Meaning of “Infrastructure”
One of the key stumbling blocks is a pronounced disagreement over what constitutes infrastructure.
Republicans have a traditional view. Democrats include a wide array of goals including union expansion and child care.
Who Pays and How?
Even if the meaning of infrastructure is limited in some sort of compromise, the second key stumbling block is how much funding, for what, and who pays.
Test in Congress Coming Up
The WSJ notes Biden’s $4 Trillion Plan Now Gets Test in Congress.
With Republicans largely lining up against most of the roughly $4 trillion in proposed spending and related tax increases, Democrats face a series of political and logistical questions.
Should party lawmakers seek a compromise on narrower infrastructure legislation with the GOP, or plunge ahead with a Democratic plan that ignores Republicans’ concerns and can be passed on party lines? Should they expand the scope of the proposals even further? And should they attempt to pass several pieces of legislation or combine everything into one package?
House Speaker Nancy Pelosi (D., Calif.) has set a target of passing an infrastructure bill by July 4, leaving Democrats weeks of negotiations on the spending both with Republicans and among themselves.
Wide Political Gap
Biden seeks Republican support and held a series of meetings with bipartisan groups.
The Republicans are willing to spend $568 billion. Democrats seek $2.3 trillion for their definition of infrastructure plus another $1.7 trillion for other pet projects.
What They Are Saying
- Sen. Joe Manchin (D., W.Va.): “That [level of spending] makes you very uncomfortable, you want to find how you’re going to pay for it. Are we going to be able to be competitive and pay for what we need in the country? And we got to figure out what our needs are and maybe make some adjustments, who knows.”
- Sen. Shelley Moore Capito (R., W.Va.), the leading Republican behind the $568 billion proposal, said in a statement Thursday night that she had a “constructive and substantive call” with Mr. Biden on infrastructure. Mr. Biden said Ms. Capito “seemed very serious and very positive” about the talks.
A Start
Agreement on $568 billion is a start of sorts. But what about the rest?
The Progressives are not at all pleased.
“You can’t go to work if you have an obligation to care for a child or an older relative, so it’s essential that we keep it in any infrastructure proposal,” Sen. Bob Casey (D., Pa.) said.
Hmm. That’s the pesky first problem in full glory: What precisely is the meaning of infrastructure?
The Progressives insist it includes two years of free child care for the needy with union wages on top of it.
Getting to the Point
“You have pretty expansive spending on top of spending, with the only way to pay for it is to go after taxes,” said Sen. Lisa Murkowski (R., Alaska). “I think it makes it very difficult for it to be truly bipartisan.”
“There are certainly some in the president’s inner circle who were part of the Obama team who say, ‘Look we can’t just have this go on forever, there has to be an outcome,’ ” said Sen. Chris Coons (D., Del.), another close Biden ally.
Meaning of Outcome
- Something Passes
- Nothing Passes
Coons seems to dismiss option 2, but that is an outcome, and a very possible one at that.
This could go on for four years with no bills signed.
Can Something Pass?
Yes, of course. But the key is whether or not Progressives are willing to compromise.
I would expect Republicans to go beyond $568 billion, possibly to $900 billion or so. I would not expect them to agree to child care, nor would I expect Joe Manchin of West Virginia or Krysten Sinema of Arizona to sign on.
Nonetheless, many Progressives want to push for even more than the $4 trillion combined plan that Biden outlined.
Resolution
Whether something passes (option 1) or nothing passes (option 2), depends not only on what compromises the Progressives are willing to make, but also on what Democrat senators Manchin and Sinema are willing to go along with.
In addition, any tax hikes need to appease 25 House democrats from New York who demand tax hikes on the wealthy (but a reduction in SALT taxes primarily for the New York wealthy)
One Big Bill or Multiple Bills?
I fail to see how one big bill can possibly accommodate all the competing views. Yet, many Progressives mistakenly believe they can ram their ideas through in one fell swoop.
One glorious bill is the path to nothing.
The path to something involves splitting Biden’s proposals into pieces, agreeing to passable goals and giving up on the rest.
Infrastructure is doable but only to the extent Manchin, Sinema, and the New York Democrats are willing to go along.
That means separating out infrastructure spending from taxes. In turn that means there may not be any tax hikes (or more likely minimal tax hikes) that will not cover even the compromise spending increases.
Numerous Roadblocks to Anything
For discussion on the Manchin, Sinema, and New York SALT roadblocks that impede resolution of literally every Biden-supported agenda item, please see Democrat’s DC Statehood Idea Is Dead Already. What Else is Dead?
Option 1, “something” vs option 2, “nothing” is much harder than it appears at first glance. That’s a good thing.
Mish
With so much communist fervor at home, what is the point of the war-mongering against China and Russia which have so much less communist fervor in so many ways.
