President Biden has proposed a massive $2 trillion-plus infrastructure plan. Here are the two things everyone should understand.
- It will hurt growth because it will be financed with very harmful tax increases, most notably a big increase in the corporate tax rate that will undermine competitiveness.
- It will hurt growth because the new spending will divert resources from the productive sector of the economy, leading to inefficient allocation of labor and capital.
Actually, there’s another thing everyone should understand. As illustrated by this summary from the Washington Post, it’s not really an infrastructure plan. It’s a spend-money-on-anything-and-everything plan, presumably to reward various interest groups.