Manchin balks at GOP’s smaller infrastructure plan – and says he can back $4 trillion as long as it’s paid for

Joe Manchin
Sen. Joe Manchin (D-WV).

  • Sen. Manchin rebuked the GOP’s infrastructure plan, saying Senators should “do whatever it takes.”
  • The moderate Democrat added he’s open to spending $4 trillion so long as it’s paid for.
  • The GOP is preparing an up to $800 billion bill, much smaller than Biden’s $2.3 trillion plan, which may be followed by another $2 trillion.
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Sen. Joe Manchin of West Virginia is open to a multitrillion-dollar infrastructure plan. He just wants to see the bill covered.

That could be bad news for Republicans hoping he’ll break with his party on the next massive plan from President Joe Biden’s desk.

Manchin – a moderate Democrat with incredible influence over Senate Democrats’ agenda – rebuked the GOP’s infrastructure plan on Thursday. These comments could reverberate widely.

A group of Senate Republicans is preparing a plan that could range from $600 billion to $800 billion, drastically undercutting President Joe Biden’s $2.3 trillion proposal. Separately, Senate Minority Leader Mitch McConnell is reportedly telling his caucus to praise Manchin in an effort to win his support.

Manchin’s support is critical for Democrats to pass an infrastructure plan of their own. With Democrats only holding 50 seats in the Senate and relying on Vice President Kamala Harris to break a tie, any opposition from Manchin or other moderate Democrats dooms efforts to pass legislation by a simple majority under reconciliation.

The senator from West Virginia told reporters he still sees room for agreement between Democrats and Republicans, but also that he’s willing to go big if the situation warrants such spending.

“I don’t think they’re locked in on any number,” Manchin said. “We’re going to do whatever it takes. If it takes $4 trillion, I’d do $4 trillion, but we have to pay for it.”

The $4 trillion sum evokes the sum Biden is reportedly looking to spend between two infrastructure proposals. The $2.3 trillion plan unveiled in March focuses more on traditional infrastructure and renovations. A follow-up measure – known as the American Families Act – is expected to include funds for universal pre-K, child care, and other social measures.

The infrastructure argument has split Senators along partisan lines as Biden looks to pass legislation that rivals the New Deal. Democrats argue that new benefits like free community college and child care should join traditional infrastructure in a spending package. Republicans balk at this wider definition and are instead pushing for a slimmed-down measure that focuses on rebuilding roads and bridges. In fact, their slimmed-down plan could double the amount spent on this aspect of physical infrastructure.

The two parties need to come to an agreement on the very definition of “infrastructure,” Manchin said. Identifying exactly what elements the bill should cover is paramount to passing legislation in a timely manner, he added.

The GOP’s plan also differs from Biden’s in that it lacks a corporate tax hike. The president proposed lifting the corporate rate to 28% from 21% along with other tax increases to pay for his infrastructure plan. The GOP instead aims to finance their plan with “user fees,” such as taxes on vehicle mileage traveled or possibly pushing for an increase to the gas tax.

GOP senators doubled down on their dismissal of a corporate tax hike, calling such policy a “non-negotiable red line” Thursday afternoon. Still, they appeared far from agreed on the scope of an overall infrastructure package.

The GOP’s stance mirrors that seen in February as both parties readied their respective stimulus packages. Republican Senators pitched a $618 billion measure to the White House that slashed spending on tenets of Biden’s own plan, including stimulus checks and unemployment insurance. Biden ended up approving a $1.9 trillion package that’s since distributed billions of dollars to American households.

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Biden has finally found a country the US can rebuild

Highway collapse traffic
A collapsed freeway overpass near downtown Oakland, California, in 2007.

  • The Biden administration has made an ambitious $2 trillion proposal to address the US’s infrastructure problems.
  • That influx of money would be welcome after two decades and billions of dollars squandered trying to rebuild other countries.
  • Daniel R. DePetris is a fellow at Defense Priorities and a foreign affairs columnist at Newsweek.
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It doesn’t take a genius to know that America’s domestic infrastructure is in utter disarray. Travel down I-95 between New York City and Boston, and you will be lucky not to hit a 5-inch-deep pothole in the middle of the lane.

