By Gordon G. Chang
“It’s the largest American jobs investment since World War II,” President Joe Biden said on March 31 in Pittsburgh, as he announced his $2.3 trillion infrastructure program. “It will create millions of jobs, good-paying jobs.”
He is correct. Biden will, in his American Jobs Plan as it’s formally called, create millions of good-paying jobs. Many of those jobs, however, will not be in America. For three principal reasons, his jobs plan will create full employment in China.
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.
Those tasks and others requiring cement and steel will benefit the world’s No. 1 producer of these products: China. Last year, China made 56.5 percent of the world’s crude steel. The United States accounted for 3.9 percent. While global output fell 0.9 percent in 2020, U.S. output plummeted 17.2 percent as mills closed.
In 2020, the United States produced 90.0 million metric tons of cement. China produced 2.2 billion metric tons, more than half the world’s production.
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.
The American Jobs Plan, therefore, will inevitably stoke demand for Chinese producers because China, more than the United States, has the capacity to produce the needed products and raw materials and it can do so at the lowest prices. It is true that Biden’s “Buy American” plan, issued in a Jan. 25 executive order, represents a substantial improvement over President Donald Trump’s efforts in this area, but Biden’s new order probably will not cover the bulk of materials required for the infrastructure contemplated by his American Jobs Plan.
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.
As Trump charged in a statement, “Joe Biden’s radical plan to implement the largest tax hike in American history is a massive giveaway to China, and many other countries, that will send thousands of factories, millions of jobs, and trillions of dollars to these competitive nations.”
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.
Perhaps Larry Kudlow, on his Fox Business show on March 30, put it best when interviewing Trump’s U.S. Trade Representative Robert Lighthizer:
“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.”
On the third point, Biden’s plan looks as if it will increase, at least in the early stages, the cost of energy, thereby putting American manufacturers at further disadvantage. At the moment, the United States is the hydrocarbon superpower, surpassing Russia in 2011 to become the world’s largest producer of natural gas and overtaking Saudi Arabia in 2018 to become the No. 1 driller of petroleum.
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.”
So, do we really need the federal government to do anything? After all, industry is moving in a “green energy” direction on its own. The U.S. Energy Information Administration reported that in 2019 renewable energy consumption, thanks largely to wind and solar, surpassed coal for the first time in more than 130 years. That year, coal consumption fell almost 15 percent while renewables consumption increased by 1 percent.
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.”