Explainer: American Jobs Plan

There has been considerable debate around the American Jobs Plan, announced by the White House two weeks ago, with Republicans and Democrats at odds once again.

We examine the plan, the ensuing response, and its implications here.


The American Jobs Plan seeks to:

  1. Modernize 20,000 miles of highways, roads, and main-streets; rebuild 10,000 bridges in disrepair; replace thousands of buses and rail cars, repair hundreds of stations and facilities, and expand transit and rail service into communities in need; and improve ports, waterways, and airports.
  2. Eliminate all lead pipes and service lines in United States drinking water systems; upgrade and modernize America’s drinking water, wastewater, and stormwater systems; and tackle new contaminants.
  3. Create hundreds of thousands of jobs building a cleaner, more resilient electric grid and capping orphan oil and gas wells and abandoned mines.
  4. Bring affordable, reliable high-speed broadband to every American, including the more than 35% of rural Americans who lack access to broadband at minimally acceptable speeds, and promote price transparency and competition among internet providers.
  5. Create jobs building and modernizing affordable, accessible, energy efficient, and resilient buildings and vehicles, while also improving our nation’s federal facilities with a focus on VA hospitals and buildings.
  6. Expand access to quality, affordable home- or community-based care for the elderly and for people with disabilities; extend the Money Follows the Person program that supports innovations in the delivery of long-term care; support well-paying caregiving jobs that include benefits and the ability to collectively bargain; and build state infrastructure to improve the quality of services and to support workers.
  7. Revitalize American manufacturing and the domestic supply chain, and require that goods and materials are made in America and shipped on U.S.-flag, U.S.-crewed vessels, in an effort to create hundreds of thousands of quality jobs.
  8. Ensure that our workers are trained for the well-paying, middle-class jobs of the future and that American taxpayers’ dollars benefit working families and their communities, and not multinational corporations or foreign governments.

A more in-depth summary can be found here, but if you are short on time, the funds would be allocated as follows:

  • $621 billion for transportation infrastructure and resilience
  • $111 billion to ensure clean, safe drinking water
  • $100 billion for affordable, reliable high-speed broadband
  • $100 billion to modernize power infrastructure
  • $213 billion to build, preserve, and retrofit homes and buildings
  • $100 billion to modernize public schools
  • $25 billion to upgrade and build child care facilities
  • $28 billion to upgrade Veterans Affairs hospitals and federal buildings
  • $400 billion to expand access to quality, affordable home-based or community-based care for the elderly and disabled
  • $180 billion for technology research and development to advance infrastructure and climate science
  • $300 billion to bolster U.S. manufacturing, strengthen supply chains, protect against future pandemics, and jump-start clean energy manufacturing
  • $100 billion for workforce development programs

Said President Joe Biden at the unveiling, “It’s not a plan that tinkers around the edges. It’s a once-in-a-generation investment in America unlike anything we’ve seen or done since we built the interstate highway system and the space race decades ago. In fact, it’s the largest American jobs investment since World War II. It will create millions of jobs, good-paying jobs.”

Continued Biden, “When we make all these investments, we’re going to make sure, as the executive order I signed early on, that we buy American. That means investing in American-based companies and American workers. Not a contract will go out, that I control, that will not go to a company that is an American company with American products, all the way down the line, and American workers.”

The $2.3 trillion plan was announced alongside the Made in America Tax Plan, which would increase the corporate tax rate from 21 percent to 28 percent, increase the global minimum tax to 21 percent on a country-by-country basis, eliminate deductions related to offshoring jobs and create a tax credit incentivizing domestic production, eliminate tax incentives related to foreign derived intangible income, and create a 15 percent minimum tax on “book income” for large, profitable corporations.

The Made in America Tax Plan, according to Biden, would fully pay for the American Jobs Plan within 15 years.


The plan enjoys widespread support among most Democrats in Congress who say that it is an overdue, historic investment that would create jobs and compete with the technology and public investments made by China.

Said Senate Majority Leader Chuck Schumer, “I look forward to working with President Biden to pass a big, bold plan that will drive America forward for decades to come.”

