Budget Watchdog All Federal, Episode 4: Infrastructure and the American Jobs Plan

Budget Watchdog All Federal, Episode 4: Infrastructure and the American Jobs Plan

Infrastructure,  | Quick Take
Apr 5, 2021  | 30 min read | Print Article

President Biden’s American Jobs Plan contains roughly $2.2 trillion in spending proposals across a broad swath of traditional and newly defined “infrastructure.” The 25-page plan is big on ideas and short on details.  What to make of it? Senior Policy Analyst Josh Sewell joins TCS President Steve Ellis for the kind of discussion you will only hear on Budget Watchdog AF.

Listen below or scroll down for a transcript.

TRANSCRIPT:

Steve Ellis: Welcome to all American taxpayers seeking common sense. You have made it to the right place. For over 25 years, TCS, that’s Taxpayers for Common Sense, has served as an independent nonpartisan budget watchdog group based in Washington, D.C. We believe in fiscal policy for America that is based on facts, and our team at TCS works to ensure that taxpayer dollars are spent responsibly and that our government operates within its means. It’s literally our mission. We believe in transparency and accountability, that no matter where you are in the political spectrum, that no one wants to see their tax dollars wasted.

It’s April 1st, 2021, and this is not a joke, it’s infrastructure week. For four years of the Trump presidency we heard talk of infrastructure week. It became a joke because substance to back it up never arrived. Now, to its credit, the Biden administration rolled out 25 pages of substance. Of course, those pages outlined more than $2 trillion in spending and $2 trillion in revenue raisers. That’s more than $160 billion a page. But before I get ahead of myself, I’ve got my colleague, Josh Sewell, senior policy analyst at TCS, to help me unpack this ginormous package. Welcome back to the podcast, Josh.

Josh Sewell: Hey, thanks, Steve. I am actually very excited to be here, not just because it’s infrastructure week, which I have been eagerly anticipating, but half of my kids are back at school in person. So any screaming you hear is just going to be me, not them.

Steve Ellis: Well, that’s exciting. And so it gave you some extra time to slap on those green eyeshades and go through this package, this booklet, if you would, of a proposal. And just on a higher level, what do you make of it, Josh?

Josh Sewell: Well, at TCS, we’ve all driven bad roads, worried about bridges, dealt with shoddy transit, and we can all see the cost of poor infrastructure. So we’re not coming at this discussion from either ignorance or dismissal. Our concerns come from, in part, our view on emergency spending, with a wrinkle. See, our infrastructure challenges are long-festering. These are not immediate or sudden, and so at least not what has been a rot or a problem for decades.

So to tackle these problems once and for all, the solutions also must be comprehensive, realistic and enduring. So we reserve judgment until the full details are released and the rubber the road, because 25 pages doesn’t provide a lot of detail on more than 2 trillion in spending, but we can start to see some details already.

Steve Ellis: So speaking of some of those details, or at least the shape of those details, just skimming through this package, it seems like there’s a lot in it that we wouldn’t typically call infrastructure. It’s not just about the feds building schools, but like $400 billion going towards quote, “Expanding access to quality affordable home or community-based care for aging relatives and people with disabilities.” I mean, whether or not you see that as a federal role, I wouldn’t call that infrastructure. What’s the play here? What’s going on, Josh?

Josh Sewell: Well, first of all, I think you should look at this as more of a stimulus bill than an infrastructure bill. And I say that because they’re trying to solve a lot of problems all at once. And frankly, money is cheap right now. Interest rates are low. There’s this idea that deficits don’t matter. And President Biden is also still in the honeymoon phase, whatever that means now in our highly partisan and polarizing environment. He’s going to get while the getting’s good.

And so we need to have a robust discussion about many of these spending proposals, because one thing that the COVID-19 pandemic and the economic fallout from trying to solve that issue has shown us is that there are some holes in our safety net. There’s some people who think we need to make some changes, but to do this in one massive package is going to be a very, very tall task.

Steve Ellis: Speaking of tall tasks, I mean, one of the things that’s in here, and I mentioned this at the beginning of the podcast, is that it includes revenue raisers. To the administration’s credit, I mean, there’s a lot of people, particularly on their side of the aisle, that have been talking about you don’t need to have any offsets in deficit spending, happy days are here again and that’s not an issue. And they did, whether you believe all the offsets or not, they did include a package of these revenue raisers. And in fact, I think that the way you look at it is they’re calling a mulligan on the 2017 tax cut, at least on the corporate side of the ledger, and reigning in a lot of it.

