Biden’s Infrastructure Plan Faces Challenges in Senate
08 Jun 2021 · 3rd Party Analysis
- President Joe Biden agrees to leave out raising the corporate tax rate
- Treasury Secretary Janet Yellen says she will “not give up” on the spending plans
President Biden signaled he is willing to agree on a narrower infrastructure package that does not include raising the corporate tax rate. Mr. Biden discussed the matter with Senate Republicans last week and said he could accept a $1tn infrastructure plan with a variety of alternative ways that could cover the costs for the measures. Nevertheless, many challenges are lying ahead as the plan would still be opposed by Republicans over some of the proposed measures.
The current proposal calls for a minimum corporate tax of 15%, alongside a repurposing of Covid-19 aid funds. The new approach to reaching a deal marks a shift from the White House which has previously said it will not support the reallocation of already approved Covid-19 aid funding. Moreover, Mr. Biden had trimmed some $700bn from the previous $1.7tn plan, which itself was a compromise as it was a slimmed-down version of the original $2.3tn.
The current proposal assumes that to pay for the spending, the White House will not boost the corporate tax rate to 28%, from 21%, as initially intended. Republicans have fervently opposed any hike in the corporate tax rate, saying the 2017 tax law should remain untouched.
Challenges Ahead for President Biden
Joining the President’s efforts to boost the White House agenda, Treasury Secretary Janet Yellen said Joe Biden should push forward his fiscal package, despite the threat of higher inflation that could be triggered by the increased money, flowing into the system. “If we ended up with a slightly higher interest rate environment it would be a plus for society’s point of view and the Fed’s point of view,” Ms. Yellen said in an interview with Bloomberg on Sunday.
President Biden’s plan to propel the US economy with a total of over $4tn in spending aims to inject as much as $400bn a year in a slew of measures from fixing roads and promoting clean energy, to paid leave and education. A “spurt” in prices, according to Janet Yellen, would fade away next year.
“We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade,” the Treasury Secretary said, adding that “we want them to go back to” a higher interest rate environment. “I will not give up on the next packages,” Yellen said. “They’re not meant as a stimulus, they’re meant as investments to address long-standing needs of our economy,” the former Federal Reserve chair said.
Meanwhile, President Joe Biden’s agenda is set for a steep and challenging week as the Senate is expected to decide whether to support some measures, included in the voting-rules bill and the infrastructure plan. The voting legislation, according to Joe Machin, a pivotal centrist, needs bipartisan support, otherwise, it runs to risk of deepening bipartisanship in Congress. Republicans have already said they are against the key voting rights bill and they seek discussions on narrower changes to voting laws.
The sweeping voting rights bill pushed by the Democrats would make a number of drastic changes to the current rules on voting and campaign financing. The roughly 800-page legislation, known as the For the People Act, addresses “voter access, election integrity, election security, political spending, and ethics for
the three branches of government.” In essence, it aims to ease voter access to polls, expand mail-in voting and overhaul the way campaigns are financed.