We Have a Deal: U.S. Infrastructure Spending Soon, Tax Increases Likely Later

On June 24, President Biden and a bipartisan group of 21 U.S. senators announced that after weeks of negotiations, they had agreed to a framework to spend $1.2 trillion over eight years on traditional infrastructure such as roads, bridges, the electrical grid, and digital infrastructure. While only about $580 billion of that is new spending above and beyond what Congress is already penciled in to spend, the bipartisan agreement is nevertheless a significant accomplishment for a deeply polarized Washington. The bill would be “paid for” by a combination of previously appropriated CARES Act money, 5G spectrum sales, and narrowing the tax gap.

But, but, but … Note, however, that a framework is very different from legislative text, and while the support of 21 senators is a strong start, it takes the votes of 60 senators and 218 representatives in a narrowly divided House to send a final bill to President Biden’s desk. While observers and legislators on both the progressive left and the conservative right are voicing concerns, we believe the infrastructure framework has a lot going for it politically:

It does not include any poison pills for either the left (e.g., no gas tax) or the right (e.g., no undoing of the Trump tax cuts). It will go through “regular order,” not the “reconciliation” process, which is important as it would allow for “earmarks” – special member-driven projects that enable both Republicans and Democrats to bring funding home to their districts. Hard infrastructure – roads, bridges, sewers, electricity – is simply good politics, according to national polling.

While I believe that much of the US infrastructure is crumbling and should be upgraded, I do not want to see Congress throw money at it in a Trillion infrastructure bill.

Let me explain. The reason that most of the infrastructure is crumbling is because it has not been maintained. Most state and local governments are in a build, let it fail due to lack of maintenance, then go to the feds or local voters claiming that things are falling apart and need to be replaced so vote them big bucks to spend.

This is much like treating a drug addiction. Giving state and local government, no matter how compassionate and how urgent the need, money without first curing the fundamental problem is just enabling the continuance of bad self-destructive behavior. It is money wasted rather than well spent.

I have been involved with many capital projects where equipment and building were replaced that instead should have lasted far longer. I have even been involved with projects where I have pointed out less costly, but maintenance oriented solutions. In those cases I have been told that they don’t want a maintenance solution as that would raise the agency’s operating budget and make them look “bad.” They have explained in detail how if they have a capital project it not only does not come from the operating budget, but they get to charge lots of labor and overhead to the project (i.e. capitalizing overheads) which reduces their operating budgets and makes them look “good” and have few “Full Time Equivalent” positions.

Capital spending is like a drug addiction to local government. The only way to cure the problem is for the “junkie” to go through withdrawal. It is well past time for some “tough love.”

"Shovel ready"?

"In the magazine article, Mr. Obama reflects on his presidency, admitting that he let himself look too much like “the same old tax-and-spend Democrat,” realized too late that “there’s no such thing as shovel-ready projects” and perhaps should have “let the Republicans insist on the tax cuts” in the stimulus."

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.