Congress and the Administration Turn Toward Building Back Better
The American Rescue Plan Act of 2021 was signed by President Joe Biden on March 11. While the White House has been touting this victory across the country, attention in Congress has turned to infrastructure. Experts agree a sweeping revamp of our nation’s infrastructure is long overdue, with the American Society of Civil Engineers reporting that 43 percent of roadways are now in poor or mediocre condition. There appears to be a bipartisan appetite for this kind of legislation, at least in principle, but its scope and how it will come together are still far from certain.
Last year, Congress extended the surface transportation bill, the Fixing America’s Surface Transportation (FAST) Act, for one year. The FAST Act, which is now due to expire on September 30, would be a natural vehicle for a traditional transportation infrastructure bill, but Democrats' vision is more expansive, ranging from water issues, to broadband, to the energy grid, to healthcare infrastructure. It's not clear how these ideas will be ultimately meshed together. However, we can expect Democrats to use H.R. 2, the Moving Forward Act, which passed the House in the 116th Congress, as a starting point.
The issue is of high importance to the president, who campaigned on a platform of Build Back Better, along with a $2 trillion infrastructure proposal. Signaling its eagerness for a package, the White House has held two meetings with bipartisan leadership from the Senate Environment and Public Works (EPW) Committee and the House Transportation and Infrastructure (T&I) Committee, along with Secretary of Transportation Pete Buttigieg. While President Biden has yet to release a framework for infrastructure legislation, the White House could make details for its vision available around a Congressional address in mid- to late-April.
Committee Activity on Infrastructure
Despite much guidance from the White House or Congressional leadership, individual committees are already developing legislation for an infrastructure package. Efforts are already underway in the House, with all 32 Democratic members of the Energy and Commerce Committee reintroducing the Leading Infrastructure For Tomorrow’s (LIFT) America Act (section-by-section summary of the bill available here) on March 11. This legislation invests more than $312 billion in clean energy, energy efficiency, drinking water, broadband, and healthcare infrastructure. The committee will hold a legislative hearing on this bill on March 22.
House T&I is also moving forward with advancing infrastructure proposals. Last year, House T&I Chairman Peter DeFazio (D-OR) introduced the Investing in a New Vision for the Environment and Surface Transportation (INVEST) in America Act, which was ultimately included as part of the House’s Moving Forward Framework. Expected to be part of the conversation again this year, this bill, which includes strong Buy America provisions and labor protections, authorizes $500 billion over five years for roads, bridges, and public transit and rail systems. Rep. DeFazio, who has also articulated a preference for including earmarks in the transportation package, is planning a Member day hearing for April 14.
The House Ways and Means Committee has also prepared legislation that could ride on an infrastructure package. For example, late last year, Democratic Members of the House Ways and Means Committee introduced the Growing Renewable Energy and Efficiency Now (GREEN) Act (a section-by-section summary is available here), outlining energy-related tax priorities. The committee will also have a role in designing any tax provisions that could be used as pay-fors. The House Ways and Means Committee will hold its Member day hearing on March 23.
While the House is expected to move an infrastructure package first, Senate EPW is also at work on infrastructure legislation and has set a March 19 deadline for Members to articulate their priorities. By way of background, in the 116th Congress, the Republican-controlled EPW committee advanced the America’s Transportation Infrastructure Act (ATIA) of 2019. A more traditional surface transportation bill, this legislation would authorize $287 billion over five years, including $259 billion formula programs to maintain and repair America’s roads and bridges. Current EPW Chairman Tom Carper (D-DE) has indicated he plans to write a new Senate bill, which may not necessarily track with Rep. DeFazio’s legislation. Sen. Carper has said he will also have infrastructure legislation ready to go by Memorial Day.
While the EPW Committee is the primary Senate committee with jurisdiction over infrastructure, additional committees may have a role to play depending on the scope of the package. The Commerce, Science and Transportation Committee has jurisdiction over broadband, rail, freight, maritime and port issues. The Senate Energy and Natural Resources (ENR) Committee may weigh in on any climate provisions that are included, while the Senate Health, Education, Labor, Pensions (HELP) Committee will oversee issues related to healthcare infrastructure, and the Senate Banking Committee has jurisdiction over mass transit issues. The Senate Finance Committee will also have a role on any tax issues addressed by the infrastructure package.
How the Package Comes Together
Democrats have spoken publicly about wanting to at least try to find common ground with Republicans on infrastructure, but there’s a fundamental clash between their words and their ambitions for a broad bill with a large climate component.
