President Biden is introducing an infrastructure plan today costing $2 trillion. The plan is a combination of subsidies for corporations and subsidies for state and local governments. Both types of subsidies are unneeded and wasteful.
Biden wants $135 billion for highways and bridges, $111 billion for water supply, $100 billion for schools, $85 billion for transit, $25 billion for airports, $17 billion for waterways and seaports, and much else. State and local governments own these assets and can fund them with their own taxes and user fees. There is no economic reason for federal subsidies for any of these assets. Indeed, federal subsidies for state and local infrastructure creates unneeded bureaucracy and misallocates resources. Obama‐era subsidies, for example, induced California to waste billions on a boondoggle high‐speed rail project.
Even more troubling is Biden’s proposed money gusher for private‐sector infrastructure. He wants $300 billion for manufacturing, $100 billion for broadband, $100 billion for electric utilities, $174 billion for electric vehicles, $180 billion for research, and much else. Much of this spending would subsidize big corporations.
Yet during the presidential campaign Biden said things such as, “we are going to have to have a major, major, major bailout package that we do not reward corporations, we reward individuals.” And his campaign website made claims such as, “Trump’s main manufacturing and innovation strategy is trickle‐down economics that works for corporate executives and Wall Street investors, but not working families.” That sounds like Biden’s strategy.
Corporations are already investing in the activities that Biden wants to subsidize. AT&T, Verizon, and other corporations invest more than $50 billion a year in broadband. Big corporations such as GE, Siemens, and Mitsubishi already invest heavily in wind power. Tesla, General Motors, Volkswagen, and other corporations already spend billions on electric vehicles. Biden wants subsidies for EV charging stations, but Tesla has already built more than 2,500 of them. The private sector with its own money build America’s 136,000 gas stations, and it should do the same for EV charging stations, if that’s what consumers want. There is no need for the federal government to pump up the profits of corporations in these industries.
What is really perverse is that Biden is proposing these corporate subsidies at the same time he wants to jack up corporate taxes. During the campaign, the Tax Foundation estimated that Biden’s overall tax package would slash business investment by more than $1 trillion. So broadband, energy, manufacturing, and other industries would get billions in new subsidies from Biden, but they will be paying billions more in taxes. Biden’s plan would be a giant, wasteful circular flow of money from corporations, through Washington, then back to favored corporations.
As federal subsidies for the states have increased over the decades, state and local governments have become little more than administrative arms of a giant national government. Under Biden, the same thing may happen with American businesses. Lobby groups such as the U.S. Chamber of Commerce have been demanding more federal infrastructure spending, but what they will get is a government takeover of business investment decisions. America’s economy will stagnate as more investment decisions are based on political whims and less on actual consumer needs.