Joint Economic Committee chairman, Rep. Don Beyer, said, “As President Biden understands, this work —creating jobs, addressing inequality, tackling climate change, building the infrastructure we need — requires us to make once-in-a-century investments that meet the scale of the crisis. We must meet the demands of the moment — both in traditional infrastructure like bridges and railways and non-traditional infrastructure like child care, elder care and educational facilities. Both types of infrastructure are critically important and there is evidence that investments in the latter may do more to create jobs and reverse recent job losses.”

Continued Beyer, “This is good for both American workers and American businesses. It is also good for the nation as it will make us more competitive around the world and reduce the impact of climate change. I applaud President Biden for his ‘Build Back Better’ vision; the once-in-a-century investments he is committed to making in infrastructure and other areas will not take our nation back to where it was before the pandemic, they will take it beyond there — well beyond there. That is what great leaders do.”

Not all Democrats are on board, however.

The progressive wing of the party, for one, has expressed a belief that the plan falls short.

Said Rep. Alexandria Ocasio-Cortez, “This is not nearly enough. The important context here is that it’s $2.25T spread out over 10 years. For context, the COVID package was $1.9T for this year *alone,* with some provisions lasting 2 years. Needs to be way bigger.”

And the Congressional Progressive Caucus said that, while the plan was a “welcome first step,” it “can and should be substantially larger in size and scope.”


Republicans disagree.

GOP members of Congress believe that the plan is too costly and too wide in scope, and many have expressed opposition to raising corporate taxes.

Said Sen. Mitch McConnell, “I think that package that they are putting together now — as much as we would like to address infrastructure — is not going to get support from our side. The last thing the economy needs right now is a big whopping tax increase.”

Arguing that the plan is overly broad, McConnell called it a “Trojan Horse” that hides “more borrowed money and massive tax increases on all the productive parts of our economy.”

Said Sen. Shelley Moore Capito, “President Biden’s so-called ‘jobs’ proposal is a clear attempt to transform the economy by advancing progressive priorities in an unprecedented way.”

Expressing opposition to the corporate tax hike, U.S. Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley said in a statement, “We applaud the Biden administration for making infrastructure a top priority. However, we believe the proposal is dangerously misguided when it comes to how to pay for infrastructure. Properly done, a major investment in infrastructure today is an investment in the future, and like a new home, should be paid for over time – say 30 years — by the users who benefit from the investment. We strongly oppose the general tax increases proposed by the administration which will slow the economic recovery and make the U.S. less competitive globally – the exact opposite of the goals of the infrastructure plan.”

And still others signaled an unwillingness to fund any infrastructure investments extending beyond roads and bridges.

Said South Dakota Republican Gov. Kristi Noem, “I was shocked by how much doesn’t go into infrastructure. It goes into research and development, it goes into housing and pipes and different initiatives, green energy, and it’s not really an honest conversation that we’re having about what this proposal is.”

Noted House Minority Leader Kevin McCarthy, “Biden’s so-called infrastructure plan spends less than 6 percent to repair bridges, highways, and roads.”


First, it is important to note what qualifies as infrastructure and what does not, as there appears to be some confusion.

While it is true that hard infrastructure pertains to tangible or built infrastructure such as roads, bridges, tunnels, railways, ports, and harbors, there is such a thing as soft infrastructure, which is comprised of the services required to maintain the economic, health, and cultural and social standards of a population, to include “physical assets such as highly specialised buildings and equipment, as well as non-physical assets, such as communication, the body of rules and regulations governing the various systems, the financing of these systems, the systems and organisations by which professionals are trained, advance in their careers by acquiring experience, and are disciplined if required by professional associations.”

Thus, while it might be fair for Republicans to conclude that they do not wish to fund soft infrastructure, claiming that “pipes,” R&D, or workforce development do not qualify displays a limited understanding of the issue.

And there is precedent for evolving definitions. In 1936, for example, the United States government expanded our understanding of infrastructure to include electricity when it passed the Rural Electrification Act, which involved a federal investment in the installation of electrical distribution systems in rural areas not previously served.