The United States, the most prosperous country in the world, is now 13th in terms of infrastructure quality, below many of its peers in Europe. Over 20% of its roads are in poor condition. About 127,000 bridges across the US are either structurally deficient or need to be replaced. And as the water crisis in Flint, Michigan showed, even clean water supplies aren’t a given.

The United States, in other words, is in desperate need of investment at home. The alternative is watching as Americans who live in cities continue to suffer from dilapidated highways while their fellow citizens in rural areas are left searching for a basic broadband connection.

The juxtaposition outside US borders is stunning. Over the last two decades, as US infrastructure was worsening, Washington was busy conducting reconstruction initiatives in nations that to this day remain consumed by conflict and led by unaccountable and corrupt governments.

Afganistan Iraq embassy troops soldiers
Afghan policemen stand guard outside the Iraqi embassy in Kabul after an attack, July 31, 2017.

As of December 2020, the US has spent approximately $143 billion of taxpayer money on reconstruction projects in Afghanistan.

The projects were designed to kickstart the Afghan economy, introduce a degree of self-sufficiency over the long-term, and ensure ordinary Afghans were able to enjoy the kinds of public goods – accessible water supplies, highways, access to hospitals – that are often taken for granted in the West.

Yet the results, to put it generously, have been poor. $1 billion was devoted to schools in Afghanistan that weren’t even operating. A $8.5 billion program to wean Afghan farmers away from growing poppy was unsuccessful, evident in Afghanistan’s current status as the world’s foremost producer of opium.

As Special Inspector General for Afghanistan Reconstruction John Sopko testified to Congress last month, systemic corruption in Afghanistan undermines US-funded reconstruction initiatives to the point of irrelevancy. Of the $7.8 billion in US reconstruction funds SIGAR investigated, just $1.2 billion – 15% – went to their intended purpose.

Many of the buildings paid for by the US taxpayer were left abandoned. Afghanistan still relies on international donors for 80% of its budget; remains dominated by corruption at all levels of government; and is seemingly incapable of exhibiting the slightest degree of responsibility in how it spends US taxpayer money.

US Soldier Selfie Iraq
A US soldier takes a selfie at the US Army base in Qayyara, south of Mosul, October 25, 2016.

The US experience in Iraq isn’t much better. Despite their good intentions, US officials ran into problems on the reconstruction front almost immediately.

After an infusion of $172 million to restore the Baiji power plant after the initial invasion, the plant was only churning out half of its potential output. The United States sunk billions into large and costly projects the Iraqi government was unable to handle or finance.

Schools and prisons funded by Washington were left idle, while water treatment plants in dangerous areas like Fallujah were overbudget and woefully inadequate for the population. Today, Iraq remains a country so riddled with parochialism and multiple power centers that Shia militias are building up their own revenue streams separate from the state.

As US soldiers and aid workers were essentially throwing billions of dollars in the toilet in Afghanistan and Iraq, America’s own schools, roads, and bridges were falling apart.

Total spending on US domestic infrastructure fell between 2007-2017. The American Society of Civil Engineers gave the US a “C-” on its infrastructure score and estimated that the US economy could lose $10 trillion in GDP by 2039 if Washington failed to plug the infrastructure spending gap.

The Biden administration, like its predecessors, is hoping to solve (or at least mitigate) America’s infrastructure problems with an ambitious $2 trillion proposal that would be paid for over a period of 15 years.

Flint Water Crisis
Michigan Army National Guard soldiers hand out bottled water at a fire station in Flint, Michigan, January 17, 2016.

The plan would dump $600 billion into improving and modernizing ports, railways, bridges and highways. $300 billion would be devoted to supporting domestic manufacturing, while an additional $100 billion would be invested into building up an electric grid prone to occasional outages.

Biden’s initiative will run into steep opposition due to the cost. But leaving the details aside, one can’t help but feel a sense of jubilation that US policymakers are actually showing some interest in investing in America rather than in countries overseas that have proven to be perpetually weak, dysfunctional, and perhaps even immune to US generosity.

