When President Joe Biden and a bipartisan group of senators gathered at the White House on Thursday to announce that they had struck a deal to spend up to $1.2 trillion on basic infrastructure over the next eight years, it was cast as a triumphal moment for those who claim it is still possible to work across partisan lines in Congress.
It was also a golden moment for those who claim that Congress can take on big challenges without expanding the federal deficit.
“We’ve agreed on the price tag, the scope and how to pay for it. It was not easy to get agreement on all three, but it was essential,” Maine Sen. Susan Collins, a Republican, said of the package. The deal includes $579 billion in new spending, with the balance made up of repurposed federal funding from other programs.
Just days after that press conference, though, the bipartisan nature of the agreement is fraying. Meanwhile, budget experts examining the list of “pay-fors” meant to fund the initiative say the proposal is full of accounting gimmickry that will not survive the close analysis the nonpartisan Congressional Budget Office (CBO) applies to spending bills.
The dealmakers rely on a number of questionable assumptions. For example, the plan assumes the Internal Revenue Service (IRS) can find a better way to crack down on tax-avoiding scofflaws, that Congress will agree to reimpose unpopular fees on industries and individuals, and that the government can raise significantly more funds from the auction of 5G airwave rights than experts believe they are worth.
The significance of the bipartisan nature of the deal is that with the support of just 10 Republicans it could clear the filibuster, which allows Republican Party lawmakers to block almost any legislation that cannot muster the support of 60 senators.
But Republicans, including some who stood beside the president during the announcement on Thursday, said on Friday that they were angry with Biden for comments made during the press conference and were already reconsidering their support for the deal.
Biden had touted the bill as a feat of legislative finesse, saying, “Neither side got everything they wanted in this deal, and that’s what it means to compromise.” However, he went on to say that he will not sign the bipartisan deal unless it is presented at the same time as a separate bill filled with priorities that Republicans do not like. That second bill would be structured as a budget "reconciliation" measure that could pass the Senate with just 51 votes, which the Democrats have.
South Carolina Sen. Lindsey Graham, a Republican who had said he would vote for a bill based on the infrastructure deal, said that he would withdraw his support if Democrats tried to pass it in tandem with a partisan reconciliation bill.
On Saturday, Biden issued a lengthy statement saying his comments ”understandably upset some Republicans” and reasserting his full support for the agreement. “My comments also created the impression that I was issuing a veto threat on the very plan I had just agreed to, which was certainly not my intent,” Biden said.
Budget experts dubious
Nonpartisan groups analyzing the proposal questioned claims that the funding sources identified by the negotiators would actually make up the difference between money being reallocated to infrastructure spending and the new spending contemplated in the deal.
“It is exciting that the two parties have agreed on a significant investment in infrastructure,” said Shai Akabas, director of economic policy for the Bipartisan Policy Center. “But it is frustrating that they are unable to similarly reach agreement on a set of pay-fors that would fully offset the cost of the package.”
He said the two parties have some ideas on offsets that are worthwhile and definitely deserve consideration. “But my expectation is that when CBO actually (analyzes) this, it will show that there is only a relatively small portion of the overall package that is ultimately paid for,” he added.
“There are lots of good policies in here, and I am so thrilled they're trying to pay for it,” said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget. “But I worry that when CBO looks at these numbers, they're going to fall short. They're probably going to save less than was expected. And some policies won't save anything at all.”
There are some pay-fors proposed in the deal that everyone agrees would increase revenue, such as an effort to narrow the difference between taxes Americans owe and taxes they actually pay.
The administration has already announced plans to beef up the enforcement division at the IRS, and the deal announced Thursday assumes that a $40 billion investment in enforcement would net as much as $100 billion in returns. While experts unanimously agree that increasing funding for enforcement will generate positive returns, there is little consensus on exactly what the dollar-for-dollar benefit will actually be from such investments.
Other measures that would generate measurable returns for the Treasury include extending some user fees for customs inspections and reinstating fees for certain environmental clean-up projects.
The benefits of other pay-fors were far less certain. The fact sheet distributed by the White House seems to include investment by individual states in broadband infrastructure as part of the package’s $1.2 billion total for federal spending. Other assumptions include $100 million from unspecified public-private partnerships, sales from the Strategic Petroleum Reserve, and generating $180 billion in private sector investment with $20 billion in loan guarantees.
“Some of these are perennials,” said Steve Robinson, chief economist for the Concord Coalition, a nonpartisan group that advocates balanced budgets and deficit reduction.
“The user fees, the Strategic Petroleum Reserve, and spectrum [auctions] are things that have been used in probably every budget deal that's been done in the last decade or more,” said Robinson, a former staffer on both the Senate and House Budget Committees. “They're all real proposals to a certain extent, but there's a lot of uncertainty around a number of them, which raises some doubt as to how solid the numbers are.”
In the end, he said, proposals like these are about lawmakers being able to claim the mantle of fiscal responsibility. Some of the measures most likely to generate returns, like the increased IRS enforcement, won’t even be allowed to count against the proposal’s costs when the Congressional Budget Office produces the official budget “score” or tally.
“There's technical, budgetary enforcement, and then there's just the political,” he said. “Can I say that I plausibly paid for it? Yeah. I think the members are more concerned about the latter than the former.”