The Senate’s bipartisan physical infrastructure bill is a triumph of congressional dealmaking, the sort of thing President BidenJoe BidenBiden invokes Trump in bid to boost McAuliffe ahead of Election Day Business lobby calls for administration to 'pump the brakes' on vaccine mandate Overnight Defense & National Security — Presented by Boeing — Afghanistan reckoning shows no signs of stopping MORE extols and the likes of which we have not seen in recent years. Compromises were made on scope, cost and offsets. If it eventually makes its way to Biden’s desk for his expected signature, members of both parties will be able to claim credit for the good stuff and share responsibility for anything that goes wrong. That’s the way major legislation is supposed to work.
And yet, there is an ominous aspect to the bill that does not bode well for future negotiations: The zeal to deal produced a package in which the spending is a lot more real than the offsets. According to the Congressional Budget Office (CBO), the bill would increase deficits by $256 billion between 2021 and 2031.
From the beginning, both sides agreed that the new spending, roughly $550 billion on roads, bridges, mass transit, broadband, water projects and the electric grid, would be paid for. This was a responsible goal, but it quickly became apparent that neither side was willing to bend very much to reach it.
Republicans, who were willing to join Democrats in a big spending bill for physical infrastructure, rejected Biden's proposed tax increases on corporations to pay for it.
They might have been open to “user pay” alternatives such as a gas tax increase, or a new vehicle miles tax, but those options violated Biden’s pledge not to raise taxes on anyone earning less than $400,000 a year.
These fiscal red lines didn't leave a lot of other options on the table. With nowhere else to go, absent abandoning the “paid for '' promise, negotiators turned from offsets to obfuscation. The final list of offsets included a number of small items that are frequently pulled from the shelf: extension of expiring customs fees, extension of the mandatory spending sequester created in the 2011 Bipartisan Budget Act, sales from the Strategic Petroleum Reserve, and proceeds from spectrum auctions.
The biggest chunk of offsets was supposed to come from redirecting money approved for COVID relief efforts, but CBO found that these efforts did not produce much in the way of real savings.
For example, proponents of the bill argued that they would save $53 billion by reclaiming money for enhanced unemployment benefits that many states had already terminated. The CBO concluded that this didn’t count as an offset because the savings were already included in their July 2021 baseline projections.
Other COVID savings did count as offsets, but the amounts were relatively small. Rescissions of previously approved COVID-related appropriations would amount to $13 billion, according to CBO, and termination of the employee retention credit would add another $8.2 billion.
While the offsets are opaque, it is clear that there is zero political will at the moment to tackle the hard choices, whether on spending or taxes, needed to put the budget on a sustainable path.
The stalemate over payfors could become even more problematic as Congress moves from the infrastructure bill to the much more expensive reconciliation bill that Democrats plan to assemble in the fall. After all, they will not be writing on a clean slate. The CBO projects that under current law, deficits will approach $2 trillion again within 10 years and the debt would be at a post World War II high. That projection came before passage of the infrastructure bill.
Based on reconciliation instructions included in the budget resolution approved by the Senate, it’s possible that just half of the reconciliation bill’s maximum potential expense ($1.75 trillion out of $3.5 trillion) will need to be offset. Even if the eventual offsets for the “paid for” part of reconciliation turn out to be more concrete than those in the infrastructure bill, it would continue the pattern of financing nonemergency post-pandemic initiatives with more and more debt, adding to the unsustainable path we were on before the pandemic hit.
There is also the possibility that the purported cost of the reconciliation bill will be reduced by artificial sunsets of new programs and rosy assumptions about positive economic growth produced by enacting the bill (“dynamic scoring”). This, in turn, would reduce the amount of offsets needed to comply with the reconciliation instructions.
We can’t know at this point what budget gimmicks will be used in attempting to pass the reconciliation bill. Maybe there won’t be any. But if the infrastructure bill is a guide, there will be plenty. This is all the more true considering that the infrastructure bill has already picked off any low-hanging fruit that could be counted as a tangible offset, including repurposing unused COVID relief funding.
It’s understandable, even laudable, that political leaders want to do big things that improve the lives of their constituents. And it’s good that they acknowledge the need to pay for what they want to do. But the cost of these big things must be faced squarely without political “no goes” or gimmicks that hide the cost and overestimate the savings.
The infrastructure bill failed this test. The reconciliation bill must do better. The biggest gimmick of all is claiming that something is paid for when it isn’t.
Robert L. Bixby is executive director of The Concord Coalition.