THE BILL WILL COME DUE ON BIDEN'S TRILLIONS.

• Author: De Rugy, Veronique
• Position: ECONOMICS

YOU KNOW WE have crossed a fiscal Rubicon when a presidential administration does not attempt to justify its spending, instead simply claiming that because of the COVID-19 pandemic, Americans must now welcome with joy and gratitude any spending bill, no matter how big, frivolous, or cronyist.

Based on that belief, President Joe Biden first backed a $1.9 trillion coronavirus relief bill that could not be justified by any broadly accepted economic theory. He then announced a $2.3 trillion "infrastructure" package that he described as a "once-in-a-generation investment in America unlike anything we've done since we built the interstate highway system and the space race decades ago."

A closer look reveals that the plan is instead a jackpot for public unions and big business. Coming after two decades of spending indulgence under the last three presidents, culminating in an explosion of outlays during Washington's COVID-fighting efforts, Biden's spending extravaganza is in effect the final stage of an effort to centralize power in the federal government, which will fund ever more private, state, and local government functions.

Gesturing toward fiscal responsibility, Biden plans to pay for most of his latest plan with a $2 trillion increase in corporate taxes, arguably the largest hike since World War II. The combined tax hikes, according to the Tax Foundation, likely will reduce private infrastructure investment by $1 trillion. A corporate tax increase from 21 to 28 percent, for instance, would reduce the after-tax rate of return on corporate investment in America and in turn reduce the amount of investment. The hikes will nevertheless please the anti-corporate wing of the Democratic Party. Never mind that the price will be paid by workers whose wages won't grow and small-business owners who will have less access to capital.

The infrastructure bill creates an interesting tension. On one hand. Wall Street will hate these tax increases, the full effect of which will be felt in the next decade and a half. On the other hand, corporate titans probably are banking on their ability to fight these taxes while enjoying Biden's $2 trillion corporate welfare handout today.

How else to explain the stock market upswing after Biden's Pittsburgh speech announcing that trillions more dollars will be spent and taxed by Washington? Could it be that years of Federal Reserve liquidity injections, the promise of rescue, and artificially low...