If Democrats decide to move a package in a bipartisan way, through regular order, we believe the size of the bill would shrink, but would allow for more substantial policy changes. At the moment, most committees are operating under the assumption that the infrastructure package will move under regular order, while acknowledging that they may need to adjust their proposals should the filibuster remain intact and Democrats be unable to muster 60 votes in the Senate. It is our instinct that Democrats are likely to spend the next 6-8 weeks trying to secure bipartisan support for infrastructure before adjusting their approach.
If we get to late April/early May and Democrats feel like Republicans are being obstructionist, Democrats could choose to move legislation through budget reconciliation, allowing for a multi trillion-dollar package, but limiting the opportunity to alter policy. An example of this paradigm in play is the recent debate over the minimum wage. Democrats were gearing up for an internal debate over inclusion of a fifteen-dollar federal minimum wage in the COVID relief bill. However, when the Senate parliamentarian deemed that it would violate the Byrd Rule, Democrats ultimately dropped the proposal. While moving an infrastructure package under reconciliation would allow Democrats to claim an infrastructure victory with little to no GOP support, a reconciliation bill may inevitably leave some Democratic priorities on the cutting room floor.
A third potential pathway for action on infrastructure would be a hybrid option. Democrats could move a larger, climate-focused infrastructure package through Congress via reconciliation, and separately reauthorize the FAST Act through regular order with bipartisan support. Regardless of how Democrats proceed, there is a short timeline to move one or more infrastructure bills before the current surface transportation expires and campaigning for the 2022 midterm elections gets underway.
The Fight Over How to Pay for It
A deciding factor in which route Democrats ultimately choose will be how the bill is paid for. There are certainly some Democrats who believe interest rates are so low that an infrastructure bill could be financed through additional deficit spending. Secretary Buttigieg has suggested the option of not paying for the plan at all. However, taking this route to pay for the package would be a nonstarter with Republicans, as well as moderate Democrats who are concerned about the deficit.
There are many key voices who acknowledge that an infrastructure bill must be at least partially paid for. House Speaker Nancy Pelosi (D-CA) has expressed support for including some pay-fors and Sen. Joe Manchin (D-WV), whose support will be necessary for Democrats to move an infrastructure package through the Senate, has also expressed a desire for offsets. Within the Democratic caucus, there also appears to be some acknowledgement of lessons learned from challenges Democrats encountered in finding ways to pay for the Affordable Care Act (ACA), which may have cost Democrats the House majority in 2010.
To date, the conversations about pay-fors have been relatively high-level. Ultimately, what those revenue raisers may be is where the paths diverge, not only between Republicans and Democrats, but also within the Democratic caucus.
Some of the ideas floated by Democrats, such as increasing taxes on high-income individuals or undoing corporate tax cuts implemented under the Tax Cuts and Jobs Act of 2017 (TCJA), would likely shed the Republican support needed to get the bill through the Senate under regular order. During the campaign, President Biden proposed taxing corporations and the wealthy to pay for his infrastructure plan, but has since clarified that no one making under $400,000 would see their taxes raised. In any case, Republicans are unlikely to vote for tax hikes, especially when it would mean giving the president a win prior to the midterms.
Some additional pay-fors that may be in the mix include indexing the gas tax for inflation and implementing a vehicle miles traveled (VMT) tax. It is possible that Congress may also explore the inclusion of other minor tax provisions to raise revenue, in addition to spending cuts.
One Area of Consensus
Despite the areas of the infrastructure debate that are currently lacking clarity and bipartisan agreement, there seems to be some consensus among Democrats and some Republicans on the timeline. On both sides of the aisle, there is some recognition of the need to pass an infrastructure bill before the FAST Act expires on September 30.
Additionally, Democrats continue to draw on President Barack Obama’s experience using reconciliation in 2009 to pass the ACA. There is some thinking that President Obama erred in spending too much time seeking support from Republicans, which led to healthcare becoming a fairly controversial issue during the August recess. Additionally, the Biden Administration appears very cognizant that 2022 could be a bad year for Democrats, given that the party in the White House traditionally loses seats during a midterm election and that some Democrats are likely to be negatively impacted by redistricting. Getting an infrastructure bill signed into law before August would allow Democrats to message the infrastructure package as a jobs bill over the summer recess and also create some space before 2022 campaigning begins. While August is the target, we would not be surprised to see infrastructure slip into September.
With all of this in mind, while some specifics remain unclear, we can expect things to shift rapidly over the coming weeks. We will continue to monitor the situation and provide real time updates and analysis for our clients.