Policymakers, lawmakers, and pundits still like to describe the United States as an exceptional nation in a league of its own. But no nation, not even the United States, can thrive if it underinvests in its own communities or takes its eyes of the ball to what is truly important: expanding its own strength domestically.

It’s a lesson the old denizens of the Soviet Union learned the hard way – and when they finally appreciated the concept, it was too late.

America’s source of power overseas is anchored in its prosperity at home. If the US is so keen on nation-building, it should start and end in its own cities and towns.

Daniel R. DePetris is a fellow at Defense Priorities and a foreign affairs columnist at Newsweek.

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The economy added almost 1 million jobs in March, but 14.3 million people are still jobless

Coronavirus movie theater
Moviegoers shop at concessions before the movie “Godzilla vs. Kong” on the reopening day of the TCL Chinese theatre during the outbreak of the coronavirus disease (COVID-19), in Los Angeles, March 31, 2021.

  • The March jobs report trounced forecasts, but some unemployment gauges show a steep climb ahead.
  • The “real” unemployment rate used by Fed Chair Powell and Treasury Secretary Yellen fell to 8.7% from 9.1%.
  • The measure includes misclassifications and workers who dropped out of the labor force since February 2020.
  • See more stories on Insider’s business page.

The March jobs report was a hugely positive surprise.

The Bureau of Labor Statistics said Friday that 916,000 nonfarm payrolls were added last month. That compares to the 660,000 expected by economists surveyed by Bloomberg and an upwardly revised gain of 468,000 jobs in February. The headline unemployment rate fell to 6%, matching the consensus forecast.

The data signals that the $1.9 trillion stimulus passed in March and gradual reopening drove a strong rebound for the labor market. Leisure and hospitality businesses – those hit hardest by the pandemic and related lockdowns – counted for one-third of the month’s additions. Construction firms added roughly 110,000 payrolls after hiring contracted during the prior month’s harsh storms.

Still, alternative metrics show there’s plenty of progress to be made before the economy fully retraces its pandemic-era losses. Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen have touted a “real” unemployment rate that includes workers that have been misclassified as having a job while they’re on pandemic-related furloughs and Americans who dropped out of the labor force since February 2020.

By Insider’s calculations, that rate fell to 8.7% in March from 9.1%. That level suggests 14.3 million Americans are still jobless.

Separately, the Bureau of Labor Statistics’ broader read of nationwide unemployment remains at worrying highs. The U-6 rate – which includes Americans employed part-time for economic reasons and workers only marginally attached to the labor force – dipped to 10.7% from 11.1%.

The rate of job growth seen in March still pushes a full recovery well into the future. Even if the US continues to add 916,000 jobs every month, it would take until January 2022 to lift employment back to levels seen before the pandemic.

“Today’s report confirms that labor market conditions are rapidly heating up but reaching broad-based and inclusive full employment will be a multi-year process,” Lydia Boussour, lead US economist at Oxford Economics, said in a note.

The White House is already teeing up its next booster for US job growth. President Joe Biden revealed a $2.3 trillion spending plan on Wednesday. The so-called American Jobs Plan includes funds for restoring roads and bridges, building affordable housing, and installing a nationwide broadband network, among other projects. The proposal should create millions of union jobs over the next eight years, according to the president.

“Now it’s time to rebuild,” Biden said during his announcement, adding: “Wall Street didn’t build this country. You, the great middle class, built this country, and unions built the middle class.”

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Biden’s infrastructure plan should supercharge growth over the long term, Dallas Fed president says

Robert Kaplan
Dallas Federal Reserve Bank President Robert Kaplan.

  • Biden’s infrastructure plan can fuel a permanent boost to growth, the Dallas Fed’s president said.
  • Where stimulus will fuel a sudden rise, infrastructure is a “long-term investment,” Robert Kaplan said.
  • Inflation will still likely trend within the Fed’s comfort zone amid the new spending, he added.
  • See more stories on Insider’s business page.

President Joe Biden’s infrastructure proposal can permanently lift the country’s economic output and drive stronger growth for years after the recovery, Robert Kaplan, president of the Federal Reserve Bank of Dallas, said.

