Following enactment of the American Rescue Plan Act (ARPA, P.L.117-2), the Biden administration indicated its next major priority was passing a comprehensive infrastructure package. The administration released the American Jobs Plan (AJP), a collection of infrastructure priorities that includes funding for road, highway and bridge projects as well as broadband expansion, water infrastructure, affordable housing projects and child care. The AJP has drawn criticism from Republican lawmakers for taking an expansive view on what encompasses infrastructure. To that end, two counterproposals were released in response to the AJP—one from Senate Republicans and another from the bipartisan Problem Solvers Caucus (PSC).
The three proposals are fundamentally different in size and scope, and each takes a unique approach to infrastructure investment. While they all share, to some degree, the same goal of investing hundreds of billions in certain projects and programs, there is little overlap between them. This alert seeks to provide clarity by comparing the three proposals and explaining where the spending and pay-fors overlap and where they diverge.
- Three Potential Paths on Infrastructure. The three infrastructure proposals take very different approaches. The AJP includes details on topline funding levels, as well as policy proposals and potential offsets. It is the most expensive proposal, with a price tag of over $2.3 trillion. It covers both traditional and nontraditional infrastructure projects, with a major focus on green energy, affordable housing and broadband. The AJP is paid for by an increase in the corporate tax rate to 28%, a major overhaul of the current international tax system, a book profits tax, and increased IRS funding for enforcement. The proposal has sparked intraparty disagreement on funding and revenue raisers, with the Biden administration and Senate Democrats taking different approaches on how to structure an international tax overhaul and disagreements on the corporate tax rate. The proposal is also unpalatable to Republicans, making budget reconciliation the only viable path forward if Democrats are unwilling to scale back on spending and eliminate partisan pay-fors.
The Senate Republican plan is very narrowly tailored, only focusing on traditional infrastructure priorities. The proposal includes few details, with vague suggestions on potential pay-fors. The Senate Republican plan totals $568 billion over five years, as compared to $621 billion for traditional infrastructure priorities in the AJP. It also offers few specifics on pay-fors. This plan is the GOP’s opening bid for a narrowly crafted bipartisan surface transportation package. Democrats would pass their other priorities through budget reconciliation.
Unlike the other two plans, the bipartisan PSC took a different approach. The PSC Plan does not include any specifics on topline numbers, choosing to focus on policy and objectives. Similar to the Senate Republican plan, it focuses mostly on traditional infrastructure priorities. However, it also includes many energy-related proposals—something not included in the Republican plan, but that was a prominent feature of the AJP. The PSC Plan also suggests specific pay-fors, including an increase in the gas tax. It stays away from making changes to the Tax Cuts and Jobs Plan.
- Beyond Traditional Infrastructure Priorities. Beyond alignment on traditional infrastructure projects, there are two areas in particular that could ultimately share bipartisan appeal: reshoring manufacturing capabilities and ensuring American leadership on innovation. Although both were absent from the Senate Republican plan, the conference could support a package that contains these and similar proposals, such as the domestic content, or “Buy America,” preferences outlined by the Problem Solvers Caucus. These domestic manufacturing and research and development incentives could be included in a bipartisan package.
- Infrastructure Bill Faces Uncertain Future. With pressure from moderates to pursue a bipartisan infrastructure package, it is unclear how Democrats plan to move their next tranche of priorities included in the AJP. Adding a layer of complexity is President Biden’s yet-to-be-released American Families Plan (AFP), which focuses on “human capital.” The AFP is expected to add another $1.5 trillion in spending to the AJP’s $2.3 trillion price tag. Ideally, Democrats would like to pass a narrow surface transportation bill, and pass green energy, low-income housing, child care and paid leave priorities through budget reconciliation. This would allow them to split up spending into two bills, bringing down the price tag for a reconciliation bill. Sen. Chris Coons (D-DE) has advocated for this approach. However, Republicans have little incentive to agree to a bipartisan package only to be excluded from negotiations on the next package. Without a bipartisan deal, Democrats must make difficult choices, potentially forcing moderates to vote on unpopular tax increases to pay for spending proposals.
Click here for a detailed comparison of the three infrastructure proposals.
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