WASHINGTON — Nearly a month after a bipartisan group of senators announced a landmark infrastructure deal with the White House to provide $579 billion of new funding for the nation’s highways, ports and rail lines, lawmakers will spend this weekend trying to answer a question that has vexed them from the start: How to pay for it.
Republicans have so far refused to raise any corporate or individual taxes to offset the new funding, which will be added to an existing transportation bill for a total of $1.2 trillion. The White House, in turn, has refused to impose user fees on the improved highways and rails.
Without these reliable sources of funding available to them, the group of senators, which now numbers 22, 11 from each party is working to cobble together offsets from across the federal government.
The list of funding sources includes repurposed pandemic relief funds, revenue from new public-private partnerships, proceeds from 5G spectrum auctions and savings from crackdowns on tax evasion and unemployment insurance fraud.
Yet as of Friday night, that list was still just a list. It was not an agreed-upon plan for how to pay for the new spending. And it was certainly not a final piece of legislation.
But the fact that there is no legislation written yet is not stopping Senate Majority Leader Chuck Schumer from moving forward with the package.
The New York Democrat revealed Thursday that he plans to hold an initial litmus test vote next week on the House bill that will eventually contain the Senate’s infrastructure legislation once it’s agreed to.
Schumer is under intense pressure to advance both of President Joe Biden’s domestic spending packages in the coming weeks: The infrastructure plan and a separate, $3.5 trillion Democrats-only budget resolution.
Biden visited Senate Democrats on Capitol Hill Wednesday to pitch the two-track plan, and he pledged that if they could pass the bills, he would sell them to the public.
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But Schumer’s surprise announcement that he would hold a vote this coming week spooked key Republicans, who balked at the idea of being asked to vote in favor of a placeholder bill before they know what the final infrastructure legislation contains.
“I will not be voting for a bill that isn’t drafted yet, so we’ll draft as soon as we can and that’ll mean resolving the issues that are outstanding,” said Sen. Mitt Romney, R-Utah, a member of the coalition.
Lisa Murkowski of Alaska, another Republican in the group, said the Schumer deadline meant the group “has a lot of work to do.”
“The good news is that we are all still talking,” Murkowski said after a meeting Thursday between White House negotiators and key senators.
“The good news-bad news is we’ve got a pretty tight timeframe,” she said.
Yet even with all the time in the world, it’s difficult to see how the proposed offsets can be made to add up to the $579 billion in new spending that senators and the White House agreed to in late June.
Pay-fors that don’t quite pay
Experts say the proposed ways to pay for the package in the working list are optimistic at best, and are, at worst, smoke and mirrors.
One such item is a proposed $100 billion in offsets to the cost from public-private partnerships and bonds from an infrastructure bank. This $100 billion represents nearly 20% of the total offsets.
But despite scant details released so far, economists say these kinds of public-private partnerships aren’t designed to bring in revenue. If anything, they typically cost the government money.
“I don’t think these [public private partnerships] are really pay-fors,” said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget. “I think they’re ways to get more infrastructure for less money, and to make federal dollars go farther.”
Traditionally, public-private partnerships use government money in order to attract private funds to projects that might not otherwise be a good investment if the entire cost was being borne by private investors.
“If [senators] said that the $579 billion figure was inclusive of the value of private capital that would be raised with the public funding, that would be a good way to do it,” said Goldwein. “But I don’t get the sense that they’re going to do that.”
Another key source of revenue in the original framework is enhanced Internal Revenue Service enforcement, or closing the so-called “tax gap.”
Estimates vary widely as to how much money the IRS would actually collect if the agency audited more taxpayers and cracked down on underpayment.
In the original bipartisan framework, a $40 billion increase to the IRS’s enforcement budget is projected to return an additional $140 billion in unpaid taxes, for a net gain of $100 billion.
But practically as soon as the tax gap plan was announced, conservative groups like Americans for Tax Reform began pressuring Republican senators to reject any increase in funding for the IRS.
On Thursday night, Politico reported that the IRS funding provision was on the chopping block, done in by Republican opposition. The outside pressure campaign appeared to have been a success.
Without additional money to beef up IRS enforcement, the additional $100 billion in taxes it was projected to bring in would disappear, too.
That leaves a hodgepodge of smaller funding sources like 5G spectrum auctions, which the plan says could raise $65 billion. Also included in the tally is the projected benefit to the U.S. economy of the improved infrastructure, which is valued at $58 billion.
“It’s a daydream to think they can take a list of proposals like this and pay for a $1 trillion or $500 billion plan,” Howard Gleckman, a policy expert at the nonpartisan Tax Policy Center, recently told The Washington Post.
“There’s not a chance they’re going to get it off a list like this,” said Gleckman, “It’s full of stuff that isn’t a tax increase and isn’t a spending cut and is just wishful and fanciful.”
Biden, meanwhile, is determined to remain above the nitty gritty debates over how to fund the infrastructure package.
Following his meeting Wednesday with Senate Democrats, the president acknowledged that more work was needed on how to pay for the plan, but he left the decisions squarely with the senators.
“There may be some slight adjustments of the pay-fors and that’s going to get down to what the Congress wants to do,” Biden told reporters later that afternoon at the White House.
“I’ve laid out how I think we pay for it and we have an agreement … there may be slight changes. I’m not sure what may happen, exactly how it’s going to be paid for, [but] that’s what we’re going to do,” he said.
The looming CBO score
In addition to the planned vote this week, the other major test that lies ahead for the infrastructure package is the nonpartisan Congressional Budget Office’s so-called “score” of the bill, an assessment of how much the package would add to the federal deficit, based on how much the offsets would actually pay for.
No one in Washington expects the CBO score of the new infrastructure funding to be a net positive for the federal balance sheet. The question is really just how big of a hole there is between what the legislation will cost and what the offsets will cover.
Several key Senate Republicans indicated this week that they will decide whether or not to support the deal only after they see the CBO score.
But other members of the group are carving out room for themselves to support the infrastructure package even if the CBO says it’s not fully, or even mostly, paid for.
“I think each senator is going to make their own assessment of whether this is going to add to the deficit or not,” Romney told reporters earlier this week.
“I don’t think that the CBO will necessarily provide the same figures that I will use for myself in determining whether this will add to the budget or not,” said Romney.
Democratic Sen. Jon Tester of Montana also cast doubt on the CBO’s ultimate authority on the bill.
“I still would question anything we get back from the CBO,” Tester said late Tuesday, “because I don’t know what kind of math they use, but it isn’t the math that I learned in high school.”
It’s unclear when the CBO might take up the broader infrastructure legislation. In order to analyze the contents, the office requires that a bill be written in legislative language, and the new funding piece of the bill cannot be turned into legislation until senators nail down the details.
Senators in the group have vowed to meet virtually this weekend to keep working on the infrastructure funding. But it’s anyone’s guess where the chips will fall in the end.
“The optimist in me thinks that they’re trying to make this add up by swapping out some of the offsets that don’t appear to be concrete, and agreeing to new ones that are,” said Goldwein, of the CRFB.
“The pessimist in me thinks this is going to be a big deficit-financed package, which is really unfortunate, because there’s been a lot of work put into finding ways to pay for it,” he said.