As TCS fans know, we opposed the 2017 tax cut because we were promised deficit neutral tax reform, and instead we got a nearly $2 trillion deficit finance tax cut, but I digress into the history here. What are they doing here and what are some of the pay fors, Josh?

Josh Sewell: One key here is that, as you already mentioned, is that this is all on the corporate side of the tax code. So there are no individual income tax increases, at least in the description. And I find it hard to believe that they would throw those on there since one of the campaign promises was not to raise taxes on individuals, at least making less than $400,000.

So specifically besides raising the basic corporate rate, they’re going to try to close a number of loopholes. A lot of this has to do with multinational corporations that can take their profits that they make in the United States and shift them to foreign countries that have a lower tax rate, or basically no tax rate in some of them. And so they’re going to close some of those.

There’s an idea that they want to get rid of some provisions that allow corporations to actually move their headquarters to another country, even though almost all their operations are within the United States, which is something that individuals can’t do, but corporations sure can. Also eliminate tax deductions for companies that offshore jobs. And there’s some introductions of tax credits as well into this that will come into play as far as maybe not raising revenue, that might actually cost revenue, but that gets into some of the onshoring of jobs.

So they want to get rid of some of the tax cuts that they believe encourage companies to shift operations overseas, while then encouraging, through additional tax cuts, some of the so-called onshoring of jobs.

And again, we don’t know all the details yet because we don’t have legislative language. And you can’t really know what’s going to happen until you start seeing how they’re going to implement this through the law.

Steve Ellis: And when you actually see legislative language, we’re talking about these 25 pages become 250 pages or 2,500 pages. You mentioned that they’re going to increase the corporate rate, but also I think it’s worth noting that before the 2017 tax cut, 28% corporate rate would actually be cut from the 35% rate that existed before then. So they cut taxes before they raised taxes. So it all depends on your perspective of what is the baseline that you’re using. And certainly there are a lot of corporations in 2015, for instance, that would have taken that 28% rate and run with it.

Josh Sewell: Yeah, absolutely. And you mentioned baselines, and that’s something that we’re really trying to figure out with this bill. 25 pages, that’s not a lot. There’s a lot in this glorified press release. I don’t want to be too dismissive of it because they do spell out some of their priorities, but a one paragraph to describe a $400 billion initiative, which is that new assistance for home healthcare, $400 billion would make it more than any agency besides the Pentagon.

Steve Ellis: And more than half the Pentagon’s budget.

Josh Sewell: Yeah. And so what are you actually going to do with this? And so it’s underwhelming and overwhelming at the same time.

Steve Ellis: Exactly. No, I completely agree. And one thing that I look at is how do you score things? And obviously we don’t have the legislative language. We don’t have the Congressional Budget Office score or the Joint Committee on Taxation score, which are the independent scorekeepers for Congress, but they do seem to play a little bit of, oh, I don’t know, matrix like temporal shifts in the spending and scoring. Can you explain that a bit, Josh?

Josh Sewell: Yeah. So when we speak about scoring of bills, scoring of proposals, what that means is the Congressional Budget Office, nonpartisan scorekeeper, they look at what’s going to happen over the next 10 years. So they calculate increases in spending or decreases in revenue, add those things together over the next 10 fiscal years, and it becomes the official score of the bill. That’s how it will affect deficits, either increase them or decrease them.

Well, on this, the administration, they’re saying this next eight years of spending will be paid for within 15 years. So they’ve expanded their scoring timeline to 15 years instead of the legal and technical 10 years in order to cover the full costs.

So it’s very speculative. What happens in legislative scoring, it’s always speculation. You have a baseline, which is current law. We make just these changes and we’ll have these effects over the next 10 years. Well, go back 10 years and see what life was like for you as an individual, let alone for policy. I mean, three years ago is much different, let alone 10 years ago. So the idea that you’re going to have the exact same conditions and you’re going to realize these out year savings, especially for costs in years four or five to 10, we’ll say it’s highly unrealistic.

