its funding mainly comes from accounting gimmicks rather than higher taxes, the impact of the bill will help ease inflationary pressures in the United States by reducing supply bottlenecks. Therefore, this will help consolidate the rebound of the US economy after the pandemic.

However, the passage of the larger bill is still far from guaranteed. Unlike the infrastructure package supported by 13 Republican senators, rebuilding better is a purely Democratic business. Even so, it will be a struggle to ensure that Democrats pass everything in the Senate at 50:50.

Centrist opposition negated some of the main features of the bill, including the strengthening of the IRS’s power to combat tax evasion, the new power of Medicare to negotiate lower prescription drug prices, the right to paid families and sick leave, and increased taxation of the highest income class.

The rest is less than half the size of the original bill, and much less than the original promise. By subsidizing universal early childhood education and expanding child tax credits, it will still provide a boost for middle-class families, especially women. This should increase the impoverished female labor force participation rate in the United States by reducing the burden of parenting, which often causes serious problems. Again, these measures are anti-inflationary.

The bill will also provide the largest renewable energy investment in US history. Although it has been deprived of the most effective climate change provisions, which will accelerate the transformation of the power sector from fossil fuels, it is still substantial.

Is this enough to get Biden back on track? Since he gambled on his credibility in passing these two bills, it is hard to imagine that he would do so without enacting the second bill. Biden’s approval rating began to decline during the August withdrawal from Afghanistan, which undermined his competence. Rising inflation, rising murder rates and a 10-year peak of illegal border crossings have exacerbated public anxiety. The best response to voter dissatisfaction is action. Passing large-scale legislation is exactly what Biden should do.

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