May 24, 2021
Infrastructure Talks Heat Up
Fifty-one days have passed since President Biden proposed his eight-year, $2.25 trillion, infrastructure-focused American Jobs Plan. Legislative and programmatic details on the plan have not yet been released, and a strategy for moving Biden’s plan through Congress continues to evolve.
Regardless of the shape a compromise package will take, most infrastructure funding will to go to state, local, and tribal governments, schools, and private entities. A much smaller amount will remain with agencies to administer grant and loan programs, conduct research and development, and modernize federal buildings.
The American Jobs Plan will be the biggest increase in non-defense research and development on record. We will see more technological change in the next 10 years than we saw in the last 50 years…. We have to develop and dominate the products and technologies of the future: advanced batteries, biotechnology, computer chips, and clean energy.
President Biden, April 28
Since his March 31 announcement, Biden and his senior staff have met with key Members of Congress to discuss strategy and priorities. This includes a May 12 Oval Office meeting with the “Big Four” congressional leaders: Senate Majority Leader Schumer (D-NY), Republican Leader McConnell (R-KY), House Speaker Pelosi (D-CA), and Republican Leader McCarthy (R-CA). This meeting was the first time since Biden’s inauguration where he hosted all four congressional leaders at the White House. In separate meetings the same week, Biden also met with Sen. Carper (D-DE), Chairman of the Environment and Public Works Committee, moderate Democratic Senators Manchin (D-WV) and Sinema (D-AZ), and a delegation of Republican Ranking Members of key Senate committees.
The nearly two-hour meeting between Biden and congressional leaders did not appear to make substantive progress other than to get the two sides in the same room. The meeting the next day between Biden and Republican senators was described as “very productive” by Sen. Capito (R-WV), who led the delegation, and Biden was “optimistic” a deal could be reached. While they are far from reaching an agreement, bipartisan discussions are continuing. On May 21, the White House responded to Sen. Capito with a memorandum proposing to reduce the Jobs Plan from $2.25 trillion to about $1.7 trillion. Changes include removing manufacturing, R&D, and supply chain funding and addressing that in separate legislation (the Senate is currently debating the U.S. Innovation and Competition Act), and reducing broadband funding from $100 billion to the Senate Republican’s proposal of $65 billion.
With an evenly-divided Senate and a narrow, 219-211 Democratic House majority, Biden knows that setting the right legislative strategy will be essential for advancing an expensive infrastructure bill. If he wants bipartisanship, there are three key areas of disagreement between Democrats and Republicans that a strategy must address.
Congressional Republicans made it clear that the American Jobs Plan’s $2.25 trillion price tag is too high. In April, Senate Republicans released an alternative to the President’s plan totaling $568 billion over five years. Since then, McConnell signaled that a bill costing in the range of $600 to $800 billion is a “proper price tag” for an infrastructure package. That could be seen as movement by McConnell, although McConnell was not clear if he intends the higher funding level to be for a five-year plan as proposed by Senate Republicans or for a longer period, such as the eight years assumed in the American Jobs Plan. In any case, the amount is well below the new $1.7 trillion White House offer.
While Biden deals with Republican frugality, he also faces pressure from progressives. Around the time the American Jobs Plan was released, progressives including Sen. Markey (D-MA) and Rep. Dingell (D-MI) urged Biden to go bigger with a $10 trillion, ten-year package focusing on green infrastructure and renewable energy. If Republicans do not sign on to a compromise bill and they maintain party discipline, as they did on the American Rescue Plan, to oppose a Democratic bill, President Biden will need to shore up support from progressives. That support will come at a cost.
Paying for Infrastructure
Biden’s plan would implement $2 trillion of corporate tax changes and enforcement over 15 years to pay for its spending. A large portion of the increased revenue would by realized by rolling back provisions of the 2017 tax law passed by a Republican Congress and signed by President Trump. For example, the plan would increase the corporate income tax rate from 21% to 28%.
