The Infrastructure and Budget Bills Are a Watershed in U.S. Economic Doctrine
Deficit demagogy has (finally) become a fringe position in American politics—just look at the massive bills moving through Congress.
Max B. Sawicky
Democrats in Congress are now on the verge of enacting two huge expansions of non-defense spending, though serious challenges remain. The first is a $1.2 trillion package of infrastructure outlays, including funding for roads, bridges, rail, rural broadband and water systems, which has bipartisan support. The other is a so-called budget reconciliation bill focusing on “human infrastructure” of care work, paid leave, expansions of Medicare and other social insurance programs, projected at $3.5 trillion. Both of these bills were given the initial go ahead in the Senate this week, setting the stage for more negotiations and opening the door to their ultimate passage by both houses of Congress.
Of the trillion plus for physical infrastructure, half is covered by funds approved in previous legislation, so only about $500 billion is actually new spending. But even spread out over ten years, by historical standards (admittedly a low bar), that’s a decent bump for investment in the federal budget. Add to that the reconciliation plan, and together the packages would exceed $4 trillion — a massive expansion.
The legislation scratches many different itches for progressives, though there will surely be room for criticism once final versions are presented. What cannot be denied is that the magnitude of these initiatives greatly surpasses past expansions of the federal government. It must also be acknowledged that as far as economic doctrine is concerned, on the heels of the multi-trillion-dollar rescue and relief plans recently voted into law, a watershed has been reached: Deficit demagogy is now confined to the political fringes of both parties, rather than enthralling their leaderships.
Bridge to somewhere
Taking the bipartisan infrastructure bill first, while the weight accorded to roads and bridges is not especially climate-sensitive, it should not be surprising. At any rate, important social justice components can also be found. Of course, electric vehicles, which get a separate boost in the bill, also need roads and bridges in good repair. The more novel and arguably urgent items provide for the replacement of lead pipes in water systems, and the expansion of broadband in rural areas.
The politically salient aspect of the infrastructure package is its support from 19 Republican senators. This support entailed filtering out progressive elements but also brings some upsides:
- It coopts enough Republicans to blunt their partisan attacks on everything else. It’s harder to bleat about ‘socialist’ programs after you have voted to give the ‘socialists’ a trillion dollars to spend
- It eliminates any veto power from the most conservative Democrats in the Senate
- It will boost employment, which still has a way to go to return to pre-pandemic levels, if not beyond them
- It defies scolding about budget deficits
Recent reporting has some deficit die-hards bemoaning the impact of the bill, estimated by the Congressional Budget Office (CBO) to add $256 billion over ten years. At the same time, the CBO projects average deficits of $1.2 trillion per year over the same period. So this $256 billion amounts to roughly a 2 percent increase annually (or less than half a percent of total outlays in 2022) — hardly the stuff of economic nightmares.
Senate Minority Leader Mitch McConnell (R-Ky.) is one of the senators playing along with the infrastructure legislation, while calling the Democrats’ reconciliation package a “socialist shopping list.” To understand McConnell’s motivation, the most evil purpose is usually the most likely one. When a bipartisan bill of noteworthy size passes, it gives the most ornery Democrats in the Senate — Joe Manchin of West Virginia and Krysten Sinema of Arizona — an excuse to bail out of voting for budget reconciliation, for which every single Democratic senator’s vote will be necessary. Whatever the truth of this hypothesis, it has now apparently failed: Both Manchin and Sinema voted to move forward on budget reconciliation, though not without complaining about its price tag.
A progressive omnibus
Thanks to the leadership of Sen. Bernie Sanders (I-Vt.), chair of the Senate Budget Committee, the $3.5 trillion budget reconciliation resolution includes nearly all the good stuff that was bleached out of the bipartisan infrastructure package. A failure to pass this reconciliation deal would be a major defeat for the Biden administration, disappoint major segments of the Democratic electorate, sink prospects for holding the Congress in 2022, and raise the specter of a return of Republicans to the White House in 2024. So Democrats — in the House and Senate — had better all get behind the final version.
What is in the reconciliation bill? In short: a whole lot, though as noted, there will be plenty to criticize in specific areas. For Medicare, there is an expansion of benefits to cover dental, vision and hearing, and a reduction of the minimum age of eligibility, along with a lowering of prescription drug prices. The new expanded Child Tax Credit is extended beyond the current year. If the bill is passed in its current form, Americans will finally have access to at least some paid family and medical leave, child care, as well as two free years of community college and universal Pre-K. The government will make massive investments in affordable housing, as well as a Civilian Climate Corps. And to pay for it, Democrats plan to hike taxes on the rich.