And scoff as Gov. Noem may, these kinds of investments are needed.

Consider, new analysis reveals that February’s power grid failure in Texas led to the deaths of 194 residents.

A leak in a Florida wastewater reservoir poured millions of gallons of polluted water into the nearby community, threatening to flood nearby homes and businesses and triggering the evacuation of more than 300.

And I’m sure all are familiar with the Flint water crisis, which lasted for five years and exposed between 6,000 and 12,000 children to drinking water with high levels of lead.

These structural failures should not be commonplace in one of the most developed nations in the world.

Additionally, as we make the inevitable transition to cleaner forms of energy, it is imperative that we train and prepare our workforce so that the livelihoods of displaced workers are not unduly threatened.

And though Republicans have argued that green initiatives will harm the economy, new analyses confirm that it is, indeed, possible to decouple economic growth from CO2.

Says Zeke Hausfather, Director of Climate and Energy at the Breakthrough Institute, “Absolute decoupling has long been controversial, with some arguing that economic growth is fundamentally incompatible with emissions reductions. However, around 15 years ago things began to change. Rather than a 21st century dominated by coal that energy modelers foresaw, global coal use peaked in 2013 and is now in structural decline. We have succeeded in making clean energy cheap, with solar power and battery storage costs falling 10-fold since 2009. The world produced more electricity from clean energy — solar, wind, hydro, and nuclear — than from coal over the past two years. And, according to major oil companies, peak oil is upon us — not because we have run out of cheap oil to produce, but because demand is falling. … While peak emissions is just the first and easiest step towards reaching net-zero emissions needed to stop the world from warming, it demonstrates that linkages between emissions and economic activity are not an immutable law, but rather a result of our means of energy production”

Now, that does not mean, however, that all climate spending is good spending.

While The Wall Street Journal chief economics commentator Grep Ip presumably agrees with the analysis above, offering his endorsement via retweet, he also cautions the Biden administration against inefficient proposals.

Says Ip, “If you accept the neoliberal default that macro can’t help when all capital and labor are employed, then microeconomic policy must be designed to use those inputs as efficiently as possible. But Bidenomics assumes we’re almost always below potential and thus it’s okay to pursue microeconomically ‘inefficient’ channels to raise demand … Consider climate policy. We need an additional $2.5 trillion in capex over 10 years, almost all from the private sector, to reach net zero, pursuing the most efficient path possible. Some progressives instead propose $10 trillion of public spending to accomplish same thing. It’s inefficient to spend 4X as much $ to achieve same result, but if we have >$1 trillion of slack in the economy, that’s a feature, not a bug. It echoes Keynes’ suggestion we bury money in bottles and pay people to dig them up, except we also get a low-carbon economy. But if the permaslack view is wrong and supply constraints start to bind in a few years thanks to stimulus and vaccinations, then microeconomic inefficiencies become costly. Work disincentives, equity overlays, and subordination of optimal economic policy (carbon price) to the politically doable (green subsidies) lead to bottlenecks, crowding out, inflation, etc.”

Ip’s thoughts are echoed by Ethan Elkind, director of the climate program at the University of California, Berkeley, School of Law’s Center for Law, Energy and the Environment, who says that, while energy efficient retrofits should, in theory, be among the most cost-effective ways that the federal government can spend money, theory is not the same as practice. And, in practice, some energy efficiency programs have not yielded cost or energy savings as quickly as predicted, and the benefits have been difficult to assess.

“I wouldn’t say any of that to cast doubt on whether it’s good to invest in these upgrades,” Elkind said. “That’s just to say that the benefits are not completely quantifiable at this point. The data is still out there to some extent on some of these specific retrofit programs.”

Ip concludes that, if efficiency is the goal, Biden would be better served using his political capital to implement a carbon tax.

Still, while the price tag is steep and the plan’s efficiency in question, Standard & Poor’s chief U.S. economist, Beth Ann Bovino, estimates that “a $2.1 trillion boost of public infrastructure spending over a 10-year period, to the levels (relative to GDP) of the mid-20th century, could add as much as $5.7 trillion to the U.S. over the next decade, creating 2.3 million jobs by 2024 as the work is being completed. The additional 0.3% boost to productivity per year that it generates will lead to a net 713,000 more jobs on the books by 2029.”

