News reports and Congressional press releases have used differing numbers to describe the bipartisan infrastructure bill. Depending on the aims of the source, the spending and ultimate cost of the legislation can be made to appear larger or smaller. Many of those taking credit, or casting aspersions, are blurring the line between “new” spending contained in the bill and spending already budgeted, but unlocked by the legislation. Besides political spin, the actual price tag for a piece of legislation is subject to numerous economic and political variables. Official “scores” of spending bills project the impact the legislation will have on spending and revenue over the next 10 fiscal years. Estimating the costs of programs or the amount of tax revenue generated one year from today, let alone over the next 10 years, is fraught with uncertainty. For these reasons projections and press releases around the costs of the infrastructure package should be taken with a grain of salt.
1. Not all spending is new spending. Nearly half is already on the books.
The $1.2 trillion number cited by many makes the budgetary impact of the bill larger than it is in reality. This is in large part because $1.2 trillion accounts for both NEW spending and spending that would have occurred without the legislation. In Washington, this is known as “baseline” spending.
For example, the bill includes a five-year reauthorization of the surface transportation bill (highway bill). A highway bill, which also funds mass transit, is adopted roughly every five years (at times the expiring highway bill will be extended for short periods of time). Even if Congress failed to agree to a bipartisan infrastructure bill, at the very least they would have extended the existing highway and transit programs at current spending levels. In fact, Congress did that twice already while negotiating the infrastructure and reconciliation bills. Under existing rules that govern the evaluation of legislation (scoring), the Congressional Budget Office (CBO) assumes current law produces a baseline level of spending.
Contract authority for various transportation programs FY2022-FY2031
Without H.R. 3654 = $586 billion
Total with H.R. 3654 = $782.5 billion
Change in contract authority = $196 billion in new Highway and Transit Bill spending
When the baseline spending for power grid, port, broadband, electric vehicle, and other programs is excluded from the $1.2 trillion top line, the amount of new spending is approximately $580 billion. Even the White House’s original talking points pointed this out in the *notes.
2. The bill is paid for according to Congressional math (but not arithmetic).
The White House and bill backers claim the bill’s new spending is fully paid for. But many of the cost savings or revenue increasing provisions to which they lay claim fail the smell test. The greatest claim of savings, nearly $200 billion, comes from repurposing dollars from various “emergency” COVID-19 response programs (enhanced unemployment, paid & family leave tax credits, and the employer retention tax credit) that cost less than originally estimated. As “emergency” programs, these pandemic response efforts were unanticipated and unbudgeted, thus financed through increased federal borrowing. So any unspent funds from these should be returned to the Treasury, reducing the deficit, rather than redirected to new spending. It’s as if you borrowed $2,000 to fix your car, but ended up only being charged $1,200, so you spent the $800 you “saved” on new clothes, a nice lunch out, and some fuzzy dice to hang from your rearview mirror.
The bill backers also claim savings for things that already happened ($67 billion from a c-band spectrum auction in February 2021), or that might never accrue ($10 billion in future spectrum sales, $6 billion from selling oil out of the Strategic Petroleum Reserve, and $28 billion from cryptocurrency tax reporting). In the end, revenue from these provisions, even if the actions happen, is speculative because they would not occur for years and are dependent on future economic conditions. This is also true of the second largest pay-for cited – $53 billion in “economic growth” resulting directly from the projects in the bill.
3. The bill increases the deficit, but by exactly how much?
CBO, the official arbiter of bill scores, estimates the Infrastructure Investment and Jobs Act will add $256 billion to projected deficits.
Change in direct spending: -$110 billion
Change in federal revenue: +$50 billion
Change in discretionary spending (increased costs): +415 billion
Net effect on deficit (FY2022-FY2031) = $256 billion in INCREASED deficits
Spin, sorcery, hopes and prayers aside, from a federal budgetary perspective, the CBO’s official score is the most important. The bill’s backers can defend their work as important, or vital to the nation’s interests, but they can’t claim it’s paid for. And it’s far short of a trillion dollars.