By Robert Yeakel / NGA Director of Government Relations
Three weeks ago, President Biden unveiled the next step in his “Build Back Better” agenda by calling on Congress to pass an infrastructure package. The American Jobs Plan, as the White House has coined it, lays out more than $2 trillion in federal spending on infrastructure and other domestic investments.
The administration sees this as a one-two punch to not only provide the resources to revitalize the nation’s roads, bridges and other traditional infrastructure, but also as a job creation tool to help the country rebound from the economic downturn of COVID-19.
Here are some highlights of Biden’s proposal and the impact it may have on our industry, as well as some suggestions to Congress as it begins to piece together its version of an infrastructure and jobs package and looks to different options for how to pass this legislation.
Traditional infrastructure investments and supply chain resiliency
The Biden plan proposes $620 billion for transportation, divvied up between roads and bridges, waterways and ports, and freight, as well as funds to safeguard against future natural disasters. In addition, Biden proposes roughly $300 billion to upgrade the country’s drinking water infrastructure, expand broadband access in rural America and improve the nation’s electrical grid. Congress has generally been reluctant to fund traditional infrastructure at levels that allow for more than a Band-Aid approach; this new funding should help to reverse the declining state of our nation’s infrastructure and help private business better transport goods and services.
The Biden proposal also calls attention to the importance of domestic supply chains. With the pandemic placing a spotlight on the pressures that grocery and other essential industries deal with, the president has called for funding for a new office within the Department of Commerce to help support and strengthen manufacturing supply chains.
Congress should go a step further and address some of the regulatory barriers that continue to bottleneck supply chains. Issues like the nationwide truck and commercial driver shortage – which predates the pandemic – could be assuaged by including legislation like the DRIVE-Safe Act (S. 659 / H.R. 1745) – which NGA and more than 100 other organizations support – to allow commercial drivers under age 21 to partake in an apprenticeship program allowing these drivers to operate across state lines.
Congress could also direct states to update their truck size and weight requirements in hopes of modernizing and streamlining the various state-by-state regulations that make it more costly and difficult for supply chains to meet industry demands.
The Biden proposal also calls for more than $200 billion in climate change-related provisions as well as another $400 billion in clean energy tax credits. Congress should look at other ways to help private business move toward greater sustainability.
In the grocery industry, the Biden administration has taken aim at the impact of refrigerants, focusing on phasing out many commonly used gases. Congress should include either tax credits or a grant program for businesses to help them with the costs of updating their systems to incentivize the transition towards refrigerants that are more sustainable.
Tax increases and inflation concerns
Included in the Biden plan is a list of tax increases proposed to pay for at least some of the more than $2 trillion in spending. While the American Jobs Plan focuses its hikes on the corporate side of the ledger – raising the corporate rate from 21 percent to 28 percent, attempting to close international tax loopholes – the White House has made clear that this proposal will be complemented by a “part two” plan expected to be introduced either later this month or in May. With expectations that this second proposal will include a variety of hikes on individuals and pass-through corporations, as well as hefty increases to the estate tax and lowering thresholds, Main Street businesses will inevitably be hit with a larger tax bill.
For many businesses, including grocers, the prospect of tax increases forces them to withhold capital that could be invested back into their companies, preventing them from hiring, renovating or expanding their stores or upgrading equipment. Congress should consider the tradeoffs of increasing taxes on companies while also using new spending in an attempt to boost job growth.
The Biden plan, and proposals for another $3 to $4 trillion in new federal spending, have also sparked concerns about whether this level of investment will accelerate inflation. Consumer prices in March jumped 2.6 percent, with the Consumer Price Index (CPI) increasing 0.6 percent, the largest one-month increase in over a decade. In addition, many food sector companies are pointing to rising commodity prices as a signal that shoppers will likely be seeing their grocery bills increasing.
With Democrats and the White House looking to add to the more than $6 trillion in COVID-19 response spending passed by Congress within the last year, there is a real concern that this massive influx of federal funding will lead to a greater uptick in inflation, putting pressures on businesses’ margins and more importantly Americans’ pocketbooks.
Reconciliation and Democrats’ “Go it Alone” strategy
Biden’s American Jobs Plan also needs to be considered with a political lens, particularly in terms of how the president and a Democratic Congress hope to pass such a massive spending package. After signaling their willingness to work in a bipartisan fashion to pass the last COVID-19 relief bill, Biden and Democrats on Capitol Hill instead moved quickly via budget reconciliation to pass March’s American Rescue Plan without a single Republican vote in both chambers.
Similarly, many Democrats are calling for a jobs and infrastructure package to also use this partisan tack, making chances for negotiated compromise unlikely. Infrastructure funding, in general, has usually been one of the few areas that Republicans and Democrats have been able to find middle ground. But Biden’s proposal is considered a starting point for many congressional Democrats who view the plan as the bare minimum for the spending and policy goals they have in mind.
NGA calls on both parties in Washington, D.C., to work together to find solutions to infrastructure funding and help the country rebound from the pandemic.