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One Deal Forward, One Deal Back

The same day the bipartisan bill advances in the Senate, one of its key
architects throws cold water on the reconciliation companion.

 

Sen. Kyrsten Sinema (D-AZ), center, joined from left by Sen. Bill
Cassidy (R-LA), Sen. Lisa Murkowski (R-AK), Sen. Susan Collins (R-ME),
and Sen. Rob Portman (R-OH), speaks to reporters after a vote to start
work on the bipartisan infrastructure package, July 28, 2021, at the
Capitol. (J. Scott Applewhite/AP Photo)

 

****

**** Joe Biden got exactly what he wanted on Wednesday: a bipartisan
deal on infrastructure that he could analogize as akin to the
transcontinental railroad and the interstate highway system, and
something that "signals to the world that our democracy can function,
deliver, and do big things," as he put it in his press statement
.
The motion to open debate on the bill passed the Senate by a 67-32 count

on Wednesday evening, with 17 Republicans joining all Democrats.

Is the president exaggerating? Folks, come on, this is Joe Biden we're
talking about. Taken by itself, the bipartisan bill is a nice starting
point for public-sector reinvestment. It comes out to an extra $110
billion per year for the next five on a variety of projects, offset by a
batch of almost comical revenue ideas, which are fortunately more
half-baked than actively harmful (though there's a bit of that too).

It won't change the world and, importantly, it's unlikely to reverse
a drastic trajectory on climate. But we can say that the legislation
would likely return the United States to something closer to an
industrialized nation in its built environment.

I say "likely" because several senators indicated they were only
agreeing to open debate and not yet to support final passage. More
important, the bipartisan bill was never supposed to be taken by itself;
in fact, numerous House Democrats will not allow it to go forward
without that additional budget reconciliation bill for investments in
health care, climate, child care, education, and more, currently slated
at $3.5 trillion. That makes Sen. Kyrsten Sinema's (D-AZ) statement

about the reconciliation package much more important than anything else.

Let's go over the bipartisan bill, or as I've been calling it,
Portman-Sinema. The original framework

came out on June 24, and the agreement a month later

honestly not different enough to have wasted a month. I did a little
comparison of
the topline spending in the two bills, and only two things went away: a
$20 billion "infrastructure financing authority" and about $9 billion in
transit spending. (The second half of this bill, the surface
transportation reauthorization, has been mostly unremarked upon, despite
the transit elements being the main sticking point through the weekend
.)

**Read all of our infrastructure coverage here**

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The financing authority, also called a national infrastructure bank, ran
up against objection

from the municipal bond industry, who roared against anyone else being
able to finance public-works projects except their rather punitive
selves. The transit funding was a Republican objection, and Democrats
relented. The White House fact sheet claims that the surface
transportation piece has a "larger share" devoted to transit than
normal, so Democrats may have gotten their overall 80/20 split on older
funding sources. (See here for details
).

Either way, we can say that this bill is even more tilted to the fossil
fuel end

of the equation now. Nevertheless, that still leaves $39.2 billion in
extra money for transit, and combined with $22 billion for Amtrak, $12
billion for intercity and high-speed rail, and $24 billion for Northeast
Corridor modernization (all of which is in a "passenger and freight
rail" section), it could have been plenty worse.

The revenue offsets did change quite a bit. We knew about Republicans
ditching the tax enforcement piece. But there was a big victory here for
progressives. A few weeks ago, it looked as if much of the bill would be
financed by selling off public assets

and allowing investment firms long-term concessions of roads and water
and power systems and whatever else they could land. The privatization
agenda was extremely dangerous, and in my view enough to oppose the
effort entirely.

But it has mostly vanished in this new version. After significant
pushback

from the left, a good deal of the privatization schemes are gone. That
was an important show of force.

There is $100 million in "asset concession incentive" grants to help
cities establish public-private partnerships (P3s). Some larger
transportation projects will also be required to evaluate a P3 option,
to ensure it's given "a fair shot." Tipping the scales to P3s is bad
news, and these measures give them a foot in the door. But there was
talk that the overall bill would save up to $100 billion by offloading
the investment to P3s, which would really have been a fire sale. This is
definitely more minor.

Portman-Sinema also extends tax-free "private activity bonds," (PABs),
which were circumscribed to specific transportation projects, to
broadband and carbon capture, and it doubles the use of PABs on
transportation. This is a tax giveaway to Wall Street investors, but in
Congress that's called Wednesday. More distressingly, projects
financed this way do not have to pay prevailing wage requirements under
the Davis-Bacon Act.

In place of tax enforcement and privatization are mostly a bunch of
gimmicks: "unused" COVID relief spending, wireless spectrum and
petroleum reserve sales, "pension smoothing," customs fees, the usual
gruel of Washington "pay-fors." There's $56 billion derived from
long-term economic growth, which is another way of saying, "We're not
covering all this." Adding reporting requirements for cryptocurrencies
to prevent tax avoidance is not bad, and overall I'll take gimmicks
and nonsense over real and bad.

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I don't want to paint too rosy a picture. I did another chart
showing the
difference between this bill and how much Biden wanted for these
measures in the American Jobs Plan
,
and it turns out Biden sought $923 billion for what became $550 billion.
There are "program integrity measures" to prevent unemployment fraud
,
which could easily just make it much harder to access needed benefits at
the most urgent time. One pay-for delays a Trump-era rule

outlawing rebates to pharmacy benefit managers, which the CBO scores as
saving $49 billion but which really just empowers predatory PBMs to
continue to inflate drug prices. There's at least a Davis-Bacon
exemption for certain projects with private funding, and maybe for more
(the summary is very poorly written on that point).

But despite the setbacks and the general fossil fuel-heavy nature of
the plan, it would be relatively acceptable if paired with a solid,
think-big agenda that Democrats can pass themselves in reconciliation.
That's what makes Sinema's comments so disturbing.

The co-architect of the bipartisan bill told

**The Arizona Republic**

that she will not support a reconciliation bill at $3.5 trillion, though
she would support the process moving forward. That means she would
likely vote for the budget resolution that Senate Majority Leader Chuck
Schumer plans to pass before the August recess. But that would just
delay the fight.

Some impossible choices on what the left sees as already a compromise
down from $6 trillion would have to be made to accommodate Sinema. House
progressives, who have much more than enough numbers to block anything,
could use that to reject Sinema's changes. And several have already
said that they would not pass the bipartisan bill without the
reconciliation bill. In a real sense, you either get both bills or
neither.

That's a fight for another day, and it will be an excruciating one,
carried out entirely among Democrats. This was actually the Republican
plan: give a modest infrastructure package that's more about things
they can tout like highways and internet access, and watch the
opposition party devolve into madness trying to wrestle the rest of the
agenda into one package. We'll see if they were right with that
assessment.

 

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