After spending months on the latest COVID aid package, President Biden and Democratic lawmakers are now turning to infrastructure. Democrats will gamble that a new investment in roads, bridges, broadband, manufacturing, energy, and climate will enjoy broad bipartisan support and further stimulate the post-pandemic economy. President Biden campaigned on modernizing infrastructure, expanding domestic manufacturing, and facilitating a clean energy economy in his signature “Build Back Better” plan. Biden’s original plan was estimated at about $7 trillion, though he is widely expected to soon float a new version, slimmed down to about $2 trillion, to a still-unscheduled joint session of Congress. Exactly how Democrats will bring the package into law, however, remains muddy. Below, the MBS team examines what we know:
What will be included? The foundation of a new infrastructure plan will probably rest on an overdue multi-year surface transportation reauthorization (also known as “highway reauthorization” or the “highway bill.”) The main feature of this push is the Highway Trust Fund, which channels federal gas taxes toward maintenance and construction of highways and bridges plus airports, mass transit, and federal transportation grants, among other priorities. Congress hasn’t passed a surface transportation package since 2015’s Fixing America’s Surface Transportation (FAST Act), but has given itself an October 1 deadline to do so.
House Transportation and Infrastructure Committee Chairman Peter DeFazio (D-OR) has also announced his committee will allow members of Congress to submit infrastructure priorities in their district for funding within the bill. This recalls the days of “earmarks,” when members of Congress could secure funding for a project like a bridge, federal building, or stretch of highway within their district to benefit their constituents. DeFazio, however, has added protections to prevent abuses of the earmark process: each member must provide information about the project related to funding, environmental reviews, and letters of support from relevant stakeholders. DeFazio will release more details about his plans for these projects in the coming weeks.
Besides roads and bridges, President Biden has promised the new package will address climate and the energy grid, encouraging “clean” technology like electric and zero-emission vehicles, schools, broadband, and even homebuilding and manufacturing. With these goals in mind, the White House brands the coming package as a “recovery” bill rather than a traditional infrastructure bill.
Some Democratic leaders are similarly pushing for more COVID relief within the package: Senate Finance Chairman Ron Wyden (D-OR) and Senate Banking Chairman Sherrod Brown (D-OH), for example, are pushing for more direct payments to Americans and an automatic extension to pandemic-related unemployment supplements in a new infrastructure bill.
How to pay for it? An infrastructure package will have two distinct halves: the projects, and the pay-fors. Chairman DeFazio and his Senate counterpart, Senate Environment and Public Works Chairman Tom Carper (D-DE), will focus on the projects. The question of where to find trillions of dollars to maintain, let alone improve, the nation’s crumbling infrastructure falls to House Ways and Means Chairman Richie Neal (D-MA) as well as Senate Finance Chairman Ron Wyden.
Secretary of Transportation Pete Buttigieg has already ruled out raising the federal gas tax, the primary funding mechanism for current highway and transportation programs funded under the Highway Trust Fund. Congress hasn’t raised the gas tax since 1993, despite inflation and improved vehicle fuel efficiency pushing down federal revenues for decades.
So what options are left? During his campaign, President Biden has floated raising the corporate tax rate from 21% to 28% to fund new federal initiatives, though the business lobby has already fought hard against that idea and the White House has backed off somewhat as the economy recovers from the COVID pandemic. Chairman Wyden has said he is considering a corporate tax increase as well as streamlining tax breaks for the energy industry: distilling 44 separate breaks into three: one for clean energy, one for clean transportation fuel, and one for energy efficiency. Chairman Neal has similarly floated tax incentives focused on “clean” technologies, but has also downplayed the need to raise revenue to pay for a new infrastructure plan at all. According to Neal, the federal government could capitalize on low interest rates to borrow money to “go big” in a recovery and infrastructure plan. Elsewhere, Sen. Elizabeth Warren (D-MA) and progressive allies have floated a 2% “wealth tax” on individuals worth at least $50 million and a 1% surtax on those worth more than $1 billion.
Will Republicans engage? Biden and DeFazio, among others, are aiming for a bipartisan package that can clear the Senate’s filibuster, winning at least ten Republican votes in that chamber. However, Republicans are already voicing doubts. Chairman DeFazio’s Republican counterpart, T&I Committee Ranking Member Sam Graves (R-MO), attended a bipartisan infrastructure meeting with President Biden last week but warned against tax increases or “a climate-focused bill with a few transportation projects.” Republicans in both chambers are also likely to object to a larger bill of several trillion dollars, citing concerns about the growing national debt.
Despite their skepticism, Republicans face pressure from business groups like the U.S. Chamber of Commerce to enact an infrastructure package by July 4. Some Republican may also engage with the process to bring specific benefits, like project funding, to their constituents.
Will Democrats use reconciliation to advance the package? Congress just spent weeks steering a COVID relief bill through the arcane but filibuster-proof budget reconciliation process after Republican leadership vowed to use Senate rules requiring at least 60 votes to advance most legislation to block that signature bill. Some Democrats believe the GOP will similarly block a new infrastructure bill, and are encouraging using reconciliation—again—to preempt this opposition. Senate Budget Chairman Bernie Sanders (I-VT) has led the charge for passing an infrastructure package through reconciliation. Sanders would have a leadership role in passing infrastructure through reconciliation that he may not have otherwise. Not all are onboard with Sanders’ plan: House T&I Chairman DeFazio said last week there’s “no possible way” the project-focused portion of an infrastructure package could pass through reconciliation. Indeed, reconciliation rules forced Senate Democrats to strip out funding for public transportation projects in this month’s COVID aid deal. However, DeFazio has suggested that his counterparts dealing with funding infrastructure, Chairman Neal and Chairman Wyden, could pass their portion through reconciliation while the project-based portion can pass through a conventional bipartisan vote. This would allow Democrats to pass tax reforms (and potentially tax increases) without Republican support, while leaving open the chance to recruit GOP votes for a project-based proposal that would be excluded under reconciliation rules.