Days after President Joe Biden’s $1.9 trillion rescue package finally passed, Democrats are already working on another big-spending initiative that will likely target the nation’s infrastructure and invest billions into new projects like broadband internet.
Biden is likely to preview the plan during a joint session of Congress in April, offering lawmakers several months to draft and modify the bill before an August recess, according to Reuters. Though specific details of the package have been vague, it will likely include provisions aimed at gaining a tighter grip on climate change, mirroring the $2 trillion infrastructure and climate plan proposed by Biden on his campaign trail.
“It is going to be green and it is going to be big,” Rep. Peter DeFazio (D-Oregon), chair of the House Transportation and Infrastructure Committee, told the Associated Press on Sunday, noting that he hopes the legislation can swiftly pass through his committee in May.
The president’s infrastructure and climate proposal outlined goals including achieving a carbon pollution-free power sector by 2035, upgrading four million buildings and weatherizing two million homes over four years, constructing 1.5 million sustainable homes, expanding broadband internet to every American and investing in 500,000 electric vehicle charging stations. The initiative also aims to create millions of jobs in related industries such as agriculture, clean energy and auto manufacturing.
“I hope the infrastructure will be of a more fundamental nature than was the case in Obama’s ‘shovel-ready’ investment projects. That is to say, projects need to be carefully thought out to yield high returns over an extended period. These are not ‘stimulus’ measures. Though they stimulate demand to some degree, that is not their primary purpose. Their purpose is to expand the potential of the economy to grow,” Eric Leeper, an economics professor at the University of Virginia, said.
But to swiftly pass the package with razor-thin margins in both congressional chambers, Democrats are reportedly turning to budget reconciliation, a legislative process with wonky rules that avoid a GOP filibuster and doesn’t require a single Republican vote. Democrats used the same procedure to push through the relief bill earlier in the month, making it a purely partisan effort.
House Speaker Nancy Pelosi (D-California) pushed Democratic committee chairs in Congress last week to begin working with Republicans on a “big, bold and transformational infrastructure package,” adding that the bill can hopefully rally bipartisan support.
While Republicans support widespread infrastructure spending, most have concerns about the overall price tag of the package that would add to the alarming national debt level and the Democrats’ push to incorporate items on climate into a big-spending initiative.
“What would happen to the national debt will depend on the extent to which the bill would include revenue raisers as well as spending. Of course, Congress basically has two options: borrowing money or raising taxes, whether it uses reconciliation or not,” Stan Veuger, a resident scholar in economic policy studies at the American Enterprise Institute, said.
Veuger added that the ratio of debt held by the public to gross domestic product (GDP), which currently stands at 99.37 percent, could reach as much as 110 percent by the end of fiscal year 2021. He noted that it will continue to grow under current law, “but if we were to add another $2 [trillion] from the infrastructure bill by borrowing the full amount, it would go up to a little under 120 percent. That is very high by historical standards, but interest rates are at historically low levels, making for more moderate annual interest payments.”
“The problem is that rates may go up and that the debt to GDP ratio will go up dramatically over the next few decades if we continue on the current path. Both of those factors will lead to a dramatic increase in interest payments,” Veuger said.
While the growing national debt is a looming issue, some economists pointed to the historically low interest rates for borrowing and that investing in infrastructure projects tends to yield a high rate of return.
“What matters is not the debt but the size of interest payments relative to GDP. Since interest rates are so low, any investment that raises GDP significantly is worth it. Investing in infrastructure has a high rate of return and so it should be done,” Jonathan Gruber, a former technical consultant to the Obama Administration and an economics professor at the Massachusetts Institute of Technology, said.
Top congressional Democrats have suggested removing former President Donald Trump’s 2017 tax cuts or implementing stiff tax policy on the wealthy to help fund the package, moves that will likely see rejection from the other side of the aisle.
“Given the severe need for government infrastructure, arguments about funding the investment are red herrings. High-value infrastructure may not fully pay for itself, but it will certainly spur federal tax revenues far more than, say, a cut in capital gains taxes or corporate taxes.” Leeper said.
It’s unclear how Biden and the Democrats will look to fund the infrastructure and clean energy plan at this point, as the focus is more targeted on developing a bipartisan package that won’t resort to budget reconciliation.
Rachel Bucchino is a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill.