Biden Infrastructure Plan: Wrong Direction

By Chris Edwards of Cato.

"President Biden has proposed a $2.3 trillion infrastructure plan. It moves entirely in the wrong direction by increasing subsidies and centralizing power. A better approach would be to end federal subsidies and decentralize infrastructure ownership and decision making.

Biden’s infrastructure subsidies would go to: 1) federal government assets, 2) state and local government assets, and 3) private assets. The following summarizes Biden’s proposed subsidies for each type of asset and the better reform approach of freeing assets from federal control.

1. Federal Government Assets

Biden would subsidize Amtrak $80 billion. Instead, passenger rail should be privatized and de‐​unionized to reduce costs and increase flexibility to run the system efficiently based on consumer needs, not political directives.

The federal government should also privatize the air traffic control system, the U.S. Postal Service, the Tennessee Valley Authority, and its water supply infrastructure. All these assets would be better managed in the private sector supported by user charges.

2. State and Local Government Assets

Biden would subsidize highways $115 billion, public schools $100 billion, urban transit $85 billion, water systems $66 billion, and airports $25 billion. There is no need for federal subsidies for these state and local assets. The states should fund their infrastructure with taxes and user charges. Indeed, many state and local assets—such as airports, seaports, and water systems—should be privatized and subsidies ended. Some highways and transit systems should also be privatized.

The Biden plan says, “According to some rankings, no U.S. airports rank in the top 25 of airports worldwide.” But all major U.S. airports are owned by governments, whereas many abroad have been privatized, such as London’s Heathrow.

Private infrastructure funded by user fees is more economically efficient and environmentally sound than subsidized infrastructure. For example, water systems should be funded by user fees, and not subsidized, so that consumers bear the full costs and limit their consumption. Thus, Biden’s $66 billion in subsidies for water systems would be anti‐​green in effect.

3. Private Assets

Biden would subsidize manufacturing $300 billion, electric vehicles $174 billion, broadband $100 billion, electric power $100 billion, and technology facilities and commercial buildings by tens of billions. These assets are generally owned by corporations. Biden’s proposals are a strange political development because Democratic Party leaders often rail against corporate subsidies. Biden’s approach is doubly strange because he funds his plan by raising corporate taxes, which would reduce investment in the same private infrastructure that he proposes to subsidize.

The Tax Foundation found that Biden’s proposed tax increases would reduce private investment by more than $1 trillion. Biden’s proposed green and labor union regulations would further undermine infrastructure investment.

Corporations are already investing in activities favored by the Biden administration, such as electric vehicles, renewable energy, and broadband. Rather than subsidizing, Biden should focus on reducing regulatory barriers to infrastructure investment and cutting corporate taxes to increase investment incentives.

More thoughts on the Biden plan here and here."