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March 30, 2021

Every Congressional Democrat Gets Their Own Infrastructure Bill

The difficulties of pleasing everyone in a big tent caucus at once

 

No, not that salt, but the State and Local Tax (SALT) deduction has
become a major issue in infrastructure negotiations. (Patrick
Boyd/Creative Commons)

The Chief

Tomorrow President Biden will introduce his Build Back Better plan at an
event in Pittsburgh. It's probably better described as a public
investment plan, which is an easier fit than shoehorning everything into
the term "infrastructure." I've heard it described as both a $3
trillion and a $4 trillion plan, because there are some tax credits that
could take up as much as $1 trillion. But it's also at least partially
offset, up to $3 trillion, with tax increases, so over a decade-long
window, you're talking at most $100 billion a year. Even at $3
trillion, you're talking about 1 percent of GDP and a 5 percent
increase in spending over the budget window. We can hardly afford not to
do this.

There's a care and family element that will not be introduced tomorrow

but next month, involving universal pre-kindergarten, free community
college, paid family leave, and some extension of the child allowance. I
have a lot to say about that-we did an entire special issue
on the subject-but we'll put that
aside to focus on the building elements that will be announced tomorrow.

We know the general outlines
.
There will be a lot of clean energy investment in things like
energy-efficient housing, electric vehicle charging stations, and
modernization of the electrical grid. There will be some traditional
infrastructure spending on roads and bridges and ports and mass transit;
that spending is only about $1 trillion in all and will probably get
folded into the surface transportation bill. There will be investment in
advanced manufacturing and deployment of things like rural broadband and
5G. There will be a component of workforce training. Tax credits to
encourage energy efficiency will raise that price tag.

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**** Every politician likes spending money, as long as it's spent on
something their constituents like. Yes, Republicans hate anything that
diminishes their fossil fuel benefactors, but there will also be rural
broadband to appeal to some of their members, and plenty of traditional
spending, and the return of earmarks so that spending can be directed.
Everyone likes attending a ribbon cutting ceremony. The pitfalls with
this package will entirely be on the revenue side, and to a lesser
extent on the process side.

Centrists are demanding these offsets, so just doing the investment and
reaping the rewards down the road is unlikely to be allowable. The taxes
are likely to get announced later, but really the four big priorities
for the Biden team include increasing the topline corporate tax rate
from 21 percent to 28 percent; making the tax on capital gains equal to
regular income for the wealthy and eliminating the "step up in
basis" so unrealized capital gains aren't wiped out upon death;
raising the top marginal tax rate back to 39.6 percent, where it was in
the Obama administration; and imposing a global minimum tax on
multinational profits obtained from foreign subsidiaries. The Tax Policy
Center estimates that this gets you $1.6 trillion over ten years.

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There are a bunch of other options, including rolling back the Trump tax
cuts to estate and partnership taxes, that look less likely to make it.
Transportation Secretary Pete Buttigieg stepped in it by saying that
vehicle miles traveled taxes could be included, and then he ran away

from that idea. There are also two intriguing pieces: increasing funding
to the IRS to audit the wealthy, which could score as a major revenue
raiser by collecting more in taxes, and allowing Medicare to negotiate
the price of prescription drugs, which saves the government a bundle
(and more if the more progressive version of that reform is
implemented).

Whether you can piece together something that appeals to a fractious
coalition, and whether you have to get all the way to $3 trillion, is
the big question. Complicating this further is the same deficit hawks
pushing for a $350 billion tax giveaway to the wealthy, in the form of
repealing the $10,000 cap on the state and local tax (SALT) deduction.
This is particularly relevant in high-income, high-tax states, and the
two Democratic leaders in Congress come from California and New York, so
you see the problem. Not only are finance industry types (successfully)
pushing Chuck Schumer

to repeal the SALT cap, but some House moderates are saying their vote
is conditioned

on repeal as well, and Speaker Pelosi doesn't have many votes to
spare.

As someone who would directly benefit from restoring SALT, let me say
that it's terrible policy, only affecting those who itemize
deductions, which is overwhelmingly the very rich. It may seem unfair
that only high-tax states are hit by this cap, but on the other hand,
high-tax states in general have good services, and their electric grid
doesn't shut down in cold weather. So I'll take the exchange.

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Figuring out the precise types of taxes and spending initiatives to
please just enough moderates and progressives to reach a majority would
frustrate the most patient person. In that sense, splitting it in two to
balance that seems like a good idea. Maybe you get the moderates to
grudgingly accept one bill in exchange for getting what they want on
another; maybe you get the reverse for progressives. Schumer floating
tying the minimum wage increase

into the infrastructure package is a tell; that could serve as the
carrot for progressives on a bill that would be oriented more to the
moderates.

Except you only have one bill left this calendar year to use budget
reconciliation rules, after which you're reliant on 10 Senate
Republicans to pass anything. This would seemingly end the multi-bill
strategy, which at least gives leadership flexibility to shape bills
somewhat differently. However, Schumer is pleading that there's a
loophole

in the Budget Act of 1974, allowing the Senate to revisit prior budget
resolutions, enabling a second reconciliation bill for the 2021 fiscal
year.

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In general this is completely absurd, to find different ways to use
majority rule without taking away the obstacle to majority rule, aka the
filibuster. What makes anyone think Joe Manchin would be against
filibuster repeal but for multiple reconciliation packages in a year? I
suppose anything's possible, and politicians have a boundless ability
to compartmentalize. But this is an elaborate way to try to hand-wave
around the fundamental issue of a minority veto in the U.S. legislature.
I know a way to get unlimited "reconciliation" bills: let the
majority on a vote win.

We're in sort of the endless haggling stage of this development, but
Biden's speech tomorrow will begin to narrow the contours.  

What Day of Biden's Presidency Is It?

Day 70.

We Can't Do This Without You

Today I Learned

* Internal documents show the virus gaining steam
.
The CDC director has talked about "impending doom." (Politico)

* I don't know that any libertarian with a typically selfish
conception of freedom will care that vaccine passports will be made in
the private sector
.
(Bloomberg)

* Eleven judicial nominees announced today
,
and I'm still seeing a tilt toward BigLaw; the former public defenders
are current judges or law partners. (Whitehouse.gov)

* Open enrollment and increased subsidies get closer to the original
conception of the Affordable Care

Act. (Vox)

* Biden team still foot-dragging on the national bank regulator, adding
more random names

into the mix. (American Banker)

* Under no circumstances would I have had former Senator Mark Pryor

on the list of those urging Biden toward stronger antitrust enforcement.
(New York Times)

* Retail pharmacy effort, by its ubiquity, outpacing mass vaccination
sites
.
For the record I got the jab yesterday at a mass site (not federally
run) and it was quite efficient. (Politico)

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