HomeBudget & Tax NewsBiden Accepts Bipartisan Compromise on Infrastructure Bill, Bending to Political, Economic Realities

Biden Accepts Bipartisan Compromise on Infrastructure Bill, Bending to Political, Economic Realities

President Joe Biden announced his acceptance of a $953 billion infrastructure package in a compromise with a bipartisan group of U.S. senators. The proposal includes $559 billion in new spending, falling well short of the size and scope of Biden’s original plan. Democrat congressional leaders have indicated they will pursue these goals in a future budget reconciliation bill.

Since the passage of the $1.9T COVID Relief Bill in March, one of the Democrats’ chief priorities has been to pass a federal infrastructure bill. A few weeks after signing the relief bill, Biden introduced his infrastructure proposal, the American Jobs Plan, with cost estimates ranging from $2.3 trillion to $4 trillion over 10 years. A major criticism of the bill has been the majority of its provisions have nothing to do with traditional transportation infrastructure such as roads, bridges, and airports.

In late April, Senate Minority Leader Mitch McConnell (R-KY) remarked on the Senate floor, “It quickly became clear their proposal mainly focused on everything but the things normal people call ‘infrastructure.’ … Out of more than $2 trillion in proposed spending, less than 6 percent would go to roads and bridges. Even when you add in airports, ports, rail, and waterways, that total would still be exceeded by the amount going to electric vehicles alone.”

Some provisions that stretched the definition of infrastructure include a $225 billion paid family leave program, $225 billion in child care subsidies, and $200 billion for universal Pre-K education.

Another part of the original plan that has received much scrutiny is $100 billion in broadband internet funding. Critics argue this provision is wasteful and duplicative because the appropriations legislation signed in December of last year included $7 billion for broadband infrastructure, and this year’s COVID relief bill provides $350 billion in state and local funding usable for broadband investment.

Proponents of the Biden plan argue high broadband prices make internet access unaffordable for many Americans, so the plan sets a preference for government-owned broadband networks. A February study by the Information Technology & Innovation Foundation cast doubt on those premises, finding U.S. broadband rates are comparable to those in other countries and private providers’ prices are in line with those of municipal providers.

Critics of the plan cite a widely publicized record going back more than a decade of failed city experiments with government-owned broadband totaling billions in wasted taxpayer dollars, including Burlington, Vermont; Chicago, Illinois; Minnesota’s FiberNet; the Northern Florida Broadband Authority, Orlando, Florida; Philadelphia, Pennsylvania; Provo, Utah; Seattle and Tacoma, Washington, and numerous others.

Senate Republicans have been unified in opposition to Biden’s plan, and even a few moderate Democrat Senators, in particular Sen. Joe Manchin (D-WV), have expressed concern over the price tag and lack of bipartisan support. At the end of May, a group of Senate Republicans unveiled an infrastructure package to counter Biden’s plan, to spend $928 billion over eight years, with a much greater focus on core infrastructure.

After talks between moderate senators in both parties and top White House officials in favor of this compromise, Biden has announced he will accept the compromise plan. A central area of contention was how to pay for the deal. Transportation infrastructure has been largely funded by the federal gas tax, but Biden’s proposal called for other tax increases such as raising the corporate income tax from 21 percent to 28 percent. Republicans have strongly opposed these proposed tax increases, and recently Sen. Susan Collins (R-ME) suggested instead of increasing the gas tax Congress should repurpose COVID surplus funds and charge electric vehicles road user fees, saying drivers of the latter “are literally free riders because they’re not paying any gas tax.”

Further complicating matters are worsening jobs numbers and evidence that lower-skilled workers are refusing to return to work because their increased compensation from unemployment benefits in the recent COVID relief bill is greater than their prior employment income. Another poor economic indicator casting doubt on the wisdom of tax and spending increases is the recent surge in commodity prices signaling a possible return to price inflation after decades of relative price stability, which may be attributable to the massive increase in federal spending in response to the COVID pandemic.

Biden’s announcement is unlikely to fulfill House Speaker Nancy Pelosi’s (D-CA-12) goal of July 4 passage when Congress breaks for Independence Day recess, as details for achieving full passage in both Houses remain to be hammered out in July.

Aaron Stover
Aaron Stover is the Director of Federal Government/Corporate Relations at The Heartland Institute

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