Infrastructure Remains Topic Number One in DC
The week began with talks between Republican Senator Shelley Moore Capito and President Biden ending in a stalemate and the week ended with a report of an infrastructure agreement between a bipartisan group of ten Senators evenly divided between Republicans and Democrats.
While the group indicated that they had reached common ground on some of the big issues ranging from defining infrastructure to how the programs would be paid for; no text of the agreement was released, raising questions as to the seriousness of the compromise.
Reports indicate that the ten Senators defined infrastructure using the traditional areas of roads, bridges, airports, trains, and mass transit, plus the idea of expanding broadband. Reportedly the ideas for paying for the programs range from indexing the gas tax for inflation to using unspent Covid Relief funds. The rub could be that President Biden has told Congressional leaders that any change in the gas tax in unacceptable because in practice it would cross his “redline” of no tax increases for those making less than $400,000. That said, the gas tax has remained the same since 1993 at $.18.4 and is not indexed for inflation. Since 1993, cars have become more gas efficient hence the same rate is bringing in less money. An additional challenge is that the move towards electric vehicles seems real and will exacerbate the decline in gas tax revenues.
With the President traveling to meetings with the G7 and NATO allies, and the culmination meeting with Russian President Putin, he will be removed from personal involvement until his return to DC later next week. The White House didn’t immediately embrace the reported Senate agreement; but they also didn’t walk away from it.
On another track, both the House and Senate are moving ahead with a reauthorization of the Surface Transportation Act, which funds most construction of roads, bridges, and mass transit in the US. It expired on October 1, 2020 and was reauthorized for one year with the expectation that Congress would pass a long-term program. Some believe that the bipartisan surface transportation bill could become a vehicle for a broader infrastructure bill.
Progressive Democrats continue to be less than enthusiastic about the bipartisan talks, as they exclude many of the ideas these Democrats favor that range from climate to new construction of long-term care facilities for the elderly. If there is a traditional bill passed with a bipartisan agreement, Democrats still have a shot at passing part of their agenda under a Budget Reconciliation Bill for FY 2022. However, to use Budget Reconciliation requires the support of all 50 Senate Democrats, and for more moderate Democrats such as Senators Joe Manchin and Kyrestn Sinema to be on board they need to be convinced that all bipartisan paths have been exhausted.
Bottom line: I continue to believe there is a 75% chance that some infrastructure legislation will pass by the fall, but the process will be messy and headline risk is very much part of the process.
