It took last week’s electoral shock in Virginia to unblock the Democratic party’s internal logjam. Friday’s night’s passage of the bipartisan $1.2tn infrastructure bill delivered a remarkably upbeat end to the bleakest week of Joe Biden’s presidency. The prospect of also passing the $1.75tn “build back better” bill by Thanksgiving would provide more good news for the beleaguered president. Nothing succeeds like success, as the saying goes.
The smaller bill passed several hours after the most encouraging jobs report in months — with more than half a million added to the payrolls in October. If the recent abatement of Delta infections persists, the US economy is likely to be in robust shape in the lead up to next year’s congressional elections. Though history and recent polls are not on Biden’s side, no iron law says an incumbent’s party must lose control in the president’s first midterm. George W Bush bucked that trend in 2002.
Political relief aside, it will take more than one infrastructure bill to change this president’s fortunes. By some measures this is the largest public infrastructure upgrade since Dwight D Eisenhower’s presidency in the early cold war. The bill includes $550bn in new spending over a decade, which makes it somewhat less dramatic than its headline number.
Nevertheless, the effects of new money for US roads, rail, ports, rural broadband, water supply and the build out of an electric car charging network will start to be felt early next year. Though it is mostly funded by accounting gimmicks rather than higher taxes, the bill’s impact will help ease US inflation pressures by reducing supply bottlenecks. It will thus help cement the US economy’s post-pandemic rebound.
Passage of the larger bill is still far from assured, however. Unlike the infrastructure package, which was supported by 13 Republican senators, build back better is a purely Democratic affair. Even then, securing Democratic unanimity, which is required to pass anything in the 50:50 Senate, will be a struggle.
Objections from centrists have denuded the bill of some of its main features, including beefed-up authority for the Internal Revenue Service to clamp down on tax evasion, new powers for Medicare to negotiate lower prescription drug prices, the right to paid family and medical leave, and tax increases on the top income brackets.
What remains is less than half the size of the original bill and considerably less transformative than its initial promise. It would still provide a shot in the arm for middle-class families, and particularly women, by funding universal early childhood learning and extending the child tax credit. This ought to lift America’s anaemic female labour force participation rate by reducing the often crippling burden of childcare. Again, such measures are disinflationary.
The bill would also deliver the largest investment in renewable energy in US history. Though it has been stripped of its most effective climate change provision, which would have accelerated the electricity sector’s transition from fossil fuels, what remains is substantive.
Would these be enough to set Biden back on course? Since he has staked his credibility on passing both bills, it would be hard to imagine him doing so without enacting the second. Biden’s approval ratings began to fall in August during the Afghanistan troop pullout, which hit his claim to being competent. Rising inflation, higher murder rates and a 10-year peak in illegal border crossings have fuelled public disquiet. The best response to voter disaffection is action. Getting big legislation passed is exactly what Biden should be doing.