The president rolled out the American Jobs Plan in a Wednesday speech, marketing the measure as a critical next step for his plan to revive the US economy. The $2.3 trillion spending package includes investments in traditional infrastructure like roads and bridges, nationwide broadband, clean water, and affordable housing.

The plan’s unveiling comes just weeks after Biden approved a $1.9 trillion stimulus plan. The March bill was necessary to breathe life back into the economy, but the “bump in GDP” expected from the stimulus will wear off over time, Kaplan said in a Bloomberg TV interview.

In contrast, the president’s new spending plan would provide a longer-lasting boost to economic growth as the country emerges from the pandemic, he added.

“The nice thing and the desirable thing, for me, about infrastructure spending: it’s that it’s a long-term investment,” the central bank president said. “It should help, in the future, create higher potential GDP growth, higher sustainable growth, better productivity.”

The American Jobs Plan is only the first half of the White House’s new spending push. Biden said Wednesday he aims to reveal the American Families Plan – a spending proposal with funds for public education and care facilities – in the coming weeks. Combined, the two packages will reportedly cost up to $4 trillion.

The additional spending measures come as economists debate whether Biden’s stimulus risks fueling rampant inflation. Where progressive economists see the plan as necessary, others fear the plan will overfill the hole in the economy.

The Fed has signaled it will allow inflation to rise above 2% as the economy recovers in hopes of reaching maximum employment. The stimulus could drive a sharp rise in inflation, but the impact will likely be temporary as the growth rate similarly slows, Kaplan said.

“I think you’ll see inflation moderate as we get into 2021 and into 2022 and 2023. But I also think it’s wise as a central banker to have a good dose of humility and an openness to learning as this all unfolds,” he added.

Kaplan isn’t a voting member of the Federal Open Market Committee and is set to become one in 2023.

The outlook is similar to that held by Fed Chair Jerome Powell. The central bank chief said the Fed aims to maintain its ultra-easy monetary policy stance well into the future due to lasting uncertainty around the coronavirus recession. Any stimulus-fueled jump in inflation is likely to be transitory, he added in a press conference.

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AOC says Biden’s infrastructure plan is way too small – she wants a $10 trillion package

alexandria ocasio-cortez aoc
Rep. Alexandria Ocasio-Cortez (D-NY).

  • An ideal infrastructure plan would spend $10 trillion, Rep. Alexandria Ocasio-Cortez said.
  • The plan Biden unveiled Wednesday is “encouraging” in scope but can be bigger, she said on MSNBC’s “Rachel Maddow Show.”
  • A larger plan could create tens of millions of jobs and vastly improve housing and health care, she said.
  • See more stories on Insider’s business page.

President Joe Biden has repeatedly said he aims to “go big” with plans to revitalize the US economy. For Rep. Alexandria Ocasio-Cortez, the administration’s $2 trillion infrastructure plan isn’t big enough.

The president unveiled the American Jobs Plan on Wednesday as a follow-up to the $1.9 trillion stimulus approved in March. The package includes spending on traditional infrastructure projects like roads and bridges as well as measures to cut down on carbon emissions and address the country’s housing shortage. The bill’s massive price tag is meant to be spread out over eight years, completely paid for over 15 years by tax hikes for corporations.

“It’s big, yes. It’s bold, yes. And we can get it done,” Biden said in a speech announcing the plan.

More progressive members of the Democratic party see room to be even more ambitious. The package’s scope is “really encouraging,” she said, but to really get to a plan that tackles America’s challenges, “we’re talking about realistically $10 trillion over 10 years.” That would cover the “ideals” sought by progressive lawmakers, Ocasio-Cortez said Wednesday on MSNBC’s The Rachel Maddow Show.

“I know that may be an eye-popping figure for some people, but we need to understand that we are in a devastating economic moment,” she said. “We have a truly crippled health-care system and a planetary crisis on our hands, and we’re the wealthiest nation in the history of the world.”

Such a plan would create tens of millions of “good union jobs,” improve the country’s health care, revamp infrastructure, shore up housing supply, and bring carbon emissions in line with standards set by the Intergovernmental Panel on Climate Change, the representative from New York added.