Steve Ellis: Right. Well, yeah, 10 years ago we would have been just past the halfway point of the first Obama administration. So yes, people I think can recognize that was quite a while ago.

We saw this administration and this Congress when they passed the COVID-19 relief package that they used, so-called reconciliation, and what’s been talked about here. So, Josh, can you inform our podcast listeners a little bit more about reconciliation, what that is, what it allows and what are the benefits, but then what are the drawbacks of using reconciliation?

Josh Sewell: I’m not sure anybody understands reconciliation. In a reconciliation package, it has to affect just the deficit and spending. So you can’t have a lot of policy changes. And so there’s arcane and complicated rules to govern what is or is not allowed in a reconciliation package, and those rules differ slightly between the House and the Senate actually. And so the House can include certain provisions that then the Senate, which is actually governed by the Senate Parliamentarian, not even the Senate itself, unless they vote to overrule the Parliamentarian, can decide what can or cannot be included in a reconciliation package.

And so what it ends up being is a little less broad. You can’t do certain things that you could do if you were just going through the traditional process. But the reason you go through reconciliation is under those rules, it only requires 50 plus one. You just have to have a simple majority. And so in a Senate that’s divided 50/50, as long as all the Democrats agree to this bill, if it’s done through reconciliation, they can do these major changes without having to get any Republicans on board, because otherwise, under the normal process, you would need 60 votes, and so you’re going to have to get 10 Republicans on board.

Steve Ellis: So reconciliation lets you get through the Senate with 50 plus one votes, but budget reconciliation normally follows the budget resolution, which follows the president’s budget request, which we still haven’t gotten. So now we’ve had a COVID package, a couple trillion dollars, we’ve got this package, a couple trillion dollars, and we still haven’t seen the actual fiscal year 2022 budget that is another one and a half trillion dollars. What’s going on here, Josh?

Josh Sewell: We are federal budget watchdogs and normally we do chase the budget, and now we’re chasing not just our tails, but we’re chasing a lot of tails apparently. It’s an important point to keep in mind.

I think part of this has to do with they’re just trying to get as much spending as they can out the door. At first it was to address COVID-19, which was a pressing and is a pressing issue, but now it’s to take advantage of this honeymoon period while the Democrats are all still basically getting along and pass what they can pass. And I think that’s what they’re trying to, get as much as they can, as quick as they can.

And I also think it’s important. It’s not just the reconciliation and the budget issue, full disclosure, we love transparency. I didn’t actually realize that this bill was not a surface transportation reauthorization bill until I was reading it again this morning, the summary. My baseline was that they’re going to do an infrastructure package like a traditional one, which is a five-year authorization of a highway bill, two to five-year authorization in water resources bill, and then they were going to throw a bunch of extra money on it. This doesn’t appear to have any of that.

So we’re going to actually have this infrastructure debate, again, very soon, because they’re going to have to do a highway reauthorization bill and they’re going to have to do an airport thanks to reauthorized airport spending. So this is just the first of many bites at the infrastructure apple.

Steve Ellis: Yeah. And I mean, what would probably be the cherry on top, now it’s a huge cherry that’s dwarfing the sundae of infrastructure spending.

You talked about the honeymoon period, but it does seem to me that there are some warring classes within the Democratic party. I think of Will Rogers, the humorous observation that he doesn’t belong to any organized political party. He’s a Democrat. And so even if want to get the 50, that’s every single Democrat in the Senate, and you’ve got people who are like Senator Manchin on a more conservative side, and you’ve got some of the other senators who are more like Senator Sanders who want to see more spending. I saw that Congresswoman Ocasio-Cortez wanted $10 trillion in spending, a trillion dollars a year over the next 10.

So there’s some of those tensions there as well. And Chief of Staff to the President, Ron Klain, it seemed like, to some extent, when I saw his interview, it was we’re throwing everything against the wall. We’ll see what stays popular and what sticks and go with there. And I guess maybe that’s an advantage of doing a 25 page document that doesn’t have a lot of detail?

Josh Sewell: The way you should look at this package is this is just an opening salvo in a conversation, and this is what we need as taxpayers and just as Americans, is to have an actual debate about what are the needs in infrastructure. And frankly, what this package should do first is what is infrastructure. I mean, they are redefining what infrastructure is, and again, we need that conversation and we need that legislative debate because there are shortcomings in our social safety net. Some people don’t see them as shortcomings, others do. We need to hash that out. And we should be doing more of this publicly and not just doing it behind closed doors.