To webej, since you do not like communism, get off the internet, which was developed by the US govt. Also, do not fly jet planes because the technologies used by airplanes and concept of a jet plane was developed by various governments.
I have to conclude that accomplishing nothing would be far better than what Biden wants to accomplish, which is just as big a wish list for the “progressives” as the corporations had for Trump…..just as bad, but in the opposite direction.
There should be some realization that there should be limits on how much individuals SHOULD be taxed, as opposed to considering taxpayers an ATM with no limits.
Putting more than half the population in a group that pays no net tax is a prescription for disaster. Why wouldn’t those people want more tax?..It’s not like they have to pay it. Tax “the rich”!!!!…..the rich have money!! But in this country the definition of rich is anybody that makes significantly above the median income……while the very top .1% own about the same as the lower 90%.
Journalists all conflate income with wealth. For the truly wealthy, earned income is an option, not a requirement. And capital gains can be taken or not taken in a given year. If Biden raises cg’s to the levels he intends, then the wealthy will merely wait him out until they can get another Trump to give them whatever they want.
The idea that you can tax your way to wealth equality is bogus. The horse is out of the barn. If you eliminate the tax breaks that are the primary path for people to accumulate wealth, then upward mobility goes away, and we become a static society with a few rich and the rest locked in wherever they are now…..at best.
For older high earners like me, the answer looks increasingly like retirement. Quitting the day job put me in a much lower earned income level, and that makes it easier to take cg’s without hitting the “soak the rich” levels.
One thing nobody is mentioning…..is that housing is going up so fast that pretty soon the proposed 500K caps on tax free cg’s from 1031 exchange proceeds won’t be enough to shield small investors anymore. Because the inflation in RE is going to turn them all into “rich” people.
I saw one source that said that 90% of single family rental properties in the country are owned by mom& pops…which doesn’t surprise me, since this is the “entry level” approach to successful RE investing, due to the way the mortgage system works.
Biden’s plan might look great to single moms who are struggling to survive..but it doesn’t look very good to anyone making a decent income who is trying to invest their way from nothing to something in one working lifetime. One less way to get there.
Even those who are fortunate to have a corporate funded 401K are going to see themselves get turned into the “rich” who are being taxed, if assets continue to inflate. Eventually the day does come when tax-free gains get taxed….and the levels that seem fair today won’t twenty years form now. What they’re calling rich now won’t look so rich when houses all cost 2 million bucks, or the S&P is at 15000.
I agree with pretty much everything you wrote above.
The bottom 50% continue to push for more taxes since they don’t pay them so they don’t care how much they rise.
I suspect 401K plans will be seized in about 10 years or so ‘for your own good’ when the earliest retirees start running out of money (ie first sign of a crisis). The money in them will be taken and you’ll get a monthly check as if you converted the whole thing into an annuity with Wall Street managing the whole thing (and collecting their fees of course) and since it’s an annuity there will be nothing to pass on to heirs.
The real problem as Mish has been stating for years is out of control spending (paying too much via union wages, spending on wasteful stuff like military and other boondoggles/pork/pet projects). If spending were reigned in we would not need higher taxes.
I’ve been doing the math. I don’t think there is any question that I should just sell out this year and pay the damn capital gains tax before it goes up……and just go on down the highway. I’m there. I don’t need the cash flow anymore, what with the recent market appreciation.
Which pisses me off to no end. I’m not ready to quit. I was just getting to the fun part of RE investing.
The alternative is to put the cash flow stuff into a trust and let it outlive me and hope it helps the kids. I might do that instead.
I’m thinking this is what financial freedom really feels like. I always wondered what it would feel like, if I ever got there.
My job still pays me great, but there is no longer a reason to do it for the money. But I’m not read to quit that either. I used to do it for the money, but now I can do it for better reasons.
If I weren’t half of a couple I’d buy a big boat and sail away. Biden really pisses me off. I have to vote the other party from now on, because it’s just stupid the way the Dems are acting. I hope the Republicans can field a better candidate than Trump.
Sure, why restrain yourselves whether Dems or Reps; 2 trln, 4 trln, or even 10 trln down the crapper, irrelevant ! Money or the lack of it, insane debt levels, bulging deficits etc are no longer a problem, even before the pandemic you were (cautiously still) spending money you didn’ t have. RELAX now, let yourself go, print and spend as if there s no tomorrow, the means justify the final end… creating a worthless dollar !
Democrats have been so eager to work with the Republicans (obviously at the behest of their common owner, aka big-money donors) that they are essentially the Republican Party with a 10-15 year time lag. That is why most of the yesteryear Republicans like GW Bush, John McCain and even Mitt Romney are considered to be distinguished statesmen by today’s leading Democrats.
