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      in US Politics

      Biden’s $2tn infrastructure plan aims to ‘finally address climate crisis as a nation'

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      Joe Biden has said his new infrastructure plan will allow “transformational progress in our ability to tackle climate change” by bolstering investments in clean energy, electric vehicles and building homes resilient to threats posed by the climate crisis.The $2tn plan will make “crumbling” American infrastructure more robust to extreme weather events, the US president said in a speech on Wednesday, while providing funds to “build a modern, resilient and fully clean grid”.Biden said that tax incentives should allow “all Americans to afford clean electric vehicles” and workers will be able to “seize amazing opportunities in a clean energy future”.Biden opened his White House term with a cavalcade of executive actions to begin the gargantuan task of shifting the US to net zero greenhouse gas emissions by 2050 and the new $2tn package, known as the American Jobs Plan, is the first indication of the scale of spending that will be required to reshape day-to-day life in order to avert disastrous climate change.As well as huge investments in crumbling roads and bridges, the Biden plan takes aim at the emissions created by transport, currently the country’s largest source of planet-heating gases. There’s $80bn for Amtrak and freight rail, $85bn for public transit, $174bn to promote electric vehicles through various incentives, the electrification of school buses and 500,000 new plug-in recharging stations within the next decade. The federal government’s vehicle fleet will also be electrified.Ports and airports will be upgraded, the plan states, while more than $200bn is proposed to build, modernize and fortify housing for low-income people affected by the storms, heatwaves and wildfires of growing intensity that are upending American lives and threatening billions, if not trillions, of dollars in ongoing damages. A further $100bn will be spent upgrading an electricity grid vulnerable to the sort of climate shocks that recently shook Texas, as well as aiding the transmission of a glut of new renewable energy. In all, 40% of this spending will be aimed at vulnerable communities of color.The scale of the investment, even in the wake of the giant Covid relief bill, is striking. Biden made clear in his speech on Wednesday that this is the point when the US “finally address the climate crisis as a nation”, according to an administration official.“There’s a lot to like in this plan, it’s excellent in almost every way,” said Julio Friedmann, who was a climate and energy adviser in Barack Obama’s administration and is now an energy researcher at Columbia University.“This is a generational commitment and it can only be applauded. The $2tn is half the price tag of World War Two, it exceeds the scale of the New Deal, it’s wildly larger than the Marshall Plan – and appropriately so. This is the hardest thing we’ve ever done. People generally don’t understand how much construction and reduction is required.”But even the administration’s allies concede further, longer-term spurs to remodel the economy and alter behavior will be required on top of this plan.The package includes a major boost to clean energy research and development, as well as a proposal for a clean electricity standard – a mandate for utilities to phase out fossil fuels use across the grid to zero over the next 15 years that Friedmann said will be a “vital” element of eliminating planet-hearting emissions.But these measures will, like the new spending, require congressional support that is far from guaranteed. Republicans have recoiled from Biden’s idea of raising corporate tax rates to help pay for the investments, with Mitch McConnell, the GOP’s Senate leader, calling the plan a “Trojan horse” for climate measures the party doesn’t support.“In an ideal world this plan would be part of a set of policies to lower emissions but with American politics it’s not clear the rest of it will happen,” said David Popp, a climate policy expert at Syracuse University. “Infrastructure alone won’t get you to net zero emissions. The hope is that you build a green economy to the point where emissions reduction mandates become more doable.”Progressives, meanwhile, have complained that Biden’s plan does not meet the scale of the climate crisis.“Needs to be way bigger,” tweeted Alexandria Ocasio-Cortez, the Democratic representative from New York. Ocasio-Cortez and her allies back an alternative $10tn plan, called the Thrive Act, that proponents say would create 15m new jobs and cut emissions in half by the end of the decade. Rallies are set to be held across the US on Wednesday by climate activists who support this plan.Communities of color, which often suffer the brunt of the climate crisis, helped elect Biden and “it’s time to make sure that our government delivers a real recovery that recognizes the harsh reality our communities continue to face on the ground,” according to Elizabeth Yeampierre, co-chair of the Climate Justice Alliance. “We’ve had enough excuses, enough delays.”The Biden plan is a “big opening gambit, a big downpayment, but it’s not the totality required,” said Friedmann. “It focuses on what’s actionable quickly that yields big emissions abatement. I would like more too, but it’s easy to throw rocks from the outside. It’s a great start but, yes, we will ultimately need more. For the next 30 years, every week is infrastructure week.” More