To be sure, the American Jobs Plan is only half of Biden’s latest spending push. The White House plans to unveil a package aimed at upgrading care facilities and education, named the American Families Plan. The proposal will likely include measures for universal pre-K, free community college, and extending child tax credits included in the March stimulus bill.

The White House is reportedly willing to spend $4 trillion across the two packages, a sum that would bring recovery spending under his term to nearly $6 trillion. Democrats so far have accepted the plan.

Democratic Sen. Joe Manchin of West Virginia – a moderate member of the party with a huge influence on Senate agenda – backed $4 trillion in infrastructure spending in January, saying such spending is necessary to bring back the nearly 10 million jobs still lost to the pandemic.

Manchin’s support marks a shift from the intraparty disagreements seen just years ago. More moderate members of the party increasingly support economic policy that centers working-class Americans, Ocasio-Cortez said.

“People really are starting to understand that these issues are no longer fringe progressive demands, but they are consensus builders,” she added.

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Electric-vehicle stocks jump after Biden infrastructure plan includes $174 billion investment in sector

EVgo charging
Levy, of EVgo, said there is a such thing as moving too quickly.

  • Electric-vehicle stocks moved higher on Wednesday following the release of Biden’s $2 trillion infrastructure plan.
  • The plan would invest $174 billion in the electric-vehicle market to better compete with China.
  • Shares of Tesla, Fisker, and Lordstown Motors were higher by as much as 4% in Wednesday trades.
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The electric-vehicle sector got a boost on Wednesday with the release of President Joe Biden’s $2 trillion infrastructure proposal.

The bill would carve out $174 billion for the EV sector, as Biden aims to better equip US companies to compete with China, which has a bigger market share of plug-in electric vehicle sales.

Biden’s plan would help automakers retool their factories, invigorate domestic supply chains for raw materials and parts, and “support American workers to make batteries and EVs,” according to a White House fact sheet on the proposal distributed today.

The infrastructure plan would also give rebates and tax incentives to US consumers that buy American-made EVs, and establish grant-and-incentive programs for local governments and the private sector to build a network of half-a-million EV chargers by 2030.

Electrifying the federal fleet of vehicles, US Postal Service vehicles, and at least 20% of school buses are also priorities of the infrastructure plan.

Investors cheered the news, with EV stocks halting their recent multi-month decline and moving higher. EV stocks have been under pressure in recent weeks as a rise in interest rates made these high-growth stocks less appealing relative to more value-oriented cyclical stocks.

Shares of Tesla, Fisker, and Lordstown Motors each traded up as much as 4% in Wednesday trades. Shares of Chinese EV companies also moved higher, with shares of Nio, XPeng, and Li Auto up 1%, 5%, and 7%, respectively.

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Investors should stick with 4 kinds of stocks as Biden’s infrastructure plan pumps up to $4 trillion into the economy, Bank of America says

file photo construction
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  • Bank of America estimates Biden’s infrastructure plan could pump up to $4 trillion into the economy.
  • Investors should focus on stocks that will benefit from an explosion of capex.
  • Cyclical stocks, value stocks, and small-and-mid cap stocks will also perform well as the fiscal stimulus accelerates the economic recovery.
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The next fiscal package out of Washington could total $3 trillion-$4 trillion and focus heavily on infrastructure, climate change, education and inequality, and investors should position their portfolios accordingly, says Bank of America.

A team of strategists led by Savita Subramanian said that investors stick with cyclical stocks, value stocks, small-and-mid-cap stocks, and stocks that will benefit from the explosion of capital expenditures that come out of the stimulus bill.

Industrials and metals are two sectors poised to be clear beneficiaries of the bill that will increase “picks & shovels” capex, BofA said.

The infrastructure plan will also be heavily focused on investments in greener public transit, EV charging stations, and energy efficient buildings. Bank of America sees industrials and materials as two sectors poised to gain from green spending. The firm also warned that commodities-driven companies may face headwinds unless they aggressively move towards greener goals.

The stimulus could boost US GDP up to 7% in 2021, and BofA likes GDP-sensitive cyclical stocks, small-caps and value stocks against the backdrop of a strong economic recovery.

However, more fiscal spending will likely lead to higher inflation as well, and energy and materials have historically been winners in periods of rising inflation, according to BofA data.

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