Considered ? It is because they are. Trump broke the Republican party but he doesn’t realize it yet. He’s going to get involved again provided he’s not convicted of a whole host of things. My take is the Republican party wants nothing to do with him but they can’t say that because 25% of their party will simply disappear they like they did in the Georgia Senate Elections in January. The Republican party of GWBush, McCain and Romney is all but dead. Romney was nearly booed off the stage in his native Utah at a Republican party conference. That in and of itself is telling.
LOL. Trump is horrible for sure. But that doesn’t turn Iraq war criminal GW Bush eternal warmonger John McCain, and corporate villain Romney into heroes.
The American Jobs Plan Will Make Our Infrastructure Crisis Worse link to strongtowns.org
It Will Take a Lot More Than Money to Fix the Digital Divide
Joe Biden’s goal to get internet to every American is a lot tougher than it looks. link to slate.com
For a technology writer from Slate I am surprised that he didn’t mention Elon Musk’s Starlink which uses satellites and gives an average of 70 Mbps and will go well over 100 when more satellites come online. No need to lay cables for rural and low density areas. All you need are dishes and decoders.
I really don’t believe anything the Republicans say anymore. They have not demonstrated they will pass anything with a Democrat as President. If Biden and the Dems were to backoff to a $500B proposal with EVERYTHING the Republicans wanted and NOTHING the Democrats wanted, I believe the Republicans would simply walk away and say no infrastructure is needed. This is the same party that still supports a former President who effectively told his supporters to attack the capitol. Fundamentally, Republicans believe in no government. This is why whatever they say cannot be trusted. It is a ruse. They’ve been talking about infrastructure for years. The last infrastructure bill to pass was during the Obama administration when the Democrats had both houses of congress for the first two years.
Infrastructure is very popular with Americans, hence the attempts by Democrats to classify everything they want as ‘infrastructure’.
Sorry, I do not understand why is it always the burden of DEMOCRATS to ensure bipartisanship. Why is the onus NEVER on Republicans to do so? Can you show me ONE instance where Republicans reached out to Dems in act of accommodative bipartisanship?
Because dems pretend to be all inclusive from the start, which republicans will never concede to ?
Bipartisanship demands compromise.
Rarely in the last 15yrs has either Party that simultaneously controlled the House, Senate and White House been willing to compromise. That’s on them… if they refuse to compromise and try to ram through a plan no matter how offensive it is to the opposition, it’s the Party in power that’s failing to compromise. Right now, the Democrats are the ones stifling bipartisanship. In 2017/2018, it was the GOP.
No party has to work with the other party, though Biden promised to be the President for all Americans. Most people heard that as a willingness to compromise. Biden can’t convince his own party to vote with him, so he can either compromise or have the whole thing fall apart. Politicians used to say “half a loaf is better than none”, but there is very little genuine compromise anymore.
It can be done. The criminal justice reform bill was a good example of bipartisan legislation. Usually bipartisanship is found only on military spending and authorizing the NSA to spy on Americans.
When I hear “bipartisan,” I remember TARP, when both Parties combined to overwhelmingly pass a bill that both their constituents were against by a 9-1 margin.
When they agree, they’re really gonna screw us.
90% of constituents weren’t against TARP. You won’t find a single issue that 90% of total constituents are for or against.
In 2008, 90% of the constituents contacts to their members of Congress were anti-TARP. That is a skewed subset of voters, however, I remember the polls of voters being similarly lopsided. The People overwhelming did not want that bailout.
I remember. The takeaway, which I’ve never forgotten either, is that when it comes down to brass tacks, the congress will always do what the bankers tell them to do to save the system, right or wrong. That’s worth remembering for future reference.
They’re always bipartisan when it comes time to fund Jihadi terrorists in Syria and such.
Talk of trillions is getting boring, when do we move on to actually spending a quad or two ?
If those 25 Democratic House members stick to their guns, then Pelosi will need GOP votes to pass any bill. However, I’m not at all sure that the 25 really will defy the whip if the SALT deduction isn’t re-instituted. Perhaps any readers from NY may be able to shed light on the issue: Are New Yorkers REALLY pissed off because the TCJA capped the SALT deduction at $10,000?
I would say the high tax bracket people are upset. The Heritage Foundation gave this example:
“The average millionaire living in New York or California deducted more than $450,000 worth of state and local taxes; the average millionaire in Texas deducted only $50,000 and therefore paid close to $180,000 more per year in federal taxes.”
The rich are definitely pissed that they capped the SALT deduction. It doesn’t really affect anyone else.
Also repealing it means you need to immediately generate about 80 billion in new taxes to offset the money it brought in.
Given all the proposals already need lots more taxes it seems strange to repeal this tax because you start off 80 billion less before you start raising taxes.
I hope they do not roll it back since it’s truly a tax on the rich.
Reinstating the SALT deduction will slow the out migration of business owners and high earners from the high tax states. States like NY/NJ/CA need the tax base especially after the severe lockdowns they imposed. Even more critical if cap gains is pushed up by 10 points or more. Cap gains earnings are much more mobile.