What We Know About Biden’s Infrastructure Bill
Dear Rich Lifer,
The Biden administration celebrated a victory recently when they passed a $1.9 trillion coronavirus relief bill. The aid and stimulus bill included another round of $1,400 stimulus checks for most Americans, extended enhanced jobless benefits through September and provided billions to help schools reopen and increase vaccine production and distribution (among many other things).
And now, President Biden seems to be ready to move on to the next big spending bill that would focus on infrastructure, clean energy and education. As a Presidential candidate, Mr. Biden went further than both his predecessors when he promised to pass a multi-trillion-dollar infrastructure plan to help create jobs and make America more competitive with China.
He specifically campaigned on a clean energy infrastructure plan that his team said would cost $2 trillion over four years.
Infrastructure may be a bipartisan issue, but the details involved in an infrastructure plan — from cost to programs included to funding — are not.
Democrats and Republicans Disagree on Funding
Although Mr. Biden wants bipartisan support for his plan, his administration has seen how difficult it is to get Republican backing (remember, not a single Republican voted for his stimulus bill), so it will likely be an uphill battle getting another large bill passed. Even within the Democratic party, getting centrists and progressives to rally behind the same bill will be complicated.
One of the biggest issues for both parties centers around how to pay for another big-ticket spending plan. In recent meetings with Biden and his aids, lawmakers on both sides of the aisle suggested breaking up the bill along different lines.
But Republicans and Democrats have very different approaches for what that could mean.
Democrats proposed breaking up the projects from the pay-fors: One measure would include the building proposals that both sides of the aisle seemingly would back. The other would include a set of provisions to cover the costs – including raising taxes on gas, corporations and electric vehicles – that have already attracted GOP criticism and would likely only pass along party lines.
Republicans have different ideas; they proposed a tax on carbon emissions — rather than a halt on drilling — and suggested a willingness to back a trust fund with assorted sources of revenue from several smaller tax changes or cost cuts.
Unless both parties can come to a funding agreement, Mr. Biden may have to attempt another reconciliation process, which requires only a simple Senate majority and therefore would require only approval from Democrats.
Republican Rep. Rodney Davis stated, “If the Democrats want to run a climate bill they know is going to be much more contentious than helping to come together and rebuild our roads and bridges, that’s what they need to use the reconciliation process for.”
However, this process may not be possible with an infrastructure bill. Democratic Rep. Peter DeFazio, who chairs the House Transportation and Infrastructure Committee, said the rules governing reconciliation would likely strip out large portions of the bill because their impact on the federal budget is deemed unclear or immaterial.
What Has the White House Said?
The White House still maintains it’s too early to talk specifics. Jen Psaki, White House Press Secretary, stated, “We don’t have a package being proposed at this point, and when we get to that point, I’m sure we will have this discussion.”
While the exact timing of the bill is uncertain, White House aides have pointed out that Mr. Biden wants to take advantage of continued low interest rates, regardless of the national debt and deficit levels.
Bharat Ramamurti, deputy director of the White House National Economic Council, commented:
The president has made clear that being fiscally responsible is a priority of his. He’s also made clear that, right now, one of the best things that we can do is deficit finance these investments because that’s what gets the economy moving more quickly. And in the long term, growth helps bring down the debt and deficit levels as well.
The U.S. Chamber of Commerce, one of the largest business advocacy groups, is putting pressure on lawmakers to have a bill passed this summer. They released a letter in February signed by 300 businesses calling for passage by July 4.
Congress has a September deadline to pass a bill reauthorizing highway funding, which leads some to believe the bill will not be passed until late summer or September. We know how much Congress loves a deadline…
Business Leaders Get Involved
Executives from Wall Street, major corporations and private equity firms are also getting involved with the White House and officials in the Transportation Department about funding.
Tax hikes, private-public partnerships and fee increases for bridge and highway tolls are some of the ideas business leaders have presented to the Biden administration.
One contentious issue for business leaders has been the proposal to raise the corporate tax rate. During his campaign, Mr. Biden stated corporations would see a tax hike, and in recent days, he has publicly reaffirmed his pledge to raise taxes on anyone making over $400,000.
Former Democratic Sen. Blanche Lincoln currently leads the RATE Coalition, which advocates against raising the corporate tax rate. She recently commented, “American employers will struggle to build back better if they pay a higher corporate rate than their competitors in China. Congress should focus on closing loopholes that enable profitable companies to pay little or nothing in tax.”
Some financial executives are instead pushing for some type of large-scale, private-public partnership where private equity firms could finance some of the larger and more expensive infrastructure projects.
Big private equity names such as Blackstone, Carlyle Group and KKR have been helping finance state-based projects for well over a decade. However, it does not appear any financial executives have approached the White House regarding this idea yet.
Other businesses and organizations friendly with corporations (like The Chamber of Commerce) have proposed other ways to pay for the plan, such as raising the gas tax, which has not seen a hike since 1993.
We expect much more information to come out about this bill in the next month, so stay tuned as we continue to bring you ongoing updates.
To a Richer Life,
The Rich Life Roadmap Team