Biden on Wednesday fleshed out the details of a $1.8 trillion plan to upgrade the workforce and help families. It complements his $2.3 billion infrastructure wish list of improving roads, bridges, and water systems, and similarly aims to deliver long-term growth benefits. For example, a $200 billion plan to provide pre-school regardless of household income should increase the share of women who work, increasing the country’s productive capacity.
There are many reasons to ensure the plans are mostly self-funding, which Biden says will be the case over a 15-year timeframe. The political one is that he can then take the fast-track “budget reconciliation” path to making them law, which requires just a simple majority of the Senate. But Biden’s estimates are just that: estimates. In its simplest form, a plan to raise an extra $1 trillion in taxes from the wealthy would give them a $1 trillion incentive to find new loopholes. And beefing up the IRS may not be as fruitful as the president hopes. The Congressional Budget Office estimated last year that investing $40 billion into the agency would deliver a tax revenue increase of just $103 billion over 10 years. Hiring and training new auditors takes time, as well as money.