President Biden’s $2.3 trillion American Jobs Plan is noteworthy for two things. First, it greatly expands the definition of “infrastructure,” and second, it’s eight years of proposed spending is designed to be paid for with increased corporate taxes over 15 years.
Both of these things pose obstacles to swift passage. The more issues that are tucked under the infrastructure umbrella, and the narrower the range of revenue options to pay for them, the more difficult it will be to reach consensus on what’s in the bill and how it is paid for. Biden’s broadened definition of infrastructure includes home health care, climate change, various forms of inequality, workplace safety, and union membership. These are all worthy of consideration, but there is far less consensus on how to deal with them than there is on more traditional infrastructure items such as roads, bridges, mass transit, airports, water and power.
This has led some, including Senators Chris Coons (D-DE) and John Cornyn (R-TX), to suggest that Biden’s proposal be split up into two legislative packages; one containing traditional infrastructure items and a second package for the remaining items. The thinking is that a bill focused on traditional infrastructure might be able to attract enough Republican support to survive a filibuster in the Senate with at least 60 votes. Democrats could then attempt to move the second, more controversial, package through the special budget reconciliation process, which only requires 50 votes with the Vice President casting the tie-breaker.
Strategically, this makes sense. A number of Republicans have signaled their support for a large infrastructure bill, perhaps up to $800 billion, so long as it remains focused on traditional items such as transportation and water projects. Senator Cornyn told Fox News Sunday that he would add broadband to the list.
One big question lingers over the dual track approach: Would negotiators remain faithful to the spirit of Biden's initial proposal and include offsets to pay for the compromise package?
Republicans who might be tempted to join Democrats in a big spending bill for roads, bridges and other physical infrastructure will not accept any of Biden's proposed tax increases on corporations. For better or worse, they are dug-in on that point.
They might be open to “user pay” alternatives such as a gas tax increase, a new vehicle miles tax, or even a carbon tax of some sort but those options would appear to violate Biden’s pledge not to raise taxes on anyone earning less than $400,000 a year. That doesn’t leave a lot on the table. So if the two sides can agree on spending of up to $800 billion but can’t agree on how to pay for it, what happens? Senator Coons gave a preview to Punchbowl News:
“In the choice between raising taxes significantly, and simply looking at each other and saying, ‘We need a robust recovery,’ I think it's more likely that we will have a package that is not paid for, and that is less robust but still putting hundreds of billions of dollars into infrastructure.”
In other words, “Off the offsets.”
That would be a very bad idea.
As Treasury Secretary Janet Yellen told CNBC in February, “Certainly part of the package, the parts that are permanent, will be paid for in order to not raise long-term deficits, but we’re still working on the details of the package.”
To Yellen’s point, we’re no longer talking about emergency spending to fight a pandemic or provide temporary economic relief. An infrastructure bill would be part of the regular budget and it should be paid for, particularly given the fact that the debt already exceeds the size of the economy, the budget is projected to go another $12 trillion in the hole over the next 10 years, and the Highway Trust Fund is headed for insolvency as soon as 2022.
It would be good to see Congress get together on an important agenda item such as infrastructure, but it would not be fiscally responsible to split up an overall package that was meant to be paid for if the net effect would be to exempt a large portion of it from the difficult task of finding offsets.
We’ve had enough magical thinking on the virtues of infrastructure spending combined with non-negotiable demands on how not to pay for it. Regardless of what counts as infrastructure, if we want more of it, we need to pay the bill. Splitting up Biden’s proposal shouldn’t change that.