First, Biden will create substantially more demand for Chinese materials to go into America’s planned physical infrastructure improvements. Second, the large corporate tax increases he proposes will drive even more businesses out of the United States—and across the Pacific. Third, Biden’s “green energy” ideas will eliminate one of the crucial advantages American manufacturers now have: cheap energy.
In Beijing, there must be, at the moment, great elation and anticipation.
On the first point, America’s infrastructure spending will thicken the profits mainly of Chinese producers. Biden, at the Carpenters Pittsburgh Training Center, proposed to spend $621 billion to, among other things, modernize 20,000 miles of roadways, repair the 10 “most economically significant bridges” and 10,000 “smaller bridges,” and “upgrade” ports and airports.
Biden also proposes to replace all the lead pipe in the United States. Pipe these days is made with polyvinyl chloride, PVC. China makes more PVC than any other country.
As onshoring advocate Jonathan Bass told Gatestone, Biden’s American Jobs Plan should be a “ground-up effort,” requiring the production in the United States of materials that go into new infrastructure. Bass points out that jobs making such materials tend to be higher-paying, and he argues that bringing back production to America enhances supply-chain security.
“Unless we invest in the capacity to make the steel, cement, and the other materials that go into our roads, bridges, and other infrastructure, we will always be at the mercy of China’s Communist Party,” stated Bass, also CEO of Whom Home.
Moreover, Bass pointed out that those with government connections—mostly multinationals and other large businesses—will enjoy “windfall” profits as they import into America the materials China will be producing for the Biden plan.
Biden, of course, wants American producers to benefit. “President Biden is calling on Congress to invest $50 billion to create a new office at the Department of Commerce dedicated to monitoring domestic industrial capacity and funding investments to support production of critical goods,” the White House’s “Fact Sheet” states. It’s unlikely that a yet-to-be-organized office, even with massive funding, can affect current spending. A clear make-in-America mandate, Bass told Gatestone, would be much more effective.
On the second point, the Biden plan asks Congress to pass large tax hikes to pay for all the proposed spending, including increasing the corporate tax rate to 28 percent from 21 percent and the minimum corporate rate to 21 percent from 13 percent.
Washington, D.C.-based trade expert Alan Tonelson agrees. “The proposed business tax increases and resulting increase in corporate costs will remove a big reason to invest in productive facilities in America and increase the attractiveness of placing or moving them elsewhere—including China,” he told Gatestone.
“I saw it first under Reagan, but it’s the same under Trump. Domestic security, domestic economic security, is essential to international security. If we damage our economy, Bob, with all these tax hikes, including the corporate tax hikes, companies will be leaving, not coming here. We will lose jobs, not gain jobs. Our whole economy will suffer. The Chinese will laugh all the way to the bank.”
Because of plentiful fossil fuels, they are inexpensive in America, but Biden will create disincentives for their use. As Tonelson, who blogs at RealityChek, told Gatestone, American companies can be disadvantaged by “the wave of environmental and climate change regulation Mr. Biden favors.”
Biden, governing like a big-government advocate, seems determined to harm American business competitiveness. Let us remember, therefore, Kudlow’s famous motto: “Free-market capitalism is the best path to prosperity.”
The free market, as we can see from recent energy-use trends in America, is also the best path to a cleaner environment.
So much is at stake. “This competition with China, which is really, really, really important, perhaps the most important thing that’s going on, is going to be very much affected by our domestic economic policy,” said Lighthizer to Kudlow. “We can’t have a policy that sets us behind and still win a competition with China.”