Despite Differences Within US Democrats, Infrastructure Investment Optimism Remains... Key Points to Watch?

Whether the Eco-friendly Budget is Included Draws Attention... Key Issue is Whether Tax Increase Will Be Used for Funding

U.S. President Joe Biden is seen eating ice cream at a Honey Hut ice cream shop during his visit to Cleveland, Ohio, on the 27th (local time). [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The U.S. government and the Republican Party continue to have differing opinions on the infrastructure investment plan. Given the ongoing expectations for the infrastructure investment plan, it is analyzed that attention should be paid to the areas both parties focus on and the methods of funding.

On the 29th, KB Securities emphasized the need to closely watch the U.S. government's process of reaching an agreement on the infrastructure investment plan against this backdrop. Recently, the Republican Party unveiled an infrastructure investment plan worth $928 billion (approximately 1,035 trillion KRW). Although this is larger than the previous $568 billion plan, it is still only about half the size of the revised $1.7 trillion plan proposed by U.S. President Joe Biden.

Not only is there a significant difference in the amount, but the areas of focus for both parties also differ. The Republican plan excludes environmentally friendly budgets such as ending fossil fuel subsidies proposed by President Biden, commercial and residential building renovations, installation of 500,000 electric vehicle charging stations, and power grid improvements. The $400 billion budget for home care was also excluded. Earlier, when President Biden proposed a concession plan reducing the scale from $2.25 trillion to $1.7 trillion, he only lowered budgets for research and development (R&D), supply chain strengthening, broadband networks, and road transportation, while keeping social infrastructure and environmentally friendly budgets intact.

Source=KB Securities

On the other hand, Senator Shelley Moore Capito, who led the composition of the Republican infrastructure investment plan, stated that from the Republican perspective, it is difficult to accept President Biden's proposed social infrastructure investment plan. KB Securities researcher Ilhyuk Kim interpreted this as "Contrary to the White House's thinking, the Republicans are focusing on traditional infrastructure."

The funding methods also differ significantly. Although the Republicans did not mention the funding method in this proposal, they still oppose tax increases. Their existing stance is to use unused funds approved for responding to the COVID-19 pandemic and to cover the necessary funds for the infrastructure investment plan by charging tolls on electric vehicles. In response, Senator Elizabeth Warren, part of the Democratic progressive camp, criticized this as an unrealistic proposal to take funds allocated to other spending items. Moreover, from President Biden's standpoint, charging tolls would break his promise of "no tax increases for people earning less than $400,000 annually."

President Biden has urged for an agreement by next Monday, but the White House and the Republicans have decided to hold additional talks next week. Earlier, White House Press Secretary Jen Psaki expressed hope to pass the infrastructure investment plan this summer, and Senate Democratic Leader Chuck Schumer also hoped the Senate would pass the bill in July. Bipartisan centrists such as Democratic Senator Joe Manchin and Republican Senator Mitt Romney are reportedly preparing a middle-ground plan in case the White House and Republicans fail to narrow their differences.

Researcher Kim said, "It is necessary to pay attention to which items the amount difference is narrowed around, that is, whether environmentally friendly budgets are included, and the direction of discussions on funding methods." He added, "If taxes are raised, we need to watch the extent of the tax increase, and if not, the scale of government bond issuance."

This content was produced with the assistance of AI translation services.