Republicans consider reversing the 2017 tax changes to be a bright red line they cannot cross. They prefer alternative budgetary offsets such as an increase to the gas tax (the traditional method of financing surface transportation infrastructure) or new user fees, such as a vehicle mileage fee that would capture electric vehicle usage better than the gas tax. Republicans would also favor reallocating other federal funding, including unused pandemic funds, toward infrastructure.
The differences between the two parties regarding paying for infrastructure will be more difficult to close than the topline differences. For decades, budget and infrastructure deals have been limited by agreements on offsets. In the current political environment, coming to a deal will be challenging.
We believe… that the American Jobs Plan should be paid for by the wealthiest 1% amongst us and corporations that have been outsourcing good paying American jobs overseas… On the other side, Mitch McConnell and the Republicans want average everyday Americans to pay for the American Jobs Plan, to pay for infrastructure, to pay for the investments in our economy. How? By raising the gas tax, apparently, or by so-called user fees.
House Democratic Caucus Chairman Jeffries (D-NY), May 12
What is Infrastructure?
Another key point of disagreement is the scope of the infrastructure package. The Biden plan uses an expansive definition of infrastructure, including protection for collective bargaining, funding for labor enforcement agencies, and expansion of home and community-based health care services.
Republicans emphasize “traditional” infrastructure. The $568 billion Senate plan focuses on roads, bridges, public transportation, airports, drinking water and wastewater infrastructure, and similar areas. There is bipartisan agreement on defining broadband expansion as infrastructure.
The administration’s proposal… is so broad and ambiguous in areas that it seems there is little, if anything, that they do not consider or call infrastructure. The American Jobs Plan proposes to be all things all people.
Senate Appropriations Committee Vice Chairman Shelby (R-AL), April 20
How these partisan differences are resolved, if they can be resolved, will influence the legislative strategy for and timing of an infrastructure bill. We believe there are two possible outcomes:
A scaled-down, bipartisan infrastructure bill under $1 trillion. This bill would pass with most Democrats in support, although some progressives would oppose it as too limited, and with enough Republican support to ensure 60 votes in the Senate. Expect Democratic leaders to follow this bill with a separate budget reconciliation bill (see Austin Smythe’s reconciliation analysis from April) that includes spending and revenue increases Republicans will oppose. Using the reconciliation process enables the bill to be passed with a simple Senate majority rather than a 60-vote majority required to break a filibuster.
Bipartisan talks break down, and Democrats move forward with a $2 trillion+ infrastructure bill. Reconciliation would be used to pass the bill, and there would be little or no Republican support.
Under either approach, expect Biden and Congressional Democrats to include elements of the President’s $1.8 trillion American Families Plan in a reconciliation bill. Congressional progressives will likely insist on including parts of this plan, which expands education and direct support for children and families.
Biden’s outreach to Democratic moderates like Manchin and Sinema, who favor a bipartisan approach, will be critical. Their votes will be needed for reconciliation, and if Biden is able to show that he tried to work across the aisle, even if the effort fails, he can make a stronger case to moderates that they should support a partisan reconciliation bill.
Speaker Pelosi stated that an infrastructure bill, in whatever form it takes, will be ready for the House floor by July 4. Congressional committees are starting work to meet this goal. House Transportation and Infrastructure Committee Chairman DeFazio (D-OR) said that a surface transportation bill is likely to be considered by his committee prior to Memorial Day. Senate Finance Committee Chairman Wyden (D-OR) said his committee will work this month on energy tax credit provisions to be included in an infrastructure bill, and he held a hearing on May 18 on infrastructure financing.
Much more committee work needs to be done to draft a bill by Pelosi’s deadline. The Biden Administration, along with congressional leadership, will need to make strategic decisions soon for this work to go forward. Narrow margins in the House and Senate suggest that the price tag on the President’s legislative initiatives is likely to shrink before they are approved.
Infrastructure can and should be a bipartisan issue…. If the President can remember that he promised to govern for all Americans, not just the far left… if my Democratic friends can remember that they have a 50-50 Senate and a closely-divided House, not a sweeping socialist mandate… Then there is so much that we could deliver together for the country.
Senate Republican Leader McConnell (R-KY), May 12