Republicans, Democrats and the White House have been discussing a $2.9 trillion “infrastructure” bill. The definition of infrastructure itself keeps changing, as does how to pay for it. The White House has indicated a willingness to cut a trillion dollars or so out and even to lower the corporate tax increase. But that still leaves a significant corporate tax increase, as well as spending not traditionally considered infrastructure.
Some commentators are chiding Republicans for not agreeing to tax hikes to pay for the bill, when Republicans have said they want Democrats to figure out how to pay for their spending. Republicans don’t want to pass much of this bill, period. Layered over these discussions is a key question from both sides.
Will President Joe Biden really agree to cut back on the bill’s price tag and lower his corporate tax ask to 15 percent on major corporations, or is he just posturing to show Sen. Joe Manchin (D-WV) that he’s trying—but the Republicans won’t play ball?
One tax expert on the left was frustrated, commenting he can’t find one tax increase the Republicans haven’t objected to. So far, the Republicans have held fast on more traditional definitions of infrastructure and not giving up the 2017 tax cuts.
Waiting in the wings is another Democrat bill that would encompass the education, family leave, housing, manufacturing, elder care and other “human infrastructure” the Democrats couldn’t get past Republicans and some Democrats as “infrastructure.”
Another consideration is the Democrat leadership’s plans to attempt spending they haven’t gotten elsewhere into another budget reconciliation bill, needing only 51 votes. But to pass another reconciliation bill, they have to get votes from Manchin and Sen. Kyrsten Sinema (D) of Arizona—not a given. Both Manchin and Sinema have said they would not vote to end the Senate filibuster.
Treasury Secretary Janet Yellen got promises from the finance ministers of the G7 countries to install a global minimum tax of 15 percent. The Democrats want other developed countries to impose a tax on U.S. companies so that companies will be willing to stay in America and pay an increased corporate tax rather than move overseas.
All of this amid an economy that is trying to recover from shutdowns while constrained by labor and supply shortages. Some two dozen states are stopping participation in the $300 a week federal unemployment boost in June. That should begin alleviating the labor shortage, which has significantly hampered the reopenings of restaurants and hotels. People are happy to get out, eat and socialize. But their patience with slow or nonexistent service will soon begin to fray.
Retail demand for beef has stayed steady and summer grilling at home should help. But $300-plus boxed beef prices may push people towards ground beef. The question is, where is the retail resistance level? Additionally, export demand is strong, comprising 20-25 percent of production. Tight supplies of chicken and higher prices for both pork and chicken will ease some beef price pressure. Further spending problems could come from the end of mortgage payment forbearance.
There have been lots of stories about “takeout” and “delivery.” Food delivery services like Grubhub, Uber Eats and Doordash are still trying to make a profit. Unknown is how much of consumer delivery demand will remain with dine-in coming back. Restaurants had to gear up for more takeout and delivery orders and now have to handle both, plus in-house customers. Will they continue using the delivery services, which cuts into their profits? Some are raising prices on delivery menus to compensate for delivery fees and higher food and labor costs.
The Biden administration has also proposed their first budget ($6 trillion), reflecting their priorities. A recent lengthy interview with Biden concluded that his team wants to set prices and wages in our economy based not on supply and demand, but on their view of “social justice,” according to race and gender “equity.”
Therefore, the budget lists a 22 percent increase in the budget for the Environmental Protection Agency (EPA) and $80 billion for 87,000 new IRS agents to help raise money. The IRS employs 74,000 now. It calls for zero increase in defense spending and border enforcement.
Most concerning, even their figures peg GDP at less than 2 percent for the next decade. Part of that EPA boost will go to implement Biden’s May executive order directing federal agencies to determine the costs and risks of climate change on various economic sectors. That requires a mandated “revealing” by regulated private industries and companies to provide dollar estimates of everything they do that could in any way affect “climate change.” — Steve Dittmer
(Steve Dittmer is the author of the Agribusiness Freedom Foundation newsletter. Views in the column do not necessarily represent the views or opinions of WLJ or its editorial staff.)