As far as the method of funding is concerned, while the proposed 28 percent corporate tax rate is well above the current rate of 21 percent, it is still well below the 35 percent rate that predated the Tax Cuts and Jobs Act.

And though Republicans claim that such a rate would stunt economic growth, there is precedent to suggest otherwise.

Bill Clinton, for example, presided over an extremely robust economy that saw strong economic growth, record job creation to the tune of 22.7 million, and the only budget surplus that we have enjoyed since 1969.

On nearly every metric, his economy strongly outperformed those of Bush, Obama, and Trump.

And yet his administration imposed higher tax rates than all. The highest income earners were taxed at a 39.6 percent rate, and businesses were taxed at 35 percent, proving that a corporate tax rate of 28 percent does not necessarily preclude growth.

However, Clinton’s countercyclical stabilization policy — with an emphasis on deficit reduction and restrained interest rates — deserves much of the credit, and Biden has not yet indicated that he will follow a similar path.

Conservatives also argue that the period was marked by large-scale entrepreneurial and technological innovation, unlikely to be replicated; though others would argue that we have a significant opportunity with renewable forms of energy.

So what are the potential byproducts of a corporate tax increase?

On the one hand, such an increase would generate significant revenue.

On the other, the Tax Foundation estimates that the hike would “reduce long-run economic output by 0.8 percent, eliminate 159,000 jobs, and reduce wages by 0.7 percent.”

It should be noted, however, that the Tax Foundation’s analysis relies heavily on the fact that, prior to the Tax Cuts and Jobs Act, corporations were incentivized to shift profits abroad and move headquarters to a foreign jurisdiction to avoid U.S. tax liability. But this ignores the fact that, under the Made in America Tax Plan, Biden would be removing some of those incentives by amending the global intangible low-taxed income (GILTI) regime to increase the global minimum tax to 21 percent on a country-by-country basis, while also eliminating the rule allowing exemption on the first 10 percent of foreign investment; seeking a global agreement on minimum taxation, while denying deductions for payments made to a corporation based in a country that does not adopt the agreement; seeking policies to deter and prevent inversions to include reducing the thresholds for inversions under Internal Revenue Code Section 7874 and making changes to further reduce the benefits; eliminating deductions related to “offshoring” jobs; and eliminating tax incentives related to foreign derived intangible income.

The analysis also fails to account for the jobs that would be gained through green initiatives — a number likely to exceed 159,000. So, too, does it fail to account for the aforementioned gains that would result from a bold investment in infrastructure. To refresh, Standard & Poor’s chief U.S. economist estimates that a $2.1 trillion infrastructure spending boost could create as many as 2.3 million jobs by 2024.

And while Democrats in Congress have proposed alternative methods of funding — increases in borrowing or raising levies like the gasoline tax — in case tax hikes prove unpalatable, polling has found that, potential drawbacks notwithstanding, the majority of Americans support the hike.

According to Morning Consult, 54 percent of voters support raising corporate taxes to fund infrastructure, to include 32 percent of Republicans.

Nonetheless, the plan faces an uphill climb.

Republicans are unlikely to support some of the soft infrastructure measures, nor are they likely to support the price tag or corporate tax hike.

Fortunately for Democrats, the Senate parliamentarian recently advised that a revised budget resolution can include reconciliation instructions, opening up the possibility that Democrats could pass the legislation by a simply majority, bypassing the filibuster. This will necessitate both chambers of Congress to pass an amended budget with revised tax and spending targets, which will require debate on the floor. Additionally, Democrats will have to secure unanimous support among its members and the two Senate independents, which may be difficult in light of the fact that one Democrat has signaled a hesitance to raise the corporate tax rate above 25 percent, and others have said that they will not support a bill without a restoration of the state and local tax (SALT) deduction.

All that to say, the road is rocky ahead.

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