Perhaps the most problematic area pertains to climate change, as progressive critics charge that the legislation doesn’t go nearly far enough to abate the crisis. When it comes to reducing carbon emissions, policy faces a relatively draconian criterion: falling too short of the goal, sometimes called the “tipping point,” risks a perverse, compounding effect of worsening conditions culminating in widespread, catastrophic outcomes. Failure to go far enough carries much more than incremental costs. Just look to this week’s terrifying report from the Intergovernmental Panel on Climate Change.
The reconciliation blueprint still leaves a myriad of details to work out. The key is that a successful reconciliation resolution provides the fiscal space — the money, in short — for subsequent haggling over the ensuing months.
As noted above, the often troublesome Joe Manchin voted to move ahead on reconciliation. By sheer coincidence, the infrastructure bill includes a cool billion dollars for the Appalachian Regional Commission, which is chaired by his wife, Gayle Manchin. Sinema was more of a question mark, but she came around as well.
Now that the Senate has passed blueprints for both bills, the House vote looks like a lock, but this could prove to be misleading. Voting in the House offers conservative House Democrats who are worried about midterms the opportunity to grandstand about the cost of the larger bill. Jonathan Chait, meanwhile, notes that progressives in the House can use their leverage to make voting on the bipartisan infrastructure conditional on passage of the larger reconciliation package.
In any case, even after passage by the House, there is still a lot of work to be done. Congressional committees now have to fill in the myriad of budgetary details, and the entire, final ‘omnibus’ bill will go back before both houses of Congress for final passage before President Biden can sign it into law.
Democrats’ self-imposed procedural roadblocks
Thus far this year, the Democrats have proceeded by observing certain dubious rules and traditions, which could derail both their legislative and political ambitions.
One self-imposed constraint has been the rulings of the Senate parliamentarian. Her most notable achievement this year has been to classify raising the minimum wage to $15 as inappropriate for inclusion in a budget reconciliation resolution. The parliamentarian, it should be noted, works for Senate Majority Leader Chuck Schumer (D-N.Y.). So far, his progressive turn—which is due in part to the agitation of Rep. Alexandria Ocasio-Cortez and other New York socialists — has not moved him to overrule his own subordinate.
Another is the infernal filibuster, which requires a majority of 60 votes in the Senate for non budget-related matters. Republicans have already used the filibuster this year to block legislation to expand democracy, and will surely continue to use it to stop Democratic priorities from passing. The filibuster is a rule and not a law, again something that Schumer could either loosen up or eliminate by getting his party behind such a change. It is commonly suspected that if circumstances were reversed and he had the votes, McConnell would not hesitate to eliminate the filibuster altogether — so long as it served his malign purposes.
Then there is the looming battle over the debt ceiling. As things stand, the Treasury Department says they can diddle the nation’s finances enough to avoid any formal breach until October. But survival of both initiatives — infrastructure and reconciliation — depends on raising the ceiling. Failing to include a ceiling increase in reconciliation will require a separate 60-vote majority in the Senate, unless adherence to the filibuster is abandoned.
A failure to raise the debt ceiling raises the possibility of the U.S. government defaulting on its debt, an event that could have global ramifications, and none of them good. Democrats may think there will be enough responsible Republicans to join them in preventing that dangerous possibility, although their leader McConnell is sworn to deny them any assistance.
Broadly speaking, the constraint on the Democrats’ fighting ability stems from the inflexibility that comes from the age and lifelong political habits of its gerontocratic leaders, ill-suited to dealing with the ruthless, anti-democratic Republican Party. We have already seen multiple instances where popular protest has affected the behavior of the Biden administration, from lifting the limits on refugees to extending the eviction moratorium. We will need much more of it, not just to help pass full-throated infrastructure and reconciliation plans that actually stem the climate crisis, but also to achieve further progressive priorities, the most urgent of which is securing voting rights. Let’s get to it.
Max B. Sawicky is a senior research fellow at the Center for Economic and Policy Research. He has worked at the Economic Policy Institute and the Government Accountability Office, and has written for numerous progressive outlets.