Washington Shortly before his flight to Europe, the US president fought for the most important mission of his term in office. Joe Biden drove up to Capitol Hill personally on Thursday morning to negotiate billion dollar investments in infrastructure, climate protection and social issues. Only a few hours later he boarded Air Force One for Rome.
“Today is a good day,” said Biden as he hurried through the corridors of convention. But the great sense of achievement that the president urgently needs after months of stagnation in Washington is only conditional on the agreement.
The bottom line is that far less remains of Biden’s original vision of a redistribution of wealth. The budget package was originally supposed to be twice as extensive and significantly increase taxes for corporations and the rich. Instead, Biden had to bury many core goals, and the counter-financing is also unclear.
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At the same time, bad news from the economy hits him: The USA, the global growth engine, seems to be losing momentum. High rates of Covid infection and problems with supply chains contributed to growth shrinking to half a percent in the third quarter.
America is back mantra has worn out
The Washington crisis could also weaken Biden’s position abroad. On Friday night, Biden is supposed to land in Rome. There he meets the Pope and takes part in the G20 summit, after which he travels to the UN climate conference in Glasgow. After all, he can announce lavish investments in climate protection there.
But the “America is back” mantra wore out quickly, says Heather Conley, transatlantic expert at think tank CSIS. “In Europe, people are following very closely that Biden is blocked in his domestic political agenda.” The trip will be “very different from Biden’s first visit to Europe to the G7 summit”. Conflicts strain transatlantic relations, including the submarine dispute with France. “The Biden administration has to fix the damage first,” said Conley.
In the past few months, Biden’s own party had prevented progress on the trillion packages. Left and moderate argued about every position – and central questions still remain unanswered. There is no final legislative text for the $ 1.85 trillion budget package, nor is a majority in Congress sealed by vote.
The infrastructure reform, which cost 1.2 billion euros, could actually have been decided in the summer, but the left wing insists on a combination with the larger budget package. Because the majority in Congress is very tight, Biden can hardly do without a vote.
These items are expected to be overturned
Climate protection: The Democrats wanted to introduce a national standard for clean electricity – and punish energy providers who rely on fossil fuels. This rule is out, also because of opposition from the head of the energy committee, Joe Manchin. The Democrat represents the coal state of West Virginia in the Senate.
It is questionable how the turbo switch to renewable energies will succeed with incentives alone, because two thirds of the electricity in the USA is currently generated from fossil resources. A charge for methane emissions is also unlikely to arise. Even incentives that have so far been able to reach a consensus seem to be in danger: Manchin is struggling with the promotion of e-cars. Manchin said he had a hard time investing heavily in charging stations.
Social and health: The USA is the only industrial nation in the world that offers little or no statutory maternity leave – and it will remain so. A nationwide paid family time would have cost 500 billion dollars, which was too expensive for centrists like Manchin.
Community colleges, which are widespread educational institutions, will also continue to charge fees. Health savings are also being made: the planned assumption of costs for dentures or hearing aids will likely result in one-off grants. Left parties like Bernie Sanders announced that they would fight “until the end” for maternity leave and lower drug prices.
These investments remain
Around three trillion dollars are to be invested: The 1.2 trillion infrastructure reform for roads, bridges and broadband is undisputed. The 1.85 trillion household package also aims to relieve families of childcare, pay care allowances, finance housing programs and provide rent subsidies for the socially disadvantaged. The largest single item is $ 500 billion for climate protection, including for e-mobility, wind power and other green energies.
The biggest problem, however, remains counter-financing. “We won’t increase the budget deficit by a cent,” Biden had promised, but in reality the Democrats are struggling to get adequate funding off the ground. Biden had firmly expected a higher corporate tax, but that has been off the table since last week.
Predecessor Donald Trump had cut corporate taxes from 35 percent to 21 percent. The Democrats wanted to raise it again, but a single Senator, Kyrsten Sinema from the state of Arizona, resisted. A wealth tax for the wealthy was crushed in the struggle for consensus.
Most recently, a special tax on the stock profits of the 800 richest Americans was discussed. Currently, the super-rich can benefit from huge increases in the value of their wealth without paying taxes on those additional sums. Profits are only taxed when an asset is sold. A tax on trillionaire capital appreciation would change that. However, the resistance of the Democrat Manchin could also topple these plans.
Displeasure comes from the economy
At the same time, the Biden government is relying more than ever on a global minimum tax, which is also supported by Germany. Many companies actually pay a much lower rate because they can claim deductions and other credits. A lower limit would put an end to that.
According to a new draft of the Democrats, 200 US companies with profits of one billion dollars or more will pay at least 15 percent taxes in the future, with no chance of exceptions. A majority in Congress is not yet sealed.
The fact that tax plans have been hectically developed and discarded in the past few days shows the pressure the Biden government is under. There is already massive criticism from the business world: “We are concerned that Congress will make really fundamental changes in tax policy in a very short time without examining the consequences,” said the US Chamber of Commerce, the largest business lobby group in the USA.
Other experts warn that parts of the counter-financing would slow down the path to carbon neutrality. Should a minimum tax of 15 percent actually come for companies, significantly fewer companies would want to use depreciation for investments in green energies, warned the lobby group American Council on Renewable Energy. “Many companies will think twice about investing in renewable energies.”
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