Biden's $2. 25 trillion infrastructure spending plan could hurt the U.S. economy

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Biden's $2. 25 trillion infrastructure spending plan could hurt the U.S. economy

President Biden last week rolled out a$ 2.25 trillion spending proposal that his administration is pitching as a once-in-a-generation investment that will create the strongest, most innovative, most resilient economy in the world.

A new study suggests the proposed tax hikes included in the American Jobs Plan could ultimately cause more damage to the economy and outweighed the benefits of the multibillion-dollar initiative.

The eight-year plan will make huge investments in the nation's roads and bridges as well as transit systems, schools and hospitals. It will be funded by raising the corporate tax rate to 28% from 21% and by increasing the global minimum tax on U.S. corporations to 21% from 13%.

Raising taxes will not slow the economy at all, said Biden on Friday during remarks on the March jobs report at the White House. We 're asking corporate America to pay their fair share, it will not slow the economy at all. According to an analysis of Congressional Budget Office data published by the Tax Foundation, a Center-Right think tank, federal investments only provide half the private sector investment- roughly 5% versus 10%.

A dollar of federal spending results in only$ 0.67 of actual investment because state, local and private sector entities reduce their spending in response. BIDEN 'S LENGTH TAX- HIKES COULD BE DEMOCRATS ARISING' FOR DEVASTATING IN 2022 Essentially, a$ 100 million federal investment would increase GDP by about$ 5 million, while the same private investment would reduce it by$ 10 million.

By this metric, the$ 2.25 trillion in federal spending backed by Biden will result in only$ 1.3 trillion in real investment, one-third less than the headline amount.

CLICK HERE TO READ MORE ON FOX BUSINESS. Since$ 1 in private investment delivers only half of the returns from$ 1 in government investment, the economy would be better if the$ 2 trillion in taxes that President Biden wants to finance his package were left in the hands of the private sector, the Tax Foundation said.

GET FOX BUSINESS ON THE GO BY CLICKING HERE There are three ways of offsetting the cost of federal spending: Increased borrowing, raising taxes or reducing other spending in the budget.

The only option that does not lead to negative economic consequences is reducing spending in other areas.

The Biden administration chose the most politically harmful method of financing infrastructure spending, the study said, by imposing nearly$ 2 trillion in taxes on the tax increases.

The federal investment financed by debt or taxes could do more economic harm than good because government borrowing and taxes undermine private investment, the study said. To avoid harming the economy, other foreign investments should be financed by cutting federal programs.

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