President Joe Biden calls his infrastructure spending plan, which could pass the Senate later today or early Tuesday, the "most significant long-term investment in our infrastructure and competitiveness in nearly a century."
If it's that important, you might expect Congress to find a way to pay for the thing.
After all, this isn't emergency spending approved in the midst of a pandemic. This is a carefully plotted bill that the country's top policymakers clearly see as a major priority, one that members of both parties have spent months shaping at a time when the country's annual budget deficit and long-term debt projections are near record highs. Surely, surely, this is the type of bill that we can reasonably expect a fully baked plan to pay for.
The Congressional Budget Office (CBO), the legislature's nonpartisan number-crunching agency, says the bipartisan infrastructure bill would add about $256 billion to the deficit over 10 years. The real figure is likely to be higher, because the package contains a few gimmicky elements that are designed to trick the CBO's forecasting metrics.
The biggest of those gimmicks is the promise that Congress will reallocate more than $200 billion of COVID relief funds to cover infrastructure costs. It remains unclear exactly what unused COVID funds will be redirected, and the bill only rescinds $50 billion in actual budget authority from previously passed COVID relief bills, according to an analysis by the Committee for a Responsible Federal Budget (CRFB).
Other proposals to save and redirect federal dollars to pay for the infrastructure bill are also unlikely to materialize. Take the $49 billion lawmakers plan to "save" by further delaying an already-delayed Trump administration regulation altering how prescription drug discounts are applied by health insurers. "Because the Congressional Budget Office projected that the so-called rebate rule would increase federal spending in Medicare and Medicaid by about $177 billion over a decade, due to a rise in Medicare premiums (and therefore, taxpayer-funded subsidies for Medicare premiums), lawmakers get to count a further delay in the rule (beyond the Biden administration's one-year delay) as 'savings' for the federal government," explains the National Taxpayers Union.
What's more, there's nothing to stop the Biden administration from implementing that new rule next year or the year after. So Congress can count the delay as "savings" for now and then incur the costs anyway. It's the equivalent of planning an expensive vacation, then postponing it, using the "savings" from not taking the trip to buy a car, and then taking the vacation next year.
When you filter out the gimmicks designed to game the CBO score of the infrastructure bill, the CRFB says the package will probably add $340 billion to the deficit over 10 years.
Deficit spending and budgetary gimmicks are nothing new. What is noticeably different this time is just how little all this seems to matter. Unlike in the recent past, when CBO projections, as The New York Times put it, "loomed like the sword of Damocles over delicate legislative compromises," the news that the infrastructure bill would require more borrowing has mostly elicited a collective shrug.
Shortly after the CBO analysis was released, Sen. Rob Portman (R–Ohio), the lead Republican negotiator on the package, put out a statement dismissing deficit concerns. Instead, he argued that infrastructure spending will "will improve economic efficiency and productivity, increase GDP, generate additional revenue, and will not increase inflation."
This is a pretty common argument—one that sometimes is even true—for deficit spending on infrastructure projects. If you build more roads, it allows for more economic activity, and thus more jobs and more future tax revenue to be collected.
But as the CBO's report makes clear, actually paying for the infrastructure makes those benefits bigger than they otherwise would be. A fully offset infrastructure package would boost GDP by an estimated 0.11 percent over the next 30 years while a deficit-financed package would barely break even. That's because, as the CRFB notes, running higher deficits to pay for infrastructure spending will reduce private investment over the long term and, thus, lower future economic growth as well.
That's why it would make sense to pay for the infrastructure bill—really, truly pay for it—even if the country weren't facing the prospect of trillion-dollar deficits for most of the foreseeable future. Unfortunately, as the debate over the infrastructure bill has once again revealed, there is simply no political will for breaking Congress's addiction to debt.
Lawmakers deserve some credit for piecing together a package that does not include any broad-based tax increases—unlike Biden's original plan, which called for hiking the corporate income tax. But adding to the deficit is nothing more than a promise that taxes will have to rise in the future. That's a promise Congress loves to make, and it's also a bill that will one day come due.