And so that’s why I would like to see legislative proposals and languages because that’s how I understand how this is going to happen. But these are the conversations that people are having at their dinner tables. These are the conversations that we should be having in the halls of Congress or in the Zoom halls of Congress since they won’t let us in right now, but we need to actually hash this stuff out because they have been avoiding making the hard decisions in transportation since before I could vote. We haven’t raised the gas tax since before I was technically in high school I think. That’s how long it’s been. And maybe I’m not that old.

Steve Ellis: 1994.

Josh Sewell: Yeah, I was not in high school yet. So these are long festering issues and we just haven’t confronted them. And I think the COVID-19 pandemic and now the significant switch between an Obama presidency to a Trump presidency, and now back to a Biden presidency, you’re having different views of the role of government, you’re having different views of how much we should spend and how we should spend, and this is the kind of debate we need to have. We need to move away from making big bills in the Speaker’s office and the Majority Leader’s office, and even excluding the committees themselves.

This is something we’ve seen in agriculture, because you can’t have a conversation with me and not talk agriculture, is that farm bills, highway bills, they’re not written by the committees. They’re written by the chairman with the input of the Minority ranking member. They’re not even written by the members themselves sometimes. And I think that’s what we need to move away from if we really want to have enduring and bipartisan and long-standing changes to solve some of these problems.

Steve Ellis: It’s not surprising because we’ve worked together for so long, but I mean, I can’t agree with you more. I mean, I almost stepped on you a couple of times there, Josh, because this package, if you have a huge, for instance, health provision going through, that’s what goes through the committee. That’s something that should have hearings, have people offer their opinions, have witnesses, actually make sure that you get it right. I mean, it’s $400 billion. We can’t afford to get something like that wrong.

And so that’s where I feel like there’s so many times where they try to short circuit the process, and while process is boring, it’s what gets solutions and gets durable solutions that have buy-in from not only both sides of the aisle, but just as importantly, from the American public.

Josh Sewell: Absolutely. And I think as we start to see language coming out, my hope is that some of this will go through the committee, or the committees, because it’s more than one, as you mentioned.

And so you can look back. What I had been operating as my baseline for what was going to be an infrastructure package was what the House transportation and infrastructure Democrats put forward last year, which was called the Move Forward Act. And it is enormous. I think it was over 3000 pages at least. But again, that was definitely some of the provisions that Mr. Biden has proposed, such as the school spending, some of these tax changes were in there, but it also included surface transportation reauthorization and some other modifications.

So there’s going to be a lot to read at some point, but this would make it easier to understand and come to an agreement or respectful disagreements if we actually had something to look at, instead of just press releases for or against platitudes and hopes and dreams.

Steve Ellis: So, bottom line, Josh, let me get you out of here on this, this document, is it aspirational or rational?

Josh Sewell: We’ll have to see. I think it is mostly aspirational until you start having that debate. If they can make their case that these various provisions are in fact helpful, necessary, and will provide a good return, then I think it starts to become more rational, but we don’t know the strategy here. If it really is to throw everything out there and see what happens, that’s not really how things work.

Steve Ellis:
So there you have it, the opening salvo from the Biden administration on their infrastructure plus proposal, for now at least.

Josh Sewell, senior policy analyst at Taxpayers for Common Sense, thanks for being here to help us begin to understand the American Jobs Plan.

Coming up next time on Budget Watchdog All Federal, the skinny budget. We thought we were getting it this week, but it didn’t show up. And so we’ll be looking forward to it coming out soon and figuring out and telling you, our podcast listener, what on book spending will the 117th Congress be considering.

Thanks for listening to Budget Watchdog All Federal. I hope you’ll subscribe and share this episode with friends and colleagues. We’re always seeking your input, suggestions, questions, and help. So send your emails directly to me, president@taxpayer.net. Until next time, we’ll keep reading the bills or 25 page pamphlets detailing trillions of dollars in spending, or maybe not detailing, but explaining trillions of dollars of spending, and we’ll keep highlighting wasteful programs that poorly spend our money and shift long-term risks to taxpayers.

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