Patrick Semansky/AP Photo
Biden speaking at an event to mark Amtrak’s 50th anniversary in Philadelphia last month
Observers in Washington are talking about this as a “critical week” for the fate of Joe Biden’s two public investment proposals, the American Jobs Plan and the American Families Plan. After a week of bipartisan negotiations, Biden has asked Republicans for a detailed offer by Tuesday, with both the scope of spending and an offsetting revenue package. There’s a soft deadline to show progress in the negotiations by Memorial Day.
But I have to candidly express that I’m a bit confounded by the confidence that a bipartisan agreement can be reached on the so-called “hard infrastructure” pieces, like roads, bridges, airports, waterways, and broadband deployment, with a Democratic-only plan on the rest of the administration’s agenda (including mass transit, free community college, housing, child and elder care, and more) to follow through budget reconciliation. The more you look at this gameplan, the fuzzier it gets.
To begin, why exactly would Republicans facilitate this? What’s in it for them? Maybe a few members would like to get a patina of bipartisanship on their resumes, though it would seemingly give them nothing but headaches with the conservative base. But overall, enabling Biden to fulfill his entire agenda, while also being able to tout a bipartisan win, seems like the polar opposite of Mitch McConnell’s stated “100 percent focus” on stopping the president. McConnell has deferred to Republican senators like Shelley Moore Capito (R-WV), who are interested in getting something done. But ultimately, he will have the final word in the matter.
You can already see the contours of an impasse here, and maybe this is the Republican gambit, to drag out gridlocked talks. McConnell, like most Republicans, are completely opposed to raising taxes on corporations or reversing any parts of the Trump tax law. Their plan, which could cost up to $800 billion (up slightly from the previous $568 billion offer), would be offset mostly through “user fees.” For the transportation sector, that would either constitute toll roads, a hike in the gas tax, or a “vehicle miles traveled” tax for electric vehicles.
There are dozens of tiny decisions that could make the difference between a transformational and ineffective program.
First of all, the Biden team has dismissed user fees out of hand, saying it would violate his pledge to not raise taxes on anyone making under $400,000 a year. All of these fees are regressive, taking a disproportionate percentage of earnings from low-income and middle-class Americans, relative to the rich. While Democrats like Sen. Mark Warner (D-VA) are open to user fees, Biden seems to recognize that this would be a politically suicidal idea, and in the case of taxing electric vehicle owners, antithetical to the concept of wanting to get more EVs on the road as a climate mitigation measure. The architecture that would have to be built to ensure compliance with a vehicle miles traveled tax is also very unclear: it would involve in most states a new layer of government checking of odometers.
Without user fees, and without tax increases on the powerful, there’s not much else available. Republicans have floated taking unused coronavirus relief funds, but there aren’t really much of those available unless you start immediately clawing back parts of the American Rescue Plan that just got passed in March, which Biden presumably would oppose. The piece the Biden team has talked up is increased funding for the IRS for audits and enforcement, which could yield close to the $800 billion price tag over a ten-year period.
But there’s a big problem here: the Congressional Budget Office (CBO) won’t score savings from increased IRS enforcement under its current Congressionally-mandated rules. Everyone knows that if you give the IRS more money, it would have the ability to go after tax cheats and evaders. But Congress’s scorekeeper can only count the actual investment in the IRS against the budget, not the revenue it might bring in. There are ways around this, like changing reporting requirements, that CBO would recognize as revenue-raisers. But they won’t raise enough to fund the entire hard infrastructure plan, and you could easily see Republicans objecting to the reporting as a “paperwork burden.”
So this feels pretty intractable, as long as the demand for budget neutrality is kept. And Joe Biden himself is leading that charge, stating plainly that he’s “not willing to deficit spend” on his agenda. He’s backed up by one of his closest confidants on economic policy, Treasury Secretary Janet Yellen.
Of course, while this may spell doom for the bipartisan package, that would just throw everything back to the budget reconciliation side. If the plan was to do a $3 trillion bill in reconciliation, there’s no rule against making it $4 trillion. Some Senate Democrats have resisted this approach in favor of bipartisanship (looking at you, Joe Manchin), but by taking serious steps to reach an agreement, Biden would be in a better position to go it alone if it all breaks down.
But the problems with a reconciliation bill in some ways mirror the problems with a bipartisan hard infrastructure bill. If Biden retains his commitment to “paying for” everything in the legislation, there may not be enough available that Democrats can agree on to fund the whole package. Already Senate Democrats have expressed a desire to cut down the corporate tax rate increase to 25 percent instead of 28 percent, and others are skeptical of increases to capital gains taxes. This is in part based on the completely wrongheaded notion that very popular tax increases on the wealthy are a political liability. But if the taxes have to be pared back, and all the funding must be offset, then the spending would have to go down too.
Moreover, the surface transportation bill needs a reauthorization by September 30. The return of earmarks has greased the wheels for that package, but you can’t actually deal with that reauthorization in reconciliation, because of the way it’s funded. That’s because the highway trust fund could not be replenished with general fund revenues while complying with budget reconciliation rules. Moreover, you could probably not honor earmarks in reconciliation. This is in part what’s driving the desire for a bipartisan hard infrastructure bill, to attach onto the surface transportation reauthorization and get that out of the way.
There are also jurisdictional issues, as the Appropriations Committees would want more control over the funding process. And finally, there’s a ton of work that needs to be done to put the Biden administration’s broad-stroke agenda into actual program language. The Prospect has been covering some of that in our Building Back America series, and there are dozens of tiny decisions that could make the difference between a transformational and ineffective program.
Committees are right now working on both options at once, planning for either a bipartisan or a unilateral process. But I’m not entirely confident about either. Both seem to have problems on revenue and hurdles involving long-standing rules. And it’s difficult to really understand the partisan motivations and where they lead. Too many people are presuming that, with so much at stake for Democrats in the midterms, they’ll be able to figure out some kind of public investment legislation. But with all these variables, I wouldn’t be so sanguine.
