President Obama’s Infrastructure Plan: A Divided Congress
Big government versus small government is a question that has politically divided Americans since the creation of the Articles of Confederation in 1777. Reducing or expanding the size of the federal government has been the basis of presidential campaign platforms for candidates ranging from Ronald Regan to Lyndon B. Johnson. After almost 250 years, the debate continues. Today, this argument is one of the fundamental ideological differences between Republicans and Democrats.
The size of government and whether to increase or decrease taxes “is the main divide between Republicans and Democrats for economic policy.” President Obama’s assistant for economic policy and the Principal Deputy Director of the National Economic Council, Mark Furman said, “It’s a balancing act when creating economic strategies. Democrats believe you have to spend money to boost the economy, but if you spend too much Republicans won’t support it.” Furman talked about “Economic Policy Making in the Obama Administration” at the Maxwell School two weeks ago. He said one of the recent policies that exemplifies this battle between small versus large government and spending cuts versus tax increases was President Obama’s infrastructure bill (Furman, 2013).
In his 2013 State of the Union Address, President Obama announced that he would introduce a Fix-it-First Bill to Congress that would invest 50 Billion dollars into the renovation of American highways, bridges and mass transit systems. The policy would include the development of a National Infrastructure Bank (Gibbs, 2013). “The bank will be able to invest, through loans and loan guarantees, in a broad range of infrastructure projects, including transportation, energy, and water, and will operate as an independent, wholly-owned government entity outside of political influence” (Gibbs, 2013). The investment would be funded by both private and public funds and the sale of new infrastructure bonds sold by the National Infrastructure Bank.
Immediately following the State of the Union Address, Speaker of the House, Republican Congressman John Boehner said, “The president talked about infrastructure, but he didn’t talk about how to pay for it.” Boehner went on to compare President Obama to Santa Claus.
“It’s easy to go out there and be Santa Claus and talk about all these things you want to give away, but at some point, somebody’s got to pay the bill” (Burgess and Snider, 2013).
According to the San Francisco Federal Reserve, President Obama’s Fix-it-First plan would boost “state economies by two dollars for every federal dollar spent,” repair over 70,000 structurally-deficient bridges and create over 100,000 jobs over the next six years (Wyler, 2013).
Historically, investment in American infrastructure has been widely supported by both Democrats and Republicans dating back to FDR’s redevelopment plan, so why would Republicans oppose the policy now?
President Obama’s new plan resembles a similar infrastructure bill he introduced to Congress in 2011. On February 20, 2011 the Senate voted down the President’s 2011 Infrastructure Stimulus plan in a 51 to 49 vote. The 2011 bill would have invested 60 billion into American infrastructure. The bill was not supported by any Republican Senator and fell 11 votes short of the 60 required (Helderman, 2011).
According to Washington Post writer Rosalind S. Helderman, most Republicans opposed the2011 bill because the policy would have increased taxes to pay for the program. This increase would have been a .07 percent increase in income tax charged to any person or business that made over $1 million annually. Speaker of the House John Boehner said President Obama “has stimulus spending in there that exceeded the amount of new cuts,” deepening the budget deficit” (Helderman, 2011).
An alternative to President Obama’s Fix-it-First policy would resemble the bill Republicans introduced to Congress in 2012. The Republican version would invest $260 billion into American infrastructure. While this plan would invest over five times the amounts of the President’s plan, it would not raise taxes. The Republican’s plan would lift the ban on offshore drilling, which would increase tax revenue and cut funding for existing federal programs. The anticipated result of $35 billion in proposed cuts would layoff firefighters and teachers. Speaker Boehner stressed that the Republican infrastructure bill would create more jobs than the President’s and not add to the rising budget deficit (Burgess & Snider, 2013 and Furman, 2013).
Like Boehner, most Republicans would agree that increasing taxes and creating new government programs does not boost economy, or reduce the deficit. According to GOP.gov, one of the main goals of the Republican Party is to “curb Washington’s spending habits and promote job creation, bring down the deficit, and build long-term fiscal stability” (“Cutting Spending,” 2013).
This is in stark contrast to the Democratic Party. According to barrackobama.com, President Obama and his fellow Democrats promote programs that provide assistance to lower and middle class families. They want to eliminate tax loopholes and implement programs that force millionaires to pay a higher share (Taxes, 2012).
This difference in economic policy is one of the main distinctions between Republicans and Democrats. This distinction suggests that there is a fundamental difference in economic theory or philosophy. This difference dates back to the Great Depression (“What is Keynesian,” 2011).
During the Great Depression there were two schools of thought about which fiscal policies governments should implement to boost the economy. These schools of thought were Keynesian Economics and Trickle Down Economics. Keynesian Economics suggests that when the government provides stimulus to the lower and middle class, consumer spending increases which causes overall economic earnings to increase (“What is Keynesian,” 2011). Trickle Down Economics suggests that lowering taxes and regulations on businesses and the wealthy will increase business investments promoting economic growth (Amadeo, 2009).
Starting with President Roosevelt’s New Deal, Democrats aligned themselves with the Keynesian economic theory. Roosevelt increased regulations on business and increased deficit spending to give assistance to the America lower and middle classes (“What is Keynesian,” 2011). President Nixon is one of the first Republicans to implement Trickle Down economic policies, but President Reagan is seen as the biggest supporter of Trickle Down Economics. President Reagan reduced the corporate tax rate from 48 percent to 34 percent to boost the American economy (Amadeo, 2009). Historically, both types of economic policies have succeeded and failed.
Democrats and Republicans have become very divided about economic policy. This divide has caused American democracy come to a standstill. There is little bipartisan action to help create jobs or promote economic sustainability. Congress has not been able to agree on a budget for over three months and the sequester has taken effect (Furman, 2013).
The sequester is a policy that automatically cuts $85 billion dollars of government funding if a budget is not passed. Furman says both Republicans and Democrats oppose the sequester because, “It will cut funding to programs that directly impact constituents such as unemployment benefits and school funding.” No matter which economic or political ideology politicians support, they must work together in order to prevent political gridlock and promote a better America for tomorrow (Furman, 2013).