On August 8, the $1.2 trillion infrastructure bill passed the final few procedural hurdles at the U.S. Senate and is heading towards its final passage within the next few days. Up to 20 Republicans are expected to join Democrats to get the bill passed in the Senate, following which it will head over to the House of Representatives. The ‘bipartisan’ bill, though presented as a measure to boost the American economy, might potentially end up creating a host of problems, not just for the country but also the Republican Party.
A negative outcome of the infrastructure bill is likely to be higher inflation which is already at a level not seen in several decades. According to the Federal Reserve’s preferred measure of inflation, the country’s annual inflation rate in the second quarter this year was at 6.1 percent, which is the highest since the inflation crisis that plagued the early 1980s.
Massive government spending inevitably leads to inflation and the biggest victims will be low-income Americans, ethnic minorities, and senior citizens. It will lead to an increase in the price of goods, growth in wages, and a spike in the cost of services, all of which combine to push inflation even higher. According to the July ISM services report, 66.7 percent of services businesses have admitted to already raising prices.
In an article by the Wall Street Journal, author Stephen Miran says that there are “hidden inflationary forces” in the infrastructure bill. For instance, the bill includes several new mandates for cars that will raise the cost of producing new vehicles, eventually charging consumers a higher price. Car prices have tended to play an ‘outsized role’ in recent inflation dynamics.
“The Biden administration and the Federal Reserve insist that higher inflation is transitory, in part because car-price growth will decelerate as supply chain bottlenecks get resolved. But this bill will provide upward pressure on car prices years into the future,” Miran writes in the article.
Racial quotas, mileage tax, Wharton study
The infrastructure bill also includes racial quotas, which runs contrary to the values of the American constitution where all races are supposed to be treated equally. One section of the bill is about the Digital Equity Act that is designed to give special treatment to “covered populations.” In the bill, the term “covered population” includes “individuals who are members of a racial or ethnic minority group.”
The Digital Equity Act reserves a part of the funding for such covered populations. “25 percent of the total grant amount shall be based on the number of individuals in the eligible State who are members of covered populations in proportion to the total number of individuals in all eligible States who are members of covered populations State plans,” the bill states.
The bill includes a mileage tax that would severely affect poorer people who tend to live in distant suburbs where property values are cheaper. Since they have to drive for longer to reach their workplaces, they will end up paying more in mileage taxation than richer people who live in urban areas. This again runs counter to the claim that the bill would help middle to low-income Americans. Award-winning novelist Roger L Simon says that the provision is a ploy to extend government control on citizens.
“The intent of this is to drive people who want a home of their own out of the suburbs and exurbs and into cities where they must live in apartments where they are ultimately more easily controlled. This exacerbates a statist trend that has been going on since the Obama administration,” he says in a recent opinion piece.
A recently released study by the University of Pennsylvania’s Penn-Wharton Budget Model dismisses the claim that the $1.2 trillion infrastructure will benefit America’s economic growth in any sizable manner. The study found that the proposal would have “no significant effect” on GDP by the end of the budget window in 2031 or even in the long run, say by 2050.
“Even with current government borrowing rates being at historical low values, higher government debt mitigates the positive impact of public investment, as U.S. and international savings are diverted from private capital investment toward public debt,” says the study.
The GOP issue
Quite a number of Republicans support passing the infrastructure bill. Writing for Breitbart, Ken Blackwell points out that one of the official reasons why some Republicans support the bill is that Democrats would otherwise pass an even worse bill through the Senate which is split 50-50. The Democrats can just get Vice President Kamala Harris to break the 50-50 tie at the Senate.
However, Blackwell feels that the real reason why some Republicans are pushing forward the bill is to “bring home the bacon.” For instance, Republican Bill Cassidy, who supports the bill, gets his state millions in funds. Similarly, Lisa Murkowski’s state gets $75 million in the infrastructure package. Another reason might be that some Republican Senators simply want to “show up Trump.”
“Internecine warfare — including from some staffers in the former president’s White House and Congressional Republicans — kept an infrastructure plan from coming together a few years ago. Now some of those Republicans are trying to show that they can achieve results that Trump did not, even if it means supporting a disgraceful bill,” Blackwell writes.
In a July 28 statement, former President Donald Trump had warned Republicans not to support the $1.2 trillion bill. He said that it was “hard to believe” that Senate Republicans were working with “radical left Democrats.” The former POTUS blamed Mitt Romney for leading the negotiations. He warned that the bill represents a “continued destruction of America” and that supporting it would affect GOP’s chances in the upcoming primaries.
“This will be a victory for the Biden Administration and Democrats and will be heavily used in the 2022 election. It is a loser for the USA, a terrible deal, and makes the Republicans look weak, foolish, and dumb. It shouldn’t be done,” Trump said.