Worley Blog

HOW DO YOU SPELL INFRASTRUCTURE? PART II

Posted on: May 18th, 2021 by Clifford F. Lynch

 

In our last blog, we outlined President Biden’s plans for infrastructure improvement. Summarized, his proposed legislation would provide for $2.3 trillion, spent over an 8–year period, creating millions of new jobs. However, only $115 billion would be spent on roads and bridges which are a concern to almost everyone. The remaining $1.7 trillion would be spent on the power grid, affordable houses and apartments, long term care services under Medicare, workforce development and other unrelated allocations.

The funds would come from a 7% increase in the corporate tax rate, a global minimum tax, and other punitive international tax provisions.

While the initial proposal emphasized job creation, in his April 28 address to a joint session of Congress, President Biden made it clear that the plan which he now calls the American Jobs Plan, is more about creating jobs than it is about repairing roads and bridges. While creating jobs is a worthy objective, we should ensure that these are jobs that will give the country the improvements it needs.

It will come as no surprise that Republican legislators, for the most part, rejected the proposal, as did most businesses and business groups. Unfortunately, in the country today, almost everything is partisan, and most Republicans would reject it just because Biden is a Democratic. The reverse would be true, as well. Personally, I do not care whose idea it is. This country needs a massive infrastructure improvement.

Two weeks ago, Senate Republicans made a counter-offer that makes a lot of sense to me, considering the way the money would be spent, as well as the amount of money the country has poured into such things as Covid-19 legislation. They proposed a $568 billion, five-year infrastructure plan. The cost would be about a quarter of President Biden’s plan, but would focus only on traditional infrastructure and broadband access. The Democratic proposal would attempt to change the course of the entire economy by addressing climate change and human services. All well and good, but let’s take it one step at a time.

Specifically, the Republican plan would provide $299 billion for roads and bridges, $65 billion for broadband, $61 billion for public transit, $44 billion for airports, $35 billion for water improvements, $20 billion for railroads, $17 billion for ports and waterways, $14 billion for water storage, and $13 billion for safety measures.

As to be expected, funding methods would be vastly different from the Democratic proposal. The primary source of funds for the Republican package would be user fees on electric vehicles and the repurposing of unspent funds in the COVID–19 bills. The corporate tax cuts of 2017 would remain in place. The funding for either proposal will be problematic. For example, it will take a lot of electric vehicles to generate enough money to pay for the improvements. Today, less than 1% of the motor vehicles in use are battery powered. For the Democratic proposal, the corporate tax rate increase will be a hard, if not an impossible sell.

The White House continues to hope for a bi-partisan solution, but such an outcome will require considerable movement from both sides. Hopefully, a productive compromise can be reached.