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      in Elections

      The $2,000 stimulus cheques alone won't work – the US needs better infrastructure

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      With the Democrats’ stunning sweep of Georgia’s two Senate run-off elections giving them control of both houses of Congress as of 20 January, the idea of $2,000 stimulus cheques for every household is sure to be back on the agenda in the US. But although targeted relief for the unemployed should unquestionably be a priority, it is not clear that $2,000 cheques for all would in fact help to sustain the US economic recovery.One post-pandemic scenario is a vigorous demand-driven recovery as people gorge on restaurant meals and other pleasures they’ve missed for the past year. Many Americans have ample funds to finance a splurge. Personal savings rates soared following the disbursement of $1,200 cheques last spring. Many recipients now expect to save their recent $600 relief payments, either because they have been spared the worst of the recession or because spending opportunities remain locked down.So, when it’s safe to go out again, the spending floodgates will open, supercharging the recovery. The Fed has already promised to “look through” – that is, to disregard – any temporary inflation resulting from this euphoria.But we shouldn’t dismiss the possibility of an alternative scenario in which consumers instead display continued restraint, causing last year’s high savings rates to persist. Prior to the Covid-19 crisis, some two-thirds of US households lacked the savings to replace six weeks of take-home pay. Having reminded Americans of the precariousness of their world, the pandemic is precisely the type of searing experience that induces fundamental changes in behaviour.We know that living through a large economic shock, especially in young adulthood, can have an enduring impact on people’s beliefs, including those about the prevalence of future shocks. Such changes in outlook are consistent with psychological research showing that people rely on “availability heuristics” – intellectual shortcuts based on recalled experience – when assessing the likelihood of an event. For those parents unable to put food on the table during the pandemic, the experience will establish a heuristic that will be hard to forget.Moreover, neurological research shows that economic stress, including from large shocks, increases anabolic steroid hormone levels in the blood, which renders individuals more risk-averse. Neuroscientists have also documented that traumatic stress can cause permanent synaptic changes in the brain that further shape attitudes and behaviour, in this case plausibly in the direction of greater risk aversion.Though the pandemic is in some ways more akin to a natural disaster than an economic shock, natural disasters also can affect saving patterns: savings rates tend to be higher in countries with a greater incidence of earthquakes and hurricanes.This behavioural response is largest in developing countries, where weak construction standards amplify the impact of such disasters. One study of Indonesia, for example, found large increases in both the perceived risk of a future disaster and risk-averse behaviour among people who had recently experienced an earthquake or flood. While the response to natural disasters may be more moderate in advanced economies – where individuals expect that their government will compensate them – some lasting impact will almost certainly remain.The upshot is that we can’t count on a burst of US consumer spending to fuel the recovery once the rollout of Covid-19 vaccines is complete. And if private spending remains subdued, continued support from public spending will be necessary to sustain the recovery.But putting $2,000 cheques in people’s bank accounts won’t solve this problem because unspent money doesn’t stimulate demand. With interest rates already near zero, the availability of additional funding won’t even encourage investment. Sending out $2,000 cheques to everyone thus would be the fiscal equivalent of pushing on a string.Fortunately, there is an alternative: the president-elect Joe Biden’s $2tn infrastructure plan would mean additional jobs and spending, which is what the post-pandemic economy really needs. Better still, under the prevailing low interest rates, this option would stimulate job creation without crowding out private investment.Guardian business email sign-upAlthough Biden’s plan will require more government borrowing, infrastructure spending that has a rate of return of 2% will more than pay for itself when the yield on 10-year US treasury bonds is 1.15%. By raising output, such expenditure reduces rather than increases the burden on future generations. The International Monetary Fund estimates that, under current circumstances, well-targeted infrastructure investment pays for itself in just two years.Obviously, the “well targeted” part is important. President Donald Trump was right that the Coronavirus Aid, Relief, and Economic Security Act was loaded with pork, not least his own “three-martini lunch” tax deduction for businesses. There’s every reason to question whether Congress can do better when crafting an infrastructure bill.In response to this problem, countries such as New Zealand have established independent commissions to design and monitor infrastructure spending initiatives. If Covid-19 changes everything, then maybe it can change the way the US government organises infrastructure spending. Creating an independent infrastructure commission with real powers would go a long way toward reassuring the sceptics and insuring the recovery against the risks posed by the pandemic’s lingering behavioural effects. More