Infrastructure Arithmetic

The White House and Senate Republicans have compromised on a $1.2 trillion infrastructure bill. Meanwhile, President Biden and Republican leaders have agreed to a $579 billion infrastructure bill.

Since $579 billion is less than half of $1.2 trillion, both of these statements can’t be true — and yet they are. The difference is that the $1.2 trillion includes “baseline spending,” or the amount that would have been spent on infrastructure even if no bill were passed. The actual infrastructure bill would only include $579 billion of new spending. That’s quite a concession on the part of the White House, which had originally proposed $2.3 trillion in new spending, or nearly four times as much as the bipartisan agreement. On the other hand, $579 billion is exactly $579 billion more than Republicans had proposed to spend before Biden released his original proposal on March 31.

At the same time, the so-called baseline appears to represent the amount that would be spent on surface transportation by the bill proposed by House Democrats, or about $78 billion a year. This is a large increase from the amount that has been spent in the past few years, which has been about $55 billion a year. In order to get the total above $1 trillion, allowing the president to save some face, the $78 billion a year is extended for eight years, even though the House bill would authorize only five years of spending.

So, in agreeing to the $1.2 trillion price tag, did Senate Republicans effectively agree to support the House bill? That bill proposes to spend way more money out of the Highway Trust Fund than is coming into that fund from gas taxes and highway user fees (which is only about $40 billion a year). I suspect that they didn’t but are going along with the illusion that they did to, again, help the president save face.

Comparison of White House Proposal with Compromise

The above comparison shows that the biggest differences between the president’s original proposal and the compromise are things that were deleted. Many of these weren’t even infrastructure items, including workforce development, subsidies to manufacturers and small businesses, and research & development. Deleted infrastructure items include housing, schools, VA hospitals, and other federal buildings. However, even if the compromise infrastructure bill is approved by Congress, Biden has practically promised that he will propose another bill with all of these things restored.
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Of the infrastructure items that remain, many of the reductions are small: 5 percent for highways & bridges; 6 percent for ports & waterways; 17.5 percent for rail; and 27.5 percent for the electrical power system. Western Republicans appear to have snuck in a new item, $5 billion for “western water storage”; at least, I don’t see anything about that in Biden’s original proposal.

Transit lost nearly half of its allocation, all of which would be wasted anyway considering that ridership was declining before the pandemic, plummeted during the pandemic, and is unlikely to ever fully recover. Water also lost half. The biggest losers are electric vehicle infrastructure and “reconnecting communities,” which was rumored to mean the removal of inner-city freeways, which were both cut by around 95 percent.

While the reductions look like good news for fiscal conservatives, the reality is the nation didn’t need any new deficit spending on highways, transit, or railroads in the first place. The whole infrastructure crisis has been fabricated by engineering firms and associations in order to boost federal spending on projects that would hire such firms. Highway conditions are improving each year. Rail transit infrastructure is in poor condition, but the solution in most cities is to abandon that infrastructure and replace the trains with buses. The freight railroads are self-funding and Amtrak is a lost cause.

Some water infrastructure needs to be replaced, but it should be funded locally. Broadband is an unnecessary subsidy that will mainly assist high-income people who don’t need subsidies. Airports and ports & waterways also should be able to fund themselves.

From a transportation view, the bill ignores the lessons learned during the pandemic: Highways are more resilient than mass transportation; infrastructure paid for out of user fees is better maintained than infrastructure paid for out of tax dollars or deficit spending; rails are great for freight but completely inefficient for passengers; and with more people working at home we can no longer expect that spending more money on transit will do anything but create jobs for contractors.

During the 2016 presidential campaign, Hillary Clinton proposed to spend $500 billion on infrastructure. Trump countered with a $1 trillion proposal, but he expected most of that would be spent by the private sector. It looks like the so-called compromise program is really an amped-up version of Hillary’s 2016 proposal. There’s no guarantee that this compromise bill will pass, so there may still be opportunities to trim some of the fat represented by projects that no longer make sense in a post-pandemic world.