There are many reasons to doubt that Congress will actually pass the “bipartisan” infrastructure plan President Biden announced on June 24. A big one: the funding mechanisms known as “payfors.”
The bipartisan “framework” calls for $1.2 trillion in spending on transportation, broadband access, power-grid upgrades and other types of infrastructure. Congressional rules require “payfors” for most legislation, to limit the swelling of the national debt. Congress can waive those rules, but Biden says he wants a responsible bill with built-in funding. Republicans agree. Ish.
Biden, of course, wants to fund many of his plans by raising taxes on businesses and the wealthy. Republicans will never agree to that. They wanted a hike in the gas tax, but that would violate Biden’s pledge not to raise taxes on anybody earning less than $400,000. So the infrastructure dealmakers devised ways to raise money with none of the taxes either side objects to. Here’s how:
Provide more money to the IRS for better enforcement of tax evaders
–Form public-private partnerships
–Sell 5G spectrum
–Tap unused jobless aid from the March relief bill
–Tap other unused money from 2020 relief bills
–Reinstate Superfund fees on certain chemicals
–Let states sell unused toll credits
–Sell oil from the Strategic Petroleum Reserve
–“Dynamic scoring”
–Require mandatory cuts in other programs
There’s more. Or less, maybe. There’s no legislative text, just a framework, so any of these ideas could end up in or out of an actual bill. Whether they do or don’t, however, they are very unlikely to raise enough money to fund the spending, and they might not even satisfy Congress’s budgeting rules.
Policy analyst Jon Lieber of the Eurasia Group called the payfors “an all-star list of budget gimmicks.” Here’s one example: public-private partnerships usually involve some government money coupled with private funds able to earn compelling returns for investors. But investment returns require cash flow, which normally means the infrastructure being financed must generate revenue from tolls or user fees. While the financing method is sound, consumer fees going to private investors is politically unpopular, unless the fees are buried out of sight, like airline user fees that help fund airports. This type of funding could also trip up Biden if applied to anybody under the $400,000 income threshold. Fee? Tax? Not really much of a difference.
Another example: Dynamic scoring means that economists forecast a change in economic activity due to some new law, and factor that into revenue gained or lost. The idea here is that better infrastructure would somehow boost GDP and along with it incomes and federal tax receipts. That extra tax revenue could be counted as a source of financing, since it would offset the cost of the program, like an investment that partly pays for itself. But the revenue would come years after the spending—if it materialized at all—and it's tough to impossible to establish this type of cause and effect in the real world.
This all matters because the Congressional Budget Office “scores” legislation that affects the federal budget, as this one obviously would. CBO cost and revenue estimates affect legislation in at least two ways. If normal budgeting rules are in effect, new revenue needs to finance at least some of the new spending. And CBO will call foul if the numbers don't add up, forcing changes to the law. CBO scores also provide ammunition for critics when the numbers come in light, making a bill look sloppy and its congressional sponsors unserious.
The bipartisan infrastructure bill certainly has critics—including some legislators who previous supported it. Biden said on June 24 that he’d only sign the bill if Congress passed another, probably much bigger, bill with all the Democratic priorities Republicans won’t agree to. So passage of a bipartisan bill depends on the passage of a Democrat-only bill Republicans will do anything they can to kill.
Lindsey Graham of South Carolina was one of 11 Republican senators who initially supported the bipartisan framework. But after Biden linked it to the Democratic bill, Graham tweeted, “that would be the ultimate deal breaker for me. No deal by extortion!” Other Republicans have indicated a similar shift of intent.
If the bipartisan bill fails, the fishy payfors won’t matter. That may be what Biden and his Capitol Hill allies want, in the end. Biden had his moment at the White House podium, announcing his bipartisan deal. In political terms, that may be good enough to establish his bona fides as a “moderate.” What Biden wants even more, however, is enactment of his sweeping economic and social welfare agenda. Bipartisanship budget tricks won’t get him there.
Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.
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