March 16, 2021 at 5:00 am ET
It’s understandable to be leery of infrastructure spending promises. Infrastructure is the perennial “Lucy and the football” situation of American politics. Everyone, Democrat or Republican, talks a big game about infrastructure spending in D.C. — it’s why there is Infrastructure Week in the first place.
Yet public infrastructure spending as a share of the gross domestic product in 2017 was at the lowest level since before the formation of the interstate highway system in the 1950s. America’s share of infrastructure spending is less than half of Europe’s and less than one-third of China’s.
But this time, Infrastructure Week is different.
And it all starts with COVID-19 relief. The latest $1.9 trillion American Rescue Plan provides over half a trillion dollars for state and local governments. This may not be direct infrastructure spending, but it bolsters the biggest spender: States account for about 75 percent of public infrastructure spending.
If states are struggling financially, increased federal spending in infrastructure could reduce a state’s own spending. This substitution effect happened with the American Recovery and Reinvestment Act in 2009, when every dollar in federal infrastructure aid was met with a decrease of state spending by an estimated 81 cents. But unlike the Great Recession, states today are not getting the short end of the fiscal aid stick, leaving them less inclined to pull back on infrastructure.
This means the federal government will likely have willing state partners. State governments will also have willing partners at the federal level. Lawmakers have not just talked about going big on infrastructure — they’ve put their ideas down on paper. Back when Republicans controlled the Senate in 2019, the Senate Environment and Public Works Committee unanimously passed a five-year, $287 billion highway spending bill. This was a 27 percent increase in the current federal highway spending levels. Last year, the Democratic House passed a $1.5 trillion infrastructure bill, which included a five-year, $494 billion surface transportation bill, of which $319 billion was for highways.
While there’s bipartisan agreement for at least a 27 percent increase in federal highway spending, getting an agreement on the funding agenda is more challenging. But the Gordian knot of infrastructure funding has loosened, albeit temporarily. Transportation Secretary Pete Buttigieg said the Biden administration won’t raise the federal gas tax, the primary source of federal infrastructure funding. While 31 states have increased the state gas tax since 2013, the federal gas tax hasn’t been raised since before Buttigieg could drive a car. However, there’s a greater willingness to have some deficit spending in the near term and low interest rates could also mean more financing opportunities as Congress looks to bring back Build America Bonds and expand Private Activity Bonds.
If some pay-fors are needed, Democrats have a menu of progressive tax revenue raisers via budget reconciliation. The bipartisan route could see the return of budget gimmicks that “paid for” the last infrastructure bill in 2015. Such gimmicks were ridiculed, but it didn’t stop 83 senators from voting for the bill. This doesn’t resolve the long-term funding challenges of infrastructure, but it will likely be sufficient in the interim to skid the wheels to reach a deal.
Finally, both President Donald Trump and Biden showed enthusiasm for infrastructure legislation, but one had zero years of previous experience in the machinations of governing to get something passed and the other has 44 years. When the Trump administration released an infrastructure plan in 2018 it was met with deep ambivalence by congressional Republicans. It was eventually opposed by Trump himself. No other plan was drafted other than errant Trump tweets calling for $2 trillion in infrastructure.
The Trump vs. Trump administration vs. congressional Republican disconnect is not present under the new administration. Amtrak Joe and his administration are drafting a plan. Biden’s plan will be formulated in close conjunction with Democratic leadership in Congress and the relevant infrastructure committees. When Biden speaks about infrastructure, he will be speaking on behalf of the Democratic establishment that is successfully shepherding a Covid-19 relief bill.
Of course, Lucy can still pull the infrastructure football. The Democrats can take a wrong turn on the way to party unity on infrastructure and the Republican deficit hawks may re-emerge from the spending ashes. But in 2021, it may be time to retire the old Infrastructure Week joke.
Ben Koltun is the director of research at Beacon Policy Advisors LLC, an independent policy research firm based in Washington, D.C.
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