Blog No. 298. Two Cheers for the Passage of the Bipartisan Infrastructure Bill

The Senate’s passage of the Bipartisan Infrastructure Bill deserves a cautious two cheers, but not three. It deserves one cheer because it addressed important and longstanding problems: roads, bridges and tunnels as well as airports, rail networks and the power grid. The proposal also includes worthy investments to improve Americans’ access to broadband and clean drinking water.

The bill deserves another cheer because it showed the ability of the Senate to come together on a bipartisan basis and the willingness of at least nineteen Republicans to support a measure that Donald Trump had opposed. CNN has provided a full roster of the Republicans who supported the bill.) There are, however, several reasons why it does not rate a third cheer.

To begin with, ultimate passage of the bill by the House is uncertain. Speaker Nancy Pelosi has indicated her intent to hold the bill hostage to passage of the much larger and justifiably more controversial $3.5 billion package that Democrats hope to pass through the Senate by means of the reconciliation procedure. Pelosi’s strategy may work, but it could end up in the defeat of both bills. Second, the luster of the bill as a trophy of bipartisanship is dimmed by the fact that of the nineteen Senators who supported the bill, only two, Linda Murkowski and Chuck Grassley, are up for reelection in 2022, and the 87-year-old Grassley may well announce his retirement before then. Thus, both were relatively impervious to Trump’s threats and admonitions.

Finally, the bill is far from fiscally responsible. As the respected Committee For a Responsible Federal Budget (CFRB) observed:

The Senate passed the Infrastructure Investment and Jobs Act, bipartisan legislation to increase federal infrastructure investments. The legislation includes roughly $170 billion in offsets over a decade to partially pay for $517 billion of direct costs and over $570 billion of total costs. We estimate this will add about $400 billion to deficits over the next decade.

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While we are pleased Republicans and Democrats have come together to move forward important public investments, this legislation falls far short of its promise to be fully paid for.

We strongly support measures in the bill to reduce the tax gap, lower drug prices, and extend or impose new user fees. But two-thirds of this package is paid for with smoke, mirrors, and debt.

As CBO and others have shown, borrowing from the future undermines the economic benefits of new public investments. The last thing we need is to put another $400 billion on the national credit card.

Moreover, looming over the bipartisan infrastructure bill is the Democrats’ proposed $3.5 trillion reconciliation package The first step toward approval of that massive proposal was taken with the Senate’s passage this week of a budget resolution—with which specific legislation must later be “reconciled.” That proposal is a matter of serious and legitimate concern—to moderate Democrats as well as Republicans—on account of both its price tag and its content.

As estimated by the CFRB the total cost could exceed $5 trillion:

Although the projects in the reconciliation bill are to be funded in part by tax increases, there is little chance that they will be fully paid for. The budget resolution allows for $1.75 trillion of borrowing. But as CFRB has explained:

Overall, we estimate these packages could cost as much as $2.4 trillion over ten years and set the stage for up to $4.3 trillion of total borrowing over the next decade. This cost would lift debt to 119 percent of Gross Domestic Product (GDP) by 2031, compared to a record 106.4 percent of GDP projected under current law.

On Wednesday, Senator Joe Manchin issued a statement saying he has “serious concerns” about the size of the budget reconciliation package, calling it “simply irresponsible” to continue spending at such high levels. Manchin’s concerns are known to be shared by Senator Kyrsten Sinema and other moderate Democrats. Yet they will find little sympathy from Senator Bernie Sanders and like-minded progressives. Majority Leader Chuck Schumer will clearly have much old-fashioned reconciling to do before he has a reconciliation bill that commands—as it must—the support of every single Democratic Senator.

Apart from the total cost of the budget proposal, it is not at all clear how the various expenditures—each involving tens of billions of dollars—will be deployed. The details, or at least some of them, will emerge from specific legislation that needs to be developed by relevant committees. Those committees, however, have been ordered by the budget resolution to present their legislative proposals by September 15. Even if some work is done during the August recess, there is simply not enough time for careful and measured consideration by such traditional elements of the legislative process, as hearing witnesses to develop facts, then proceeding to bipartisan mark-ups. 

The success or failure in the next few weeks of the course that Biden, Schumer and Pelosi have charted may determine the outcome of not only the elections in 2022, but the presidential election in 2024 and much of the future of the country after that.