Washington Wednesday - Compromises and contradictions

MARY REICHARD, HOST: It’s Wednesday, June 2nd, 2021.

Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. First up: the effort to build a bipartisan infrastructure bill.

Republicans on Capitol Hill last week countered President Biden’s $1.7 trillion plan with an infrastructure proposal that would spend just over half as much.

Sen. Shelley Moore Capito of West Virginia helped design that counterproposal.

CAPITO: We’re hoping that this moved the ball forward. We believe that the alternative, which is a partisan reconciliation process, would be destructive to our future bipartisan attempts.

Transportation Secretary Pete Buttigieg said the Biden administration has numerous concerns about the counter-offer, but he added:

BUTTIGIEG: Well, there’s certainly been major movement and a lot of good conversations. Look, we started out with a $2.2-plus trillion plan on the part of the president.

He noted that the White House has cut its asking price by about a half-trillion dollars, while Republicans have increased their offer. He said the talks are moving in the right direction.

REICHARD: The latest GOP plan is $928 billion in total, and it’s largely confined to spending on things that are traditionally recognized as “infrastructure.”

Republicans have complained that only a portion of the president’s infrastructure proposal actually addresses infrastructure.

Joining us now with more insight on the GOP proposal and how that compares to the president’s plan is Chris Edwards. He is Director of Tax Policy Studies at the Cato Institute in Washington.

Chris, good morning!

CHRIS EDWARDS, GUEST: Hey, thanks for having me today.

REICHARD: As we mentioned, the Republican counterproposal is $928 billion. What are the high points in there? What’s in this bill?

EDWARDS: Well, the Republicans tried to focus the bill more on traditional projects that Congress has supported in terms of infrastructure. So they allocate most of the money to roads and bridges, airports, to water infrastructure, and to rail. So the federal government has traditionally funded those activities and they would exclude some of the new expanded priorities of President Biden such as subsidizing home care, for example. So the Republicans tried to pare back the spending under the Biden plan, but from my perspective, you know, the federal government can't really afford any of this. Even without an infrastructure bill, the government's already going to have a $3 trillion deficit this year, and you know, these deficits cannot go on forever.

REICHARD: The GOP’s original infrastructure offer had a price tag of less than $600 billion. What did Republicans add to the offer between the initial plan and this most recent one to bump the price up above $900 billion?

EDWARDS: I think they added in a bunch of new money for roads and broadband. But you know, I don't think any of this additional money is needed. If you look at roads, for example, state governments generally fund their own roads through their own gas taxes. And just in the last five years, half the states have raised their own gas taxes to fund their own highways. So, you know, I question whether any of this additional federal infrastructure spending is really needed. We can, you know, state governments have their own funding sources, and are quite willing to go ahead and fund their own infrastructure when it's needed.

REICHARD: Well let’s talk about that for a minute. How much of this is how much of this is deal making or negotiating technique? Where you ask for the moon and the stars knowing you’re going to get only the moon. How much of that is going on here?

EDWARDS: Right, I'm actually a little surprised that so many Republicans are willing to go along with the $900 billion in spending now. It's less than President Biden is asked for, but, you know, Republicans used to claim to be the fiscally responsible party, and were against deficits. So I'm really quite surprised that both parties are willing to spend this much money. Something else that really surprises me about the package is, you know, Biden has proposed hundreds of billions of dollars in subsidies to big corporations. He wants hundreds of billions in subsidies to manufacturers, to broadband companies, to electric vehicle makers. You know, the Democrats in particular used to be against corporate subsidies, and Republicans often claim they’re against corporate subsidies as well. So there are these sort of contradictions, I think, that are going on here with both parties that they're willing to hand big subsidies to corporations, and yet they say they're against corporate subsidies. So I think there's some real contradictions that need to be tackled here.

REICHARD: Setting aside the contradictions just for a moment: the Republicans’ plan would provide $65 billion for broadband. That’s one big piece of this that might be outside of what’s traditionally seen as infrastructure. What exactly would that money do?

EDWARDS: Well, I think the idea is to extend broadband to some rural areas that don't currently have broadband. But, you know, if you look at the data on broadband spending, the private sector companies like Comcast and AT&T already spend $50 billion a year on broadband and expanding 5G capabilities. And I think it's, again, I think it's dubious for the federal government to come in and start subsidizing that activity. Private broadband companies have an interest to serve more customers, to reach those rural areas, and I think innovation will lower costs and bring broadband to every corner of this nation. So, I don't really think that getting the federal government involved in the private subsidies like this is a good way to go.

REICHARD: Okay, now, as far as how to pay for these plan, President Biden has proposed tax increases to pay for his plan. How do Republicans propose to pay for their plan?

EDWARDS: So, President Biden has proposed raising the corporate taxes to fund his infrastructure plan. One of the ironies with that is that most infrastructure in America is actually provided by big corporations—whether it's broadband or pipelines and the like. So President Biden's raising of the corporate tax would reduce incentives for private companies to invest in their own infrastructures. That's a bit of an internal contradiction there. Republicans are completely against raising income taxes to fund their plan, and would rely more on user fees as well as reallocating some of the money that has already been passed in previous pandemic related budget packages.

REICHARD: And I’ve read that there’s resistance on the Democrat side to reallocate some of those Covid dollars? Can you elaborate on that aspect?

EDWARDS: Well, for example, in President Biden's plan that's already been signed into law for the pandemic a couple months ago, he increased or extended emergency unemployment benefits. And in a couple dozen states now, Republican-led states have said, Hey, we don't think that extra unemployment benefit money is really useful. And they've canceled it for their own states. So that'll save the federal government a lot of money as well. And so that's a pot of money that Republicans are saying that should be reallocated to infrastructure.

REICHARD: You know, we often hear that phrase tossed around about… “America’s crumbling infrastructure.” That seems like it’s probably hyperbole, but what is the condition of infrastructure overall in this country? How big is the need for new infrastructure spending?

EDWARDS: You know, it really depends on the infrastructure. So people often say that our highways and our bridges are crumbling. But, you know, the Federal Highway Administration actually has good data on this. And so for example, the Federal Highway Administration keeps track of how many of America's bridges are structurally deficient. And that share has actually fallen from 22 percent in the early 90s to just 9 percent today. And we also measure the surface quality of the interstate highway system, and that's been improving for the last couple decades. So some infrastructure is getting better. But it is true that some infrastructure has gotten a lot worse and big city subway systems are a good example of infrastructure where governments haven't been doing a very good job with maintenance. And so we've seen a lot of maintenance and breakdown problems in New York, Washington D.C., and Boston metro systems in recent years. So, you know, it's hard to generalize what infrastructure. It really depends on, you know, who owns it, who's managing it, and whether they're doing a very good job managing it.

REICHARD: Chris, anything else you think the public should know about these current negotiations going on?

EDWARDS: Well, one thing that I think is, you know, I mentioned contradictions, one thing that I think is a contradiction is that the way President Biden, you know, part of his a big theme in his infrastructure plan is to help mitigate climate change. But economists of any political disposition think that the best way to do that is to use user charges for infrastructure to limit demand. In other words, you want people to drive less, raise gas taxes. If you want people to use less water, raise water charges to reduce use. But President Biden doesn't do that. He would fund this infrastructure with income tax increases. So I've argued that, you know, what he's proposing is really not a green way to fund infrastructure.

REICHARD: Chris Edwards with the Cato Institute has been our guest. Chris, thanks so much!

EDWARDS: Yeah, thank you.

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