40 Years After Reagan, Biden’s Bet That Big Government Can Get Something Done

President Biden feels a burning sense of competition, his aides say, to prove that democratic capitalism can work.,

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WASHINGTON — It has been 40 years since President Ronald Reagan declared in his first inaugural address that “government is not the solution to our problems, government is the problem.”

The infrastructure plan that President Biden described on Wednesday — $2 trillion in federal investment in poured concrete, electric car chargers, artificial intelligence and social engineering — is a bet that government can do colossal things that the private sector cannot.

In fact, when the long-awaited “infrastructure week” finally arrived in Washington, it turned out to be about a lot more than just new highways and the replacement of old lead pipes. Urged on by the left wing of his party, and reminded by historians that Presidents Franklin D. Roosevelt and Lyndon B. Johnson went big, Mr. Biden is using the framework of rebuilding crumbling highways and bridges to try to reshape the American economy by focusing more on long-range problems like climate change and inequality that have been caught up in the culture wars.

It will take years to know whether Mr. Biden’s initiative will have the lasting power of the New Deal or the Great Society, or whether it can “change the paradigm,” as he argued a few weeks ago.

Yet it is already clear it is based on the gamble that the country is ready to dispense with one of the main tenets of the Reagan revolution, and show that for some tasks the government can jump-start the economy more efficiently than market forces. Mr. Biden has also made a bet that the trauma of the coronavirus pandemic and the social and racial inequities it underscored have changed the political center of gravity for the nation.

Mr. Biden’s infrastructure plan fits with his declaration last week that “we’ve got to prove democracy works,” which was an acknowledgment that the Chinese government’s decision to underwrite “national champions” like the telecom giant Huawei and pour billions of dollars into key technologies like artificial intelligence is attracting imitators. Mr. Biden, his aides say, feels a burning sense of competition to prove that democratic capitalism can work.

Last week, Mr. Biden cast the competition as “a battle between the utility of democracies in the 21st century and autocracies,” a line he repeated in abbreviated form on Wednesday in a speech in Pittsburgh. But he went further, saying that “there’s a lot of autocrats in the world” — clearly referring to Presidents Xi Jinping of China and Vladimir V. Putin of Russia — “who think the reason why they are going to win is democracies can’t reach consensus any longer.”

It is an argument that has echoes of the Cold War, this time with China playing the central adversarial role that the Soviet Union once did. And Mr. Biden, sensing this may be his best argument for a bipartisan consensus, pressed the case by citing President Dwight D. Eisenhower’s investment in the highway system and President John F. Kennedy’s in the space race.

“This is central to where the president’s head is at when it comes to the infrastructure plan,” said Brian C. Deese, the director of Mr. Biden’s National Economic Council and one of the chief architects of the proposal.

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Ronald and Nancy Reagan at his first inauguration in 1981. Reagan declared in his inaugural address that “government is not the solution to our problems, government is the problem.”Credit…Associated Press

“The world has been watching as the world’s greatest superpower was ravaged by a virus and wasn’t capable of mounting a response for almost a year,” Mr. Deese said. “And now it’s waiting to see whether the United States can deliver on great things domestically,” as an indicator of whether it will restore its place as the leader of the international order.

It is not the first time Reagan’s reliance on markets to fix the nation has been challenged, but no previous effort in recent decades was on the scale Mr. Biden presented on Wednesday.

Reagan himself pushed through a tax increase. Presidents George H.W. Bush and Bill Clinton tried a few modest experiments in what used to be called “industrial policy,” with efforts to bolster the semiconductor industry. President George W. Bush oversaw a huge expansion of the security state after Sept. 11, 2001, attacks as well as a Medicare prescription-drug plan for seniors that many in his own party objected to as interference with the market.

President Barack Obama’s health law was, depending on one’s political view, a government intervention in the distribution of medical services or a way of fixing private markets to ensure that health insurance was more widely available.

But Mr. Biden’s plan is a mammoth public investment that amounts to about 1 percent of gross domestic product for each of the next eight years. Republicans, who traditionally have favored big infrastructure projects, are objecting just on its size, especially after a $1.9 trillion coronavirus relief plan that, unlike the infrastructure bill, was intended as a one-time jolt to the economy.

They are also objecting to the way Mr. Biden is proposing to pay for it: an increase in corporate taxes over the next 15 years for a building plan that will last only eight. And, Mr. Biden said on Wednesday, there would be higher taxes on those making more than $400,000 a year.

Taken together, those come down to reversing the tax cuts of President Donald J. Trump, who on Wednesday denounced Mr. Biden’s plan “a classic globalist betrayal” that he argued would benefit politicians, government bureaucrats and China.

But Mr. Trump himself may have helped make it possible by throwing out so much Republican orthodoxy. He let deficits soar, and invoked tariffs on Chinese goods that American consumers paid. And his actions neither drove up interest rates nor tanked the stock market, raising confidence inside the Biden administration that it may have more leeway to pump money into the economy without fears of rapid overheating.

The plan includes big outlays for traditional infrastructure projects: $115 billion for highways, roads and 10,000 small bridges that need to be reconstructed. There is $85 billion for transit systems and $80 billion for Amtrak — an acknowledgment that the once-tempting idea that a passenger high-speed rail program could be a profitable private enterprise, able to raise the capital to keep up-to-date, was a fantasy.

Then there is the unfamiliar part, stretching the definition of infrastructure in new directions. There is $180 billion for research and development and $50 billion to revive semiconductor production in the United States, clearly intended to counter China. Billions of dollars for internet connections in ill-served rural and poor communities is being sold as a jobs program, an issue of equity and an enabler of innovation.

To many on the left, the Biden plan is too cautious, a fraction of what Senator Bernie Sanders of Vermont and Senator Elizabeth Warren of Massachusetts called for when they ran against Mr. Biden for the Democratic nomination. Representative Alexandria Ocasio-Cortez, the New York Democrat and perhaps the most influential voice of the progressive movement, declared after seeing Mr. Biden’s plan that “this is not nearly enough.”

But the argument the Biden administration will make in coming days is that it simply restores the status quo of five decades ago when public investment in research and development, infrastructure and commercialization of technology was, as a percentage of the economy, significantly higher than it is today.

“What this is designed to do,” Mr. Deese said, “is to get us back up to something approaching what that level was in the 1960s.”

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