9 Things to Know About Senate’s $1.1 Trillion Infrastructure Bill

COMMENTARY Budget and Spending

9 Things to Know About Senate’s $1.1 Trillion Infrastructure Bill

Aug 5, 2021 9 min read

Commentary By

Jeremy Dalrymple
Diane Katz
Tori K. Smith
Katie Tubb
Senate Majority Leader Charles Schumer walks back to the U.S. Capitol after speaking at a press conference on the budget reconciliation bill on July 20, 2021 in Washington, D.C. Kevin Dietsch / Getty Images

Key Takeaways

America is in dire need of fiscal responsibility from the nation’s leaders. Unfortunately, the Senate bill offers anything but.

The bill spends on major new programs at the Department of Energy, riddling the energy sector with cronyism and barriers to entry.

Improving America’s infrastructure is a worthwhile goal that should have bipartisan support. This bill isn’t the way to do that.

The Senate unveiled its long-awaited $1.1 trillion infrastructure bill on Monday. In a textbook example of Washington dysfunction, members and the public will only have a few days to review 2,702 pages of programs and provisions before it’s voted on.

Analysts from The Heritage Foundation have found a variety of flaws that should give pause to legislators in both chambers. 

1. Adds Hundreds of Billions to the National Debt.

With the national debt having increased $5.2 trillion since the start of 2020 (or $40,000 per household) and the economy at risk of serious inflation, America is in dire need of fiscal responsibility from the nation’s leaders. Unfortunately, the Senate bill offers anything but.

For starters, it bails out the Highway Trust Fund to the tune of $118 billion. The fund suffers from chronic deficits due to overspending. Rather than bring it into balance, senators are whipping out the national credit card, and then pretending they didn’t when it comes to keeping score.

2. Fake and Inappropriate ‘Pay-Fors.’

The bill includes many provisions designed to pay for the spending spree, which are dubious, inappropriate, or both.

This includes a laundry list of tired budget gimmicks, including the sale of oil from the Strategic Petroleum Reserve, extending long-standing fees, and spectrum sales. Many of these gimmicks have a history of falling short of expectations.

Another gimmick, known as “interest rate stabilization” (or “pension smoothing”) would allow corporations to reduce pension contributions and increase their profit margins, leading to more revenue from the corporate income tax. This would shortchange the pension funds by roughly $9 billion for the sake of less than $3 billion in additional tax revenue.

In an attempt to increase capital gains tax revenue, the bill also includes a rule that would force cryptocurrency companies to disclose personal information on their users to the government. This surveillance mandate would be technologically impossible for many key parts of the industry to comply with, including “miners” who maintain the networks, “stakers” who save in crypto, and even software developers, potentially driving these functions offshore altogether.

While legislators anticipate a $28 billion tax windfall from crypto, it will almost certainly bring in far less. For example, an IRS probe into the Coinbase crypto exchange market led to only $25 million in tax assessments.

The bill also repurposes hundreds of billions worth of funds that were originally passed in COVID-19 relief bills. The vast majority of this amount (such as states turning down harmful unemployment benefit expansions) would not have been spent, meaning this represents fake savings.

3. Sets Up a $3.5 Trillion Left-Wing Bonanza.

Congressional Democrats have repeatedly stated that they will not allow any infrastructure bill to reach President Joe Biden’s desk for signature unless it is accompanied by a $3.5 trillion package passed along party lines through the budget procedure known as reconciliation.

This package would be the largest tax-and-spend bill in the history of the world. It would hike taxes on investment just when the economic recovery needs it most, seek to give amnesty to illegal immigrants, expand welfare benefits on a scale not seen in generations, and deliver the radical Green New Deal agenda.

4. Massive Amounts of Wasted Transportation Spending.

While the bill’s spending is focused on transportation, that doesn’t mean Congress is making a smart investment.

On the contrary: it adds as much new spending to modes like mass transit and Amtrak as it does for highways, even though buses and rail account for only a tiny fraction of travel.

Even the value of highway funding is hampered by wasteful set-asides: $2 million per year for bee-friendly landscaping, $50 million per year to combat weeds, and expensive mandates that give unionized contractors a leg up on taxpayer-friendly, non-union shops.

5. Embeds Climate Activism in the Department of Transportation.

The climate section of the bill expands the size and scope of the federal government with alternate fuel corridors, grants for electric and alternative vehicle refueling stations, cost-sharing for weather resistant infrastructure, workforce training programs, and even grants for reflective sidewalks and tree planting.

By and large, these are highly local projects that should be paid for by residents and users, and in some cases (such as electric vehicle charging stations) duplicate what states and the private sector are already doing.

Perhaps most significantly, Section 11403 requires states to reduce carbon dioxide emissions from highway transportation by developing state “carbon reduction strategy” plans that must be approved by the federal government and updated at least every four years. The bill does not indicate what environmental benefits these strategies are to achieve or what level of reductions will be required.

This gives a lot of leeway to the federal bureaucracy to define the goal, and minimal accountability to Americans as to costs and benefits of the program. That’s a poor way to conduct environmental policy, will likely increase costs for Americans, and will have no meaningful impact on global temperatures.

Congress needs to remember whose job it is to do the legislating, and that it is its constituents who will bear the costs of ill-conceived policies.

6. Corporate Welfare for the Energy Sector.

The energy section incorporates the Energy Infrastructure Act of Sen. Joe Manchin, D-W.Va., which spends exorbitantly on virtually every energy technology, fuel, and supply chain. Handouts include grants, loan guarantees, cost-sharing programs, and federally funded research, development, demonstration, and commercialization.

The bill spends on major new programs at the Department of Energy, riddling the energy sector with cronyism and barriers to entry for companies and technologies that don’t fit the federal government’s definition and mold of “innovative.”

This takes the U.S. further away from an energy sector where businesses must compete to understand and meet the needs, preferences, and choices of customers (as opposed to what is politically preferred).

It also protects certain electricity companies over customers. In particular, it repackages the nuclear power bailout attempted in previous years.

Competition gives customers more choices, who are increasingly interested in “green” energy options and are always interested in reducing their expenses if given the freedom to make informed decisions. At the same time, competition forces companies to be efficient and innovative—inherently pro-environment features. Bailouts do the opposite.

Meanwhile, the bill fails to address root regulatory issues that tie up energy infrastructure of all types from being deployed in a timely, efficient manner. For example, it creates research and development programs on critical minerals used in cellphones, batteries, solar panels, and many other products.

Yet the overwhelming problem the industry faces is federal permitting, which can take a decade to complete, and a litigation culture reinforced by vague laws, which wastes significant time and resources on technicalities rather than material issues. After all, what’s the point of increasing taxpayer spending on innovative technologies if they just get strangled by red tape?

On a positive note, the bill requests reports on jobs lost and consumer costs incurred by the Biden administration’s counterproductive decision to halt the Keystone XL pipeline, the environmental impacts of electric vehicles, and the role of forced labor in China’s electric vehicle supply chain.

7. Applies Social Justice Approach to Broadband Internet.

The package provides nearly $65 billion for expanding broadband internet service. Of that, the bill allocates $42 billion for the Broadband Equity, Access, and Deployment program, which funds grants for broadband infrastructure and related projects. The program also places an emphasis on favoring municipal broadband networks, which are government- and nonprofit-run broadband networks.

When local governments overbuild existing networks, it limits the ability of private internet service providers that are already serving the area to recoup costs of deploying and operating their own networks, as the new government networks take customer share. As a result of the reduced market share, the ability of private providers to effectively deliver service, along with upgrading their networks, is severely degraded.

The bill also makes changes to the Emergency Broadband Benefit program. Besides renaming the Emergency Broadband Benefit to the Affordable Connectivity Benefit program, the bill cuts the cost of low-income internet access plans from $50 per month to just $30 per month.

This provision goes hand in hand with another requirement of the bill: that any internet providers who receive a grant from the Broadband Equity, Access, and Deployment program must offer a plan for low-income consumers at rates set by the state. While the infrastructure bill emphasizes that it does not allow rate regulation of broadband, that is exactly what these provisions do.

The bill also includes the radical Digital Equity Act of 2021. It directs $2.75 billion toward the stated goal of “achieving digital equity is a matter of social and economic justice.”

This includes a definition for “gender identity” and ensuring that “incarcerated individuals” (aka prisoners) are able to have high-speed internet access.

The Digital Equity Act also specifies entities to oversee the distribution of funds, including the Appalachian Regional Commission, which is co-chaired by Manchin’s wife, Gayle Manchin.

While improving the deployment of broadband is a worthwhile goal, this will not be achieved through costly top-down programs with unproven success. Instead, policymakers should seek to work with the private sector and encourage further innovative solutions to improve access to high-quality, high-speed internet.

8. Wasteful Protectionist Mandates.

Since taking office, Biden has made government procurement increasingly more difficult and more costly. America’s dozens of domestic content requirements create burdens for businesses, decrease competition for government contracts, and increase costs for taxpayers.

Biden’s executive order in January strengthened domestic content laws and regulations and worked to make it more difficult for companies to acquire waivers to these rules. Biden took another step in July by proposing a new rule to increase the content threshold from 55% to 75% for goods to be considered made in the U.S.

The infrastructure bill, which is already riddled with wasteful spending, would ensure spending that is actually meant for roads, bridges, and other real infrastructure is not spent as wisely as it should be. These rules do include an exception for projects that would cost 25% more if bid to a domestic company, but for taxpayers that means a $50 million project could cost as much as $62.5 million before a foreign bid could be considered.

Some say the extra cost is worth it to support American jobs, but the truth is that these policies are unlikely to yield job growth in the targeted sectors (such as steel).

9. Modest Progress on Reducing Red Tape.

The legislation codifies several reforms initiated under executive order by former President Donald Trump that were rescinded by Biden. Among them is the “One Federal Decision” framework, which includes designation of a “lead” agency for each major project to navigate environmental reviews and the compilation of agencies’ findings into a single record of decision.

Trump also called for reducing the processing time for environmental reviews to “not more than an average of approximately two years.” The bill would ease the Trump requirement, directing lead agencies to develop a schedule for completing projects within two years. However, the lead agency may lengthen or shorten the schedule “for good cause”—although not by more than one year.

Similarly, the legislation calls for federal agencies to issue a “record of decision” within 90 days after an environmental impact statement is finalized. Statutory deadlines are rarely strict, but even a soft deadline is better than none. After all, the average time to complete an environmental impact assessment of a transportation project tripled from 2.2 years in the 1970s to 6.6 years by 2011.

The bill also includes limitations on the volume of environmental impact statements—the average length of which ran 669 pages between 2013 and 2017. If enacted, agencies would be directed to limit environmental impact statements to 200 pages or fewer.

Several provisions of the bill also add flexibility to the federal-state dealings for planning and managing highway projects. Projects involving federal land management agencies would also be streamlined by allowing use of environmental assessments previously prepared by the Federal Highway Administration for a similar project. The use of existing documentation should apply across the government.

Establishing reasonable timelines for National Environmental Policy Act permitting and streamlining the process of environmental assessments will expedite construction of new and safer roads, bridges, and highways, as well as cleaner energy infrastructure—without sacrificing environmental protection.

Key Takeaway: This Is Not a Reasonable Bill.

The bipartisan group promoting the infrastructure deal are attempting to sell it as a reasonable, centrist compromise. In reality, it would greatly expand the size and scope of the federal government, needlessly add to the national debt, waste hundreds of billions of taxpayer dollars, and promote a variety of far-left causes.

Improving America’s infrastructure is a worthwhile goal that should have bipartisan support. This bill isn’t the way to do that.

This piece originally appeared in The Daily Signal