May 31, 2021
President Joe Biden has mapped out a strategy to make the United States more competitive and block, or at least slow down, China’s drive to dominate the world economy. The $6 trillion price tag for Biden’s proposals is expensive, and he may not be able to get his program through Congress. But if he fails, make sure that your children start studying Chinese, because the U.S. could lose its role as the global leader. China is catching up with America, and time is running short for the U.S. to defend its position.
Meanwhile, Sen. Mitch McConnell continues to act as though he is China’s best friend, sabotaging any attempts to repair our physical infrastructure and the tattered social safety net for less affluent families. McConnell is a smart, shrewd man, but he only thinks about the short-term…how his party can win the next election…rather than improving the U.S. economy’s long-term prospects.
McConnell and other Republicans remain fixated on cutting taxes and regulations. That keeps their donors happy, of course. But their policy prescriptions are a recipe for national decline and eventual Chinese domination of the world. Government is not the problem for the U.S. Lack of investment in infrastructure and its people is what’s holding America back.
The $4 Trillion Solution
Besides the annual budget of $2 trillion, Biden has proposed an additional $4 trillion of long-term programs:
· $1.7 trillion on “infrastructure” (somewhat loosely defined)
· $2.3 trillion on education and family support programs
These proposals reflect three explicit strategic goals:
· Combat climate change, after four years of disastrous neglect
· Put the working-class and lower middle-class on a more secure economic footing
· Improve America’s competitiveness versus China in key industries such as clean energy, electric vehicles and electric batteries
And a fourth implicit goal:
· Winning the war of ideas with China by showing that democracy works
One can certainly quibble with some of Biden’s proposals. For example, the “infrastructure” program would allocate $400 billion for care for disabled people and older adults. The goal is to help family members struggling to care for such people; that’s laudable, but not related to any physical assets.
The Biden plan contemplates higher taxes, larger deficits and a rise in debt to gross national product, which raise important, long-term concerns. But overall, the plans are well-thought out, and they address long-standing, critical issues in the American economy and society.
We will consider the tax and deficit questions in a subsequent article. But here’s a spoiler alert: the Trump tax cuts of 2017 did not spur capital investment or an economic boom, and they primarily benefited the top 0.1% of Americans. Reversing those tax cuts will not hurt the economy or affect most Americans. The Republic will survive.
A Push For Clean Energy And Cars…And More Jobs
When the President broadly outlined his spending plans to Congress, in his April unofficial “State of the Union” address, he referred frequently to two themes: creating blue-collar jobs and competing with China. Biden is keenly aware of the threat that China could overtake the U.S., and soon.
China is investing large sums in electric batteries and electric cars, by providing cheap loans and subsidies to manufacturers. Biden is clearly worried that China could dominate those emerging industries, just as it crushed competitors in solar panels and wind turbines.
Biden’s $1.7 trillion infrastructure program would provide badly-needed funds for traditional physical assets such as roads and bridges, airports and public transit. But Biden would also allocate $174 billion in various incentives to encourage and facilitate the production of electric vehicles.
Auto manufacturers in Detroit consider electric vehicles the future for their industry. Under Biden’s plan, the government would assist the transition, partly by building a nationwide network of charging stations. This initiative could help improve the environment, defend a key U.S. industry and stimulate employment.
The Biden plan would also provide about $150 billion to ease the transition for utilities and other energy users to switch to clean energy. That should help combat climate change while generating a lot of blue-collar jobs.
The Republican Response: An Offer Biden Can Refuse
Sen. McConnell has announced that he is “100% focused” on defeating Biden’s agenda. No surprise there, although some of McConnell’s constituents wonder why he doesn’t welcome funds for repairing a key bridge between his state, Kentucky, and Ohio that is considered one of the most dangerous in the country. At least he’s consistent…
A group of “moderate” Republican senators, led by Sen. Shelly Moore Caputo (R-W.Va.), has made a counter-offer to the Administration, proposing about $260 billion in new spending on infrastructure. That’s about 15% of the amount in Biden’s plan. The senators have focused narrowly on repairing roads and bridges. They don’t address how to prevent the Chinese from dominating the promising new industries like electric batteries and cars or how to fight climate change.
The supposed total amount of the Republican infrastructure plan is about $930 billion, but that involves redirecting funds from the $1.9 trillion Covid relief legislation that Congress has already passed.
In short, the Republican counter-offer is a non-starter. Rather than waste any more time on negotiations seeking a “bipartisan” solution, the Administration should use the reconciliation process to pass as much of its program as it can.
The War Of Ideas With China
Biden and his advisers are also trying to restore democracy’s allure for developing countries, to burnish the brand, if you will.
China has been touting the virtues of its authoritarian model, pointing to its sustained and rapid economic growth, the rise in its standard of living, and its success in controlling the Covid outbreak. China has attacked U. S. democracy as a chaotic system that does not improve the lives of ordinary Americans. Unfortunately, China has some good talking points, so it’s crucial that Biden succeeds in implementing much of his program.
While the U.S. continues to under-invest in its infrastructure and is torn apart by cultural wars, China is forging ahead. In 2009, when Sen. McConnell started to block Democratic spending programs, the U.S. economy was almost three times larger than China’s. By 2020, that gap had shrunk to 1.5 times, as China’s economy grew rapidly. Although the U.S. economy remains larger, its relative position is declining.
India’s Covid Catastrophe Doesn’t Help
To compound the “brand” problem, India, the world’s largest democracy, has let the Covid epidemic spiral out of control. Some experts estimate that up to a million Indians may have died from the virus; the official figures are not considered trustworthy. Meanwhile, Chinese citizens throng restaurants and public spaces, safely, and its economy is humming.
Other developing nations have undoubtedly taken note.
The U.S. government has taken strong action to support Americans financially during the Covid epidemic, under both the Trump and Biden administrations, partly because Democrats demanded large assistance programs.
But an outside observer might note, with some fairness, that the government has not done much to help the struggling working-class and lower middle-class Americans who have suffered enormously from the industrial decline in many parts of the country.
The Biden programs, if passed, would demonstrate that our democracy can provide concrete benefits to ordinary Americans. That’s the right thing to do…and the best way to counter China’s propaganda.
The world is watching.