Biden Team Prepares $3 Trillion in New Spending for the Economy

A pair of proposals would invest in infrastructure, education, work force development and fighting climate change, with the aim of making the economy more productive.

 A wind farm in Carbon County, Wyo. Clean energy is among the areas that would see investment under President Biden’s infrastructure plan.Credit…Benjamin Rasmussen for The New York Times

 By Jim Tankersley  Published March 22, 2021Updated May 12, 2021

WASHINGTON — President Biden’s economic advisers are pulling together a sweeping $3 trillion package to boost the economy, reduce carbon emissions and narrow economic inequality, beginning with a giant infrastructure plan that may be financed in part through tax increases on corporations and the rich.

After months of internal debate, Mr. Biden’s advisers are expected to present the spending proposal to the president and congressional leaders this week, as well as begin outreach to industry and labor groups. On Monday, Mr. Biden’s national climate adviser, Gina McCarthy, discussed his infrastructure plans — and their role in combating climate change — in a meeting with oil and gas industry executives.

Administration officials caution that details remain in flux. But the enormous scope of the proposal highlights the aggressive approach the Biden administration wants to take as it tries to harness the power of the federal government to make the economy more equitable, address climate change, and improve American manufacturing and high-technology industries in an escalating battle with China.

The $1.9 trillion economic aid package that Mr. Biden signed into law this month includes money to help vulnerable people and businesses survive the pandemic downturn. But it does little to advance the longer-term economic agenda that Mr. Biden campaigned on, including transitioning to renewable energy and improving America’s ability to compete in emerging industries, like electric vehicles. Administration officials essentially see those goals — building out the nation’s infrastructure and shifting to a low-carbon future — as inseparable.

The package under consideration would begin that effort in earnest.

“President Biden’s plan represents a stunning shift in priorities, addressing many of the nation’s most pressing challenges,” said Seth Hanlon, a senior fellow at the liberal Center for American Progress think tank, contrasting the plan with the priorities of Mr. Biden’s predecessor President Donald J. Trump. “As reported, the plan is very wide-ranging, reflecting the fact that we’ve underinvested in so many areas.”

Just how to approach the legislative strategy is still under discussion given the size of the proposal and the thin majority that Democrats hold in the House and the Senate.

Mr. Biden’s advisers plan to recommend that the effort be broken into pieces, with Congress tackling infrastructure before turning to a second package that would include more people-focused proposals, like free community college, universal prekindergarten and a national paid leave program.

Some White House officials believe the focus of the first package may be more appealing to Republicans, business leaders and many moderate Senate Democrats, given the longstanding bipartisan push in Washington for an infrastructure bill.

That plan would spend heavily on clean energy deployment and the development of other “high-growth industries of the future” like 5G telecommunications. It includes money for rural broadband, advanced training for millions of workers, and one million affordable and energy-efficient housing units. Documents suggest it will include nearly $1 trillion in spending on the construction of roads, bridges, rail lines, ports, electric vehicle charging stations, and improvements to the electric grid and other parts of the power sector.

Whether it can muster Republican support will depend in large part on how the bill is paid for.

Officials have discussed offsetting some or all of the infrastructure spending by raising taxes on corporations, including increasing the 21 percent corporate income tax rate and a variety of measures to force multinational corporations to pay more tax in the United States on income they earn abroad. That strategy is unlikely to garner Republican votes.

“I don’t think there’s going to be any enthusiasm on our side for a tax increase,” Senator Mitch McConnell of Kentucky, the Republican leader, told reporters last week. He predicted the administration’s infrastructure plan would be a “Trojan horse” for tax increases.

The overall price tag of the package could approach $4 trillion since it includes several tax incentives, like credits to help families afford child care and to encourage energy efficiency in existing buildings. It could also extend temporary tax cuts meant to fight poverty, which could increase the size of the proposal by hundreds of billions of dollars, according to estimates prepared by administration officials.

Mr. Biden supports all of the individual spending and tax proposals under consideration, but it is unclear whether he will back splitting his agenda into pieces, or what legislative strategy he and Democratic leaders will pursue to maximize the chances of pushing the effort through Congress.

His advisers have debated the merits of aggressively pursuing compromise with Republicans and business leaders on an infrastructure package, which would most likely require dropping or scaling back plans to raise taxes on corporations. Another route would be to move the sweeping bill through a special parliamentary process that would require only Democratic votes, as Mr. Biden did with the stimulus package.

“President Biden and his team are considering a range of potential options for how to invest in working families and reform our tax code so it rewards work, not wealth,” said Jen Psaki, the White House press secretary. “Those conversations are ongoing, so any speculation about future economic proposals is premature and not a reflection of the White House’s thinking.”

Mr. Biden said in January that his relief bill would be followed by a “Build Back Better Recovery Plan,” which would include investments in infrastructure, manufacturing, clean energy, skills training and other areas.

The timing of that proposal — which Mr. Biden had initially said would come in February — slipped as administration officials focused on completing the relief package. In the interim, administration officials have concluded that their best chance to advance Mr. Biden’s larger agenda in Congress will be to split it into pieces.

The infrastructure proposal includes large portions of the plan Mr. Biden offered during the 2020 election, including investments that his campaign predicted would create five million new jobs, on top of restoring all the jobs lost last year during the Covid-19 crisis.

The second plan is focused on what many progressives call the nation’s human infrastructure — students, workers and people left on the sidelines of the job market — according to documents and people familiar with the discussions. It would spend heavily on education and programs meant to increase the participation of women in the labor force by helping them balance work and caregiving.

 Image An electric vehicle charging station in Baker, Calif. Documents suggest a Biden administration plan would include nearly $1 trillion in spending alone on the construction of roads, bridges, rail lines, and electric vehicle charging stations.Credit…Philip Cheung for The New York Times

That plan would also extend or make permanent two temporary provisions of Mr. Biden’s recent relief bill: expanded subsidies for low- and middle-income Americans to buy health insurance and tax credits aimed at cutting poverty, particularly for children.

Officials have weighed financing that plan through initiatives that would reduce federal spending by as much as $700 billion over a decade, like allowing Medicare to negotiate prescription drug costs with pharmaceutical companies. The officials have discussed further offsetting the spending increases by raising taxes on high-earning individuals and households, like raising the top marginal income tax rate to 39.6 percent from 37 percent.

One question is how, exactly, to apply Mr. Biden’s campaign promise that no one earning less than $400,000 a year would pay more in federal taxes under his plan. Currently, the top marginal income tax rate starts at just above $500,000 for individuals and above $600,000 for couples. Mr. Biden proposed raising that rate during the campaign.

Mr. Biden’s advisers say they are committed to not raising the tax bills of any individual earning less than $400,000. But they have debated whether to lower the income threshold for the top marginal rate, to tax all individual income above $400,000 at 39.6 percent, in order to raise more revenue for his spending plans.

Mr. Biden’s broader economic agenda will face a more difficult road in Congress than his relief bill, which was financed entirely by federal borrowing and passed using the special parliamentary tactic. Mr. Biden could again try to use that same budget reconciliation process to pass a bill on party lines. But moderate Democrats in the Senate have insisted that the president engage Republicans on the next wave of economic legislation, and that the new spending be offset by tax increases.

Large business groups and some congressional Republicans have expressed support for some of Mr. Biden’s broad goals, most notably efforts to rebuild roads, bridges, water and sewer systems, and other infrastructure. The U.S. Chamber of Commerce and the National Association of Manufacturers have both spoken favorably of spending up to $2 trillion on infrastructure this year.

But Republicans are united in opposition to most of the tax increases Mr. Biden has proposed. Business groups have warned that corporate tax increases would scuttle their support for an infrastructure plan. “That’s the kind of thing that can just wreck the competitiveness in a country,” Aric Newhouse, the senior vice president for policy and government relations at the National Association of Manufacturers, said last month.

Administration officials are considering offering as part of their plans to extend some 2017 tax breaks that are set to expire, like the ability to immediately deduct new investments, in order to win business support.

Top business groups have also expressed an openness to Mr. Biden breaking up his Build Back Better agenda to pass smaller pieces with bipartisan support.

“If you try to solve every major issue in one bill, I don’t know that’s a recipe for success,” Neil Bradley, the executive vice president and chief policy officer at the U.S. Chamber of Commerce, said in an interview last month. “These don’t have to be done in one package.”

Jim Tankersley is a White House correspondent with a focus on economic policy. He has written for more than a decade in Washington about the decline of opportunity for American workers, and is the author of “The Riches of This Land: The Untold, True Story of America’s Middle Class.” @jimtankersley

A version of this article appears in print on March 23, 2021, Section A, Page 1 of the New York edition with the headline: Biden Team Hones a $3 Trillion Plan to Ignite Growth. Order Reprints | Today’